STOCK WATCH

Lloyd Electric & Engineering Ltd. (Code: 517518) (Rs.137.55) is India’s largest manufacturer of evaporator and condenser (E&C) coils used in air conditioners with an installed capacity of more than 1 mn. coils and can also assemble around 2,20,000 air conditioners per annum. Recently, it set-up a new manufacturing unit in Dehradun (Uttaranchal) to manufacture room air-conditioners, components of air-conditioners and electronic goods. Besides, it is in contract with an Australian company for designing, manufacturing and supplying of AC package units to Metro Rail in India It has also tied up with a Korean company for the manufacture of roll bond and frost-free coils for refrigerators. For FY07, it is expected to report sales of Rs.475 cr. with net profit of Rs.43 cr. This will work out to an EPS of Rs.14 on its diluted equity of Rs.31 cr. This can improve upto Rs.17-18 due to expansion and other factors in FY08. A solid bet.

Visesh Infotechnics Ltd. (Code: 532411) (Rs.30.30) has strategic partnerships & alliances with global IT leaders like Novell, Microsoft, Oracle, Compaq, IBM, Sun, Cisco, 3Com, HP, Toshiba etc. Its ERP softwares and other products are being successfully used in almost all industry verticals such as telecommunications, chemicals, automobiles, pharmaceuticals, services (including finance & ITeS), government, education, sugar, sales & distribution. Of late, it has diversified into high technology and fast emerging areas of mobile telematics. Last fiscal, the company ventured into the business of Knowledge Process Outsourcing (KPO) and BPO through its newly-formed division VConnect™. The company has other aggressive expansion plans for which it may raise more than Rs.40 cr. in the near future. It may end FY07 with a topline of around Rs.125 cr. and bottomline of Rs.19 cr. i.e. EPS of Rs.7 on its current equity of Rs.26.97 cr. The scrip can easily rise 50% in the medium-term. Just buy and hold.

Kavveri Telecom Products Ltd. (Code: 49.55) (Rs.590041) is a leading manufacturer of telecom related products like Antennas, Radio frequency (RF) components, Cables & Connectors, Repeaters, Fixed Cellular Terminals and Solar Products. Besides it also provides solutions like Site/RF Survey, RF planning, designing & implementation, Repeater based GSM & CDMA indoor as well as outdoor coverage solution and Microcell based indoor coverage solution. Its esteemed clientele includes industry giants such as Ericsson, Motorola, Spice, Airtel, Reliance Infocomm, BEL, MTNL, BSNL, Tata Teleservices, Aircell, Infosys, IBM, HP, LG, ISRO, World Space etc to name a few. A few days back, the company bagged a huge contract from Hutchison Essar for providing In-Building Solutions (IBS) to their network for all its circles throughout India for the year 2007. Last year, it also acquired Til-Tek Antenna - a leading antenna manufacturing company based in Canada. For FY07, it may report sales and net profit of Rs.40 cr. and Rs.5.25 cr., which may shoot up to Rs.60 and Rs.8.50 cr. respectively in FY08. This means EPS of Rs.5 & Rs.9 on its current equity of Rs.9.80 cr. A good buy for the medium-to-long-term.

Austin Engineering Co. Ltd. (Code: 522005) (Rs.77.80) is a leading manufacturer and exporter of quality automobile and industrial ball and roller bearings. It manufactures all types of bearings including Ball Bearings, Cylindrical Roller Bearings, Needle Roller Bearings, Tapered Roller Bearings, Spherical Roller Bearings and Flexible Roller Bearings. On the back of strong industrial growth, the bearing industry is doing exceptionally well and this company, too, is expected to announce decent numbers for the March 2007 quarter. For full year ending 31st March 2007, it may register net sales of little less than Rs.65 cr. with net profit of Rs.5.50 cr. This translates into an EPS of Rs.16 on its tiny equity of Rs.3.53 cr. and may declare 20-25% dividend. With huge reserves of Rs.20 cr. supporting its small capital, the book value works out to more than Rs.65. For FY08, it can register an EPS of Rs.18. At a current P/E ratio of less than 5 and EV of Rs.40 cr., it’s a value buy.

