STOCK WATCH

Ironically in the current meltdown share price of Sujana Towers (50.00) has fallen more than 80% from its high of Rs 235 in Jan’08. Company is basically engaged in manufacturing of galvanized steel towers used in the power transmission and telecom tower sectors. Besides it also offer various services including engineering and consultation, turnkey installations, inspection and maintainance of towers etc. It has set up two large scale units at Hyderabad to emerge as India's largest galvanized steel tower manufacturing company. It has expanded its towers capacity at Hyderabad from 28,125 TPA of galvanized towers to 128,125 TPA. In the light of fast growing demand for supply of power transmission and telecom towers and associated services within the country as well as in the neighboring countries, it is in the midst of setting up another 100,000 TPA manufacturing facility at Chennai in order to cater to the domestic and export market. It also intends to set up / acquire subsidiaries in the Middle East/ South East Asia in the area of power transmission and telecom infrastructure services. Recently, it acquired 51% shareholding in Telesuprecon Ltd (Mauritius), undertaking Telecom infrastructure contracts in various cast / central African countries. For the trailing twelve months ending June 2008 it report total revenue of Rs 582 cr and profit of Rs 46 cr i.e. EPS of Rs 11 on current equity of Rs 20.70 cr. A screaming buy at current levels.

From a high of more than Rs 1000 early this year, share price of KLG Systel (290.00) has currently tumbled down to sub Rs 300 levels and hitting new lows. Company specializes in offering technological solution for entire business life cycle i.e. right from concept and creation, through plant design, project execution and management operations & optimisation to expansion/ revamp. It also provides on-line IT solutions to distribution utilities, using its self-developed software Vidushi, SG61 Technology and solution for determining the transmission & distribution losses, fixing the areas of power theft, on-the spot billing & cheque collection, increasing revenue collection efficiency of the utilities and addressing consumer grievances. Recently it has demerged the power systems solutions business into a new subsidiary named KLG Power in which IBM group company has invested Rs 12 cr for taking 1.20% stake, thereby putting the valuation of KLG Power Ltd to whopping 1000 cr. Ironically against this, KLG systel - the parent company which is holding the rest 98.80% is available at a market cap of less than Rs 400 cr. For FY09 it is expected to clock a turnover of Rs 350 cr and profit of Rs 60 cr i.e. EPS of Rs 41 on estimated diluted equity of around Rs 14.50 cr. Keep accumulating at sharp declines.

Indo Asian Fuse Gear (65.00) manufactures wide range of electrical circuit protection equipment including distribution boards, switch boards, switch panels, fuse switches, MCCBs, HRC Fuses, MCBs, RCDs, etc. Besides, it’s one of the largest manufacturers of CFLs and MCB’s in India. To capitalize the ongoing boom, it is diversifying into power distribution business on behalf of state electricity board on franchise basis. Lately, it has forayed into cables & wires manufacturing business as well with a planned investment of 100 cr in phases. For the higher end segment, company is setting up a plant in Haridwar under a joint venture with Simon Holding (Spain) for manufacturing home and building automation products for the first time in India. At the same time it is putting up a facility in Saudi Arabia thru a tie up with Saudi National Glass for production of Compact Fluorescent Lamps (CFLs) and High Intensity Discharge Lamps (HID Lamps). For FY09 it is expected to clock a turnover of Rs 325 cr and PAT of Rs 15~16 cr on a conservative basis which works out to an EPS of Rs 10 on current equity of Rs 15.30 cr. At current market cap of Rs 100 cr its available fairly cheap.

Vakrangee Software (155.00) is a leading provider of complete document and data management solutions encompassing large-scale data capturing & management, scanning, digitization and printing. It has three business segments, viz - document management services, printing management services and IT enabled services catering to various verticals like the central and the state government, banking and financial services industry, telecom, power, retail, aviation and others. Infact, company has the largest scanning and variable data printing capacity in India with 5.6 million pages per day and 2.40 million pages per day respectively. Last year, it has entered into a strategic alliance with Eastman Kodak company to offer mass customization & personalization of customer communication practices in India and has been granted with the Kodak Gold Plus accreditation status. Of late it has started focusing to cater private sector and intends to take the share from this segment to more than 50% of the total revenue. Company is expected to end FY09 with total revenue of Rs 300 cr and net profit of Rs 60 cr i.e. EPS of Rs 28 on equity of Rs 21.40 cr. Hence scrip is currently available at a PE ratio of less than 6x times. Moreover, company is contemplating to come out with right issue in near future.

