Small & Beautiful

Investors shouldn’t sell Sunil Hitech (70.00) although it posted loss at the net level. Actually it recorded 90% growth in revenue to Rs 148 cr and 40% increase in profit to Rs 7 cr, but due to provisioning of notional loss in mutual fund investments to the tune of Rs 13 cr, it registered net loss of Rs 6 cr. Although company hasn’t bagged any major order of late, but it boast of having an massive order book position of Rs 1300 cr. Company specializes in niche segment of fabrication, erection & testing and commissioning of thermal power plants including doing individual works under balance of plant. It also undertakes projects in the transmission and distribution segments including commissioning of EHV lines for substations, errection of turbine generators etc. It has 125,000 TPA of steel fabrication capacity and 100,000 TPA of equipment installation capacity in power plants. Incidentally, company has an under leveraged balance sheet with a low debt equity ratio of 0.60x times and can raise more debt comfortably. It may end FY09 with a topline of Rs 525 cr and PAT of Rs 25 (excluding notional loss on investment). This translates into EPS of Rs 20 on current equity of Rs 12.30 cr. Secondly it has huge reserves to the tune of Rs 145 cr on small equity leading to a healthy book value of Rs 128. Aggressive traders can buy for short term gain.

ABG Shipyard (70.00) is one of India’s largest private sector shipbuilding companies & established manufacturer and service provider of a variety of ships, including bulk carriers, interceptor boats, diving support vessels, anchor handling supply ships, dynamic positioning vessels, anchor handling tugs & other multipurpose vehicles. Till date it has delivered 104 ships and has further order book position of nearly Rs 10,000 cr to be executed in next 4~5 years. Few months back it bagged its first rig order from Essar Shipping. For the Dec’08 quarter, company has reported 80% rise in sales to Rs 489 cr but due to very high interest cost, PAT remained flat at Rs 46 cr. Although there is high probability of company witnessing huge order cancellation in short term because of slowing down of world economy, still the Indian ship building industry has a tremendous growth potential ahead. According to new international shipping norms, single-hull tankers have to be phased out by 2010 & ships that are over 25-year old have to be scrapped. Meanwhile, the ship-building activity has shifted from Europe to Asian countries like Korea, China and India due to cost and other factors. Notably, it is the first ship building company in private sector to actually receive the subsidy to the tune of Rs 19 cr from govt last year. It is estimated to clock a turnover of Rs 1400 cr and profit of Rs 150 cr i.e. EPS of Rs 29 on current equity of Rs 51 cr. A short term trading bet.

Last week, Voltamp Transformer (325.00) came out with excellent set of nos for Q3FY09. Despite reporting marginal fall in net sales to Rs 136 cr it posted 50% increase in net profit to Rs 34 cr due lower raw material cost. Surprisingly it posted a very healthy OPM of 30%, where the EPS for the quarter stood at whopping Rs 34. Company has special expertise in production of dry type vacuum resin impregnated (upto 3 MVA/11 kV class) and cast resin transformers (upto 7.5 MVA/33 kV class) apart from manufacturing regular oil filled power & distribution transformers, induction furnace transformers & unitized substations. Infact, company is the market leader in dry type transformers with around 40% market share. Currently company is in the midst of putting up a Greenfield plan with an installed capacity of 4000 MVA thereby taking the total transformer manufacturing capacity to 13000 MVA. It is expected to end the current fiscal with sales of Rs 650 cr and profit of Rs 100 cr i.e. EPS of Rs 99 on equity of Rs 10.10 cr. Being debt free and having huge reserves of more than Rs 150 cr, liquid cash worth Rs 60 cr, ROCE of 95% and ROE of 60% it’s a screaming buy.

Unichem Laboratories (155.00) have been churning out excellent nos from last few quarters. For the Dec’08 qtr, it recorded whopping 90% increase in net profit to Rs 28 cr with 10% improvement in sales to Rs 152 cr. It posted an impressive OPM of 24% against 17% last fiscal. Its nine months net profit of Rs 97 cr has already surpassed the entire FY08 NP of Rs 78 cr by wide margin. Thus the EPS till date of the current fiscal stands at Rs 27. Company is a leading domestic pharma company deriving majority of its revenue from formulation although it also manufactures active pharmaceutical ingredients. It has its formulation facilities at Ghaziabad(UP), Baddi(HP) and Goa and the API plants in Roha(Maharashtra) and Pithampur(MP). The Goa and UP plant has already got the US FDA approval whereas MP plant is expected to get it soon. Company has a wide chronic care portfolio with cardiovascular and diabetology therapeutic segments contributing around 50% of the domestic formulations. Lately company has launched new division focusing on Dermatology and has even introduced 15 products of this segment in the market. For FY09 it is estimated to report topline of Rs 650 cr and PAT of Rs 110 cr leading an EPS of Rs 31 on current equity of Rs 18 cr having face value as Rs 2/- per share.