After hitting a high of Rs.320, the share of Indo Asian FuseGear (Code: 532658) (Rs.117.75) has reduced to one third although its fundamentals have not changed much. The company manufactures all types of LT switchgears, miniature circuit breakers, compact fluorescent lights and other allied electrical engineering goods. Apart from six manufacturing facilities, it recently put up three more units in the tax-free area of Haridwar- Uttaranchal, all of which have begun commercial production. Last year, it entered into a joint venture with a Spanish company for setting up a new plant to manufacture and market state-of-the-art wiring accessories and products that include Intelligent Building and Home Automation products. Although its FY07 working may not be so great but the coming three years will be bumper years, as the company is on the inflexion point and the expansion effect will start kicking in from FY08. It is expected to register total revenue of Rs.350 cr. with net profit of Rs.30 cr. for FY08, which means an EPS of Rs.20 on its diluted equity of around Rs.15 cr. This is one of the best contrarian bets for the long-term.

Mobile Telecommunication - Rs.13.50

Incorporated in 1995, Mobile Telecommunication Ltd (MTL) is engaged in the business of telecom system development, manufacturing of electronic hardware, software development and trading in other products. In short, the company focuses on products and services related to the telecommunication infrastructure. It has gradually emerged as a reputed contract manufacturing service provider with its electronic manufacturing facility located at Nasik. It manufactures box assemblies as well as PCB assemblies and caters to clients from IT, Auto, Power, Medical and Telecommunications sector. In late 2005, however MTL diversified into the BPO business by acquiring the BPO facility of M/s Quantum eServices Pvt. Ltd.

Presently, MTL is focusing on three divisions – Internet technologies (VOIP & IP telephony), IT enabled services (International Call center) and manufacturing of telecom products (WLL handsets). The company is working on VOIP and IP Telephony technology and is in the process of establishing a network of Servers in USA, UK and India. Till such time as two-way telephony through Internet is allowed in India, MTL will be providing Voicemail through telephones. It is also setting up a subsidiary in USA to launch its services over there. On the BPO front, Quantum eServices has become a wholly owned subsidiary of MTL and has a 550-seater facility in the renowned Mindspace, Malad (W), Mumbai. The company is planning to enter into BPO space in a big way and the contract with one of the world's leading airline for its outsourcing requirement is underway. Thirdly, it is setting up a manufacturing plant for the production of WLL (Wireless in Local Loop) handsets based on corDECT technology. Notably MTL is the 5th licencee for this technology but has taken it solely for the export market.

Besides, MTL has got into APFC (Automatic Power Factor Controller) panels under the joint venture with Herodex Power Systems, who are one of the leading manufacturers of energy saving equipments related to industrial, commercial and power distribution applications. Hence the company has forayed into the energy - saving devices market and plans to enter into areas of light and energy saving products. With Herodex, the company is developing 'THAI CAP' APFC relays with the best technological features, which are definitely in a class apart from the other relays available in the market. Moreover, MTL is working towards a portal call Stdisdfree.com which will offer suite of services like PC-to-Phone, PC-to-PC, PC-to-Fax and voice mail, all integrated into one easy to use product. It has plans to launch the Automatic Meter reading system, which will collect the data automatically from meters and other devices via telecommunications at a remote central location of your choice. MTL also intends to enter the rapidly growing market of Wireless Brodband Services.

Although its future plans look very interesting, execution is the key to its growth. In spite of taking approval from the shareholders in November 2005 to raise around Rs.90 cr. through the FCCB/GDR route, nothing has been finalized till now. It was even decided to split the face value of shares to Re.1 but eventually it was dropped. For FY07, it may report a topline of Rs.23 cr. and bottomline of Rs.1.50 cr., which means an EPS of Rs.1.20 on its equity of Rs.11.90 cr. If things pan out well as per the company’s plans then for FY08 it can register total revenue of Rs.30 cr. with net profit of Rs.2.25 cr. i.e. an EPS of Rs.2. However, despite some promoter concerns, this company with a BPO facility of 550 seats is available extremely cheap at an Enterprise Value (EV) of Rs.20 cr. Long term investors can take an exposure as the scrip has bottomed out and can double in 6-9 months with operators support.

Sunil Hitech - Rs.74.50

Sunil Hitech Engineers Ltd. (SHEL) is an engineering turnkey service provider in the power sector. It is engaged in the niche segment of fabrication, erection, testing and commissioning of bunkers, electrostatic precipitators, boilers and turbine generator sets in power plants. Its service profile includes civil works for thermal power stations, ash handling, repairs, modification, rehabilitation and major maintenance of power plants. The company has executed many projects varying from 30 MW to 500 MW like Korba STPS (Super Thermal Power Station), Chandrapur STPS, Vindhachal STPS, Talcher STPP (Super Thermal Power Plant), Rihand STPP etc. Its clientele includes heavyweights like BHEL, REL, NTPC, L&T, Tata Power, Punj Lloyd, JSW Steel, Sterlite, Tata Power and major SEBs across India.