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Krone Communications Ltd

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Small & Beautiful

Ironically in the current meltdown share price of Sujana Towers (50.00) has fallen more than 80% from its high of Rs 235 in Jan’08. Company is basically engaged in manufacturing of galvanized steel towers used in the power transmission and telecom tower sectors. Besides it also offer various services including engineering and consultation, turnkey installations, inspection and maintainance of towers etc. It has set up two large scale units at Hyderabad to emerge as India's largest galvanized steel tower manufacturing company. It has expanded its towers capacity at Hyderabad from 28,125 TPA of galvanized towers to 128,125 TPA. In the light of fast growing demand for supply of power transmission and telecom towers and associated services within the country as well as in the neighboring countries, it is in the midst of setting up another 100,000 TPA manufacturing facility at Chennai in order to cater to the domestic and export market. It also intends to set up / acquire subsidiaries in the Middle East/ South East Asia in the area of power transmission and telecom infrastructure services. Recently, it acquired 51% shareholding in Telesuprecon Ltd (Mauritius), undertaking Telecom infrastructure contracts in various cast / central African countries. For the trailing twelve months ending June 2008 it report total revenue of Rs 582 cr and profit of Rs 46 cr i.e. EPS of Rs 11 on current equity of Rs 20.70 cr. A screaming buy at current levels.

IMP Power (93.00) is engaged in manufacturing of entire range of power & distribution transformers, electrical & digital measuring instruments, testing equipments etc. For the latest June’08 qtr, it reported very flat nos with marginal fall in topline as well as bottomline. Accordingly for entire FY08 ending June’08, its sales grew by 30% to Rs 134 cr and PAT increased by 25% to Rs 9.40 cr posting an EPS of Rs 14 on equity of Rs 6.80 cr. To maintain its growth momentum company has undertaken 28 cr capex for expansion of its manufacturing facilities situated at Silvassa from existing 3,600 MVA to 6,000 MVA. It is also contemplating to increase it meter manufacturuing capacity by nearly 50% to 315,000 units. For FY09 ending June 2009, it is expected to report a topline of Rs 160 cr and bottomline of Rs 11.50 cr i.e. EPS of Rs 17 Rs on current equity of Rs 6.80 cr. Whereas the EPS works out to Rs 13 on fully diluted equity (post conversion of all warrants and CCRP) of around Rs 8.50 cr. After hitting a high of Rs 330 in Jan’08 share price has been reduced to 30% now and is available at attractive valuation. Keep accumulating at declines.

Part of B M Thapar group, Greaves Cotton (155.00) is enaged in production of diesel/petrol/LPG engines for power generation, agro equipment & atumotive apart from manufacturing gensets, agro equipment and construction equipment Besides, it is also engaged in marketing high technology systems for marine, aviation and electronic applications. Last year, to increase its presence in global market it acquired, Bukh Farymann Diesel GmbH (renamed as Greaves Farymann Diesel GmbH) which is engaged in the manufacture and marketing of single cylinder diesel engines and parts for Rs 25 cr. For FY08 it may clock a turnover of Rs 1400 cr and PAT of Rs 115 cr i.e. EPS of Rs 24 on current equity of Rs 48.80 cr. Of late Piaggio Group's Indian subsidiary signed a 8 year agreement with the company for purchase of mono-cylinder diesel engines for application on the three-wheeled vehicles manufactured by them. This implies that company will continue to be a single source supplier of such mono-cylinder diesel engines to Piaggio. Secondly few months ago company inaugurated its new manufacturing facility for compaction equipment at Gummidipoondi, Tamil Nadu. Recently it has also formed a 100% subsidiary to take up some new business in future. For FY09 it may clock a turnover of Rs 1500 cr and NP of Rs 100 cr i.e. EPS of Rs 20 on equity of Rs 48.85 cr. Only long term investors are advised to buy at declines.

Vivimed Labs (64.00) is a speciality chemical manufacturer catering to segments including oral care, sun care, skin care, hair care, natural extracts, preservatives, anti microbial, anti oxidants, anti-aging molecule etc. Infact it is world’s 2nd largest manufacturer of Triclosan - an antibacterial used for oral care and one of the top three companies for Avis – a chemical which improves UV absorbing ability of Sunscreen. Couple of months back it acquired 100% stake in M/s James Robinson,UK which is an international manufacturer and supplier of speciality chemicals used in hair dyes, pharmaceuticals and photographic films/prints to ophthalmic sunglasses. Organically as well company has been expanding its capacity and has chalked out Greenfield expansion plan in Uttaranchal and Hyderabad. Considering its Q1FY09 nos and acquisition of UK company, company is estimated to report a consolidated sales of more than Rs 225 cr and net profit of Rs 17 cr. This leads to an EPS of Rs 18 on current equity of Rs 9.40 cr whereas diluted EPS works out to Rs 13 on diluted equity of Rs 12.65 cr. A strong buy.

JMC Projects Ltd - Rs 145.00

Founded in 1982, JMC Projects Ltd (JMC) was originally promoted by Mr. Suhas Joshi & Mr. Hemant Modi as Joshi & Modi Construction Pvt Ltd. Later it was renamed as JMC Projects Ltd and subsequently in 2004 was taken over by the renowned and well diversified Kalpataru group. Since then, under the new corporate leadership JMC has been growing leaps and bounds and today it is among the top seven players for building and factory construction in India. It has also been recognized as India’s sixth fastest growing company by the latest “Business Today” June’08 edition. Importantly JMC caters to all major sectors of the economy namely industries, buildings and infrastructure. It provides all types of construction services including fabrication and erection of structural steel components, pre-casting and allied works. It has successfully ventured into fields of turnkey execution involving civil, mechanical, electrical, HVAC, fire fighting, architectural and landscaping works. Over the years JMC’s major thrust has been in the areas of industrial plants which include automobiles, textiles, heavy engineering, chemicals, cement, pharmaceuticals, sugar, power plants etc, and institutional building comprising hospitals, software parks, hotels, educational institutes etc. It boasts of several landmark projects such as construction of IIM Ahmedabad campus, three elevated Delhi Metro railway station, Software Park for Infosys in Bangalore, residential/commercial complex at Bhopal for MP housing Board, Vardhman Medical College at Delhi, Software development centre in Pune for Syntel Int apart from constructing factory/plant for Nirma, Arvind Mills, Maruti Udyog, Hindustan motors, Indian Rayon, Alstom Projects etc.

Of late, apart from industrial and building project, JMC has started focusing on infrastructure and power projects. It is aggressively bidding for contracts to construct bridges & flyovers, roads & highways, railways stations, marine work, water supply & irrigation projects and construction of power plants. Importantly, JMC owns & operates a large fleet of the best & the latest construction plants & equipment which ensures availability of the pertinent equipment for the particular task. Last fiscal company made an additional investment of more than Rs 100 cr in fixed assets to increase its project execution capacity. Today, JMC is among the few construction companies certified under ISO 9001:2000 quality management system by TUV Management Services of Germany. Because of its excellent track record, technological & execution capabilities and strong backing by the parent company i.e. Kalpataru Power Transmission Limited, JMC has been successful in getting some major orders from prestigious clients such as BHEL, Wipro, MPRDC, NHAI, Prestige Group, EISAI Pharma, JP Greens, RGA Software etc. during last fiscal. This has resulted into massive order in hand position of more than Rs 2000 cr as on March 2008 which is twice its FY08 turnover. In future company intends to up railways, airports and water management projects on an EPC basis which will further add to its bulging order book.

Ironically despite robust performance quarter after quarter, share price of JMC has been decimated to one fourth from its high of Rs 575 in Nov’07. For FY08 its revenue jumped up 80% to Rs 915 cr and PAT almost doubled to Rs 31 cr posting an EPS of Rs 17 on equity of Rs 18.14 cr. Even for Q1FY09 when most of the construction companies announced disappointing result, JMC registered 75% rise in topline to Rs 313 cr and 50% jump in profit to Rs 8 cr. Last year to fund its working capital requirement company had raised Rs 25 cr thru issue of preference shares to be convertible into equity shares @ Rs 202 per share. With respect to CMP, the chance of conversion into equity shares is less and it may get transformed into redeemable preference share. Well considering its strong order book position, JMC is expected to clock a turnover of Rs 1350 cr and PAT of Rs 32 cr for FY09 which leads to an EPS of Rs 18 on current equity. Investors are recommended to buy at current levels as at average discounting by 12x times, share price has the potential to shoot up to Rs 220 (60% appreciation) within 12 months.

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Emco Ltd - Rs 94.00

Incorporated in 1964, Emco Ltd (Emco) is the third largest manufacturer of transformers in India and a leading player in electronic energy meters and turnkey electrical projects. With its acquisitions, joint ventures and growth strategies, Emco has ensured its presence in all the major areas of the power sector and have come a long way from being a product supplier to end-to-end solutions provider in the transmission and distribution sector. The company has spread from one manufacturing location to seven manufacturing locations in India and is now poised to make its presence felt even in the overseas market. For better efficiency and to focus on each business unit, Emco has segmented its business into following four divisions:-

· Transformer Division (65%): This is the flagship division of Emco with three manufacturing plants having combined installed capacity of 20,000 MVA. It offers widest transformers range from 5 kVA, 11kV right up to 315 MVA, 400 kV for power generation, transmission & distribution. It is one of the leading players in manufacturing special application transformers like furnace transformers (for Steel Industry), large rectifier transformers (for Chemical Industry) and traction and locomotive transformers (for Railways).

· Meters Division (5%): This division has a state-of-the-art fully computerized manufacturing facility with an installed capacity of 1.3 million meters per annum - one of the largest in Asia. It offers metering solutions like tamper proof electronic energy meters, automatic meter reading solutions, prepayment metering solutions & high end metering like Trivector meters, Grid metering etc. It also offers a total energy and revenue management solutions to customers in the distribution business.

· Projects Divisions (30%): This division offers turnkey solutions from concept to commissioning of large electrical substation projects in the power sector. It focuses on turnkey projects in the T&D area, mainly catering to high voltage and extra high voltage substations up to 400 Kv and strengthening the sub-transmission and distribution network. It also undertakes entire industrial electrification work from designing to execution. Besides, with the acquisition and amalgamation of Urja Engineers Limited, Emco moved into the transmission line business enabling itself to offer a wider portfolio of products and solutions for transmission and distribution of power under a single roof to various customers. It can now construct EHV Power Transmission Lines upto 765 kV on a total turnkey basis and boasts of having a tower manufacturing facility up to 45000 MT/Annum. It also provides custom built outdoor packaged substation upto 1 MVA.

· International Division: This division basically offers the products and services of other divisions to the international market and currently derives around 20% of total sales from exports. With supplies to global majors such as SHELL, Global, Petrofac-UAE, Parsons-UK, Peebles-UK and other leading power utility multinationals in more than 30 countries, Emco has experience of designing transformers to meet various International standards like BS, IEC, ANSI, CSA etc and meeting the approval of independent Inspection agencies such as BVQI, Lloyds, Crown Agent, SGS and others.

With a goal to achieve 30% of revenue from international business, Emco has decided to set up a transformer manufacturing plant in South Africa to meet the growing demand in the African region and neighbouring countries. For this it has entered into a MOU with Edison Power (Pty) Ltd, a leading electrical contracting company from South Africa for this purpose. Emco has also floated a 100% subsidiary in Singapore which has already made investments in solar renewal energy company, USA and in a coal mine company, Indonesia.

Apart from above, Emco has setup 7 wind mills of 1.5 MW each in Maharashtra. Besides getting additional revenue on sale of electricity generated to MSEDCL, Emco has also registered this project with UNFCCC under CDM and is expected to start trading in CER from current year. Moreover the company is also in the process of setting up a 540 MW Coal-based power project near Nagpur for which it has already obtained the coal linkage from Government of India and has procured the land for the project. The plant is expected to commission before mid 2010 with a total estimated outlay of Rs 1100 cr. Further the company has plans for synergic diversification in to switchgear business, up to 400 kv, which would further add to the top line and bottom line of the company. Incidentally, the management intends to double the company’s turnover every two years.

Fundamentally, Emco has been performing excellent and been substantially benefited from the strong surge in investments towards improving the country's dilapidated T&D framework as also adding new transmission capacities. It caters to several govt and private entities such as MSEDCL, NTPC, APSPDCL, NDPL, Power Grid, IRCON, CSEB, KPTCL, ACC, Reliance group, Tata Group, Essar group, Aditya Birla group, Jindal group, Jai Balaji to name a few. For FY08 it registered 45% growth in net sales to Rs 944 cr whereas profit shot up 60% to Rs 64.50 cr posting an EPS of Rs 11 Rs on equity of Rs 11.77 cr having face value as Rs 2/- per share. Recently, company went for a stock split of shares to FV of Rs 2/- from Rs 10/- earlier. On the back of satisfactory nos for the latest June’08 quarter it is expected to clock a turnover of Rs 1250 cr and PAT of Rs 70 cr for FY09. This translates into EPS of Rs 12 on current equity. At a reasonable discounting by 12x times, scrip can appreciate 50% within 12~15 months.

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