Currently, SHEL derives 85% revenue from its projects division whereas 15% comes from its operations & maintenance division. Its present service offering on the generation side is strongly backed by a manufacturing facility through a 100% subsidiary-Sunil Hitech Engineers & Manufacturers and a huge fleet of heavy equipments and machineries. Recently, SHEL has diversified into manufacturing of Transmission Towers with an initial investment of Rs.10 cr. For this purpose, it is setting up a fully automated German technology galvanizing plant at Butibori, Nagpur, with an annual production capacity of 20,000 MTPA expandable upto 40,000 MTPA for a total capex of Rs.110 cr. Of late, the company has also forayed into power distribution-related contracts and is executing the Rs.19 cr. Accelerated Power Development and Reforms Programme (APDRP) project in Kalyan, near Mumbai. Besides this, it has participated for Bhandup and Thane APDRP tenders worth Rs.130 cr. Thus, the company is now into each part of power sector viz. generation, transmission & distribution. Importantly, the company is regularly bagging prestigious orders and is constantly bidding for various public and private projects. At present, its 25 projects are at the execution stage and its order book stands at whopping Rs.500 cr., which is nearly 3 times its expected FY07 topline.

Moreover, the central government has planned an addition of 1,00,000 MW by 2012 in the 10th and 11th Five Year Plans and huge investment for upgradation of old power plants in addition to power sector reforms would create huge business opportunities for the company in coming years. In February 2006, SHEL launched its maiden IPO by issuing 34.8 lakh equity shares at Rs.100 aggregating to around Rs.35 cr. For FY07, it is expected to clock a turnover of around Rs.150 cr. with net profit of Rs.6.50 cr. recording an EPS of Rs.6.50 on its current equity of Rs.10 cr. However, on the back of aggressive order execution, it may report total revenue of Rs.220 cr. and profit of Rs.11 cr. i.e. EPS of Rs.11 for FY08. This means that the scrip is currently trading at a P/E multiple of merely 7 against its FY08 earnings. Although the company may raise capital to fund its working capital requirement and which may dilute the equity to some extent, investors are still recommended to buy it at current levels as the share price may double in 15-18 months.

STOCK WATCH

Kilburn Engineering Ltd. (Code: 522101) (Rs.46.70) belonging to the Williamson Magor Group operates in areas of process design, engineering, manufacturing, installation and commissioning of turnkey plants and systems catering to industries such as petrochemicals, chemicals fertilisers, refineries, oil & gas and food processing. It has already been discharged from the purview of SICA / BIFR as its networth has turned positive. For the year ending 31st March 2006, it may report sales of Rs.50 cr. with net profit of Rs.4.50 cr. i.e. EPS of Rs.3 on its current equity of Rs.13.50 cr. But the company is expected to make a smart turnaround from FY08 on the back of higher volumes as well as better margins. Currently, it has a very healthy order book position to the tune of Rs.100 cr. Hence for FY08, it can clock a turnover of Rs.80 cr. with profit of Rs.8.25 cr., which will lead to an EPS of Rs.6. Besides, the company is in the of relocating its manufacturing plant to a bigger premises and may sell its land admeasuring 8.42 acres in Bhandup, which may fetch around Rs.100 cr. After hitting a high of Rs.92, the scrip has tumbled down sharply to Rs.40 level. Investors can safely buy it at current levels with a price target of Rs.75 in the medium-term.

The share price of Rama Paper Mills Ltd. (Code: 500357) (Rs.35) is trading in the same price range over the past two years inspite of the sharp improvement in its fundamentals. It has already enhanced its capacity to 44500 TPA by installing some balancing equipment and is putting up an additional line to produce tissue and post paper with a capacity of 18380 TPA. Further, it has plans to augment its production capacity to 79500 TPA and is in the process of installing 6 MW power plant for captive consumption to reduce its power cost substantially. Although its December 2006 numbers were not great, still it is expected to report net sales of Rs.90 cr. with net profit of Rs.7 cr. i.e. EPS of Rs.9 on equity of Rs.7.60 cr. for FY07. During FY07, it raised Rs.8.75 cr. through preferential allotment of 25 lakh equity shares at Rs.35 per share and the promoters are infusing Rs.7.50 cr. by way of preferential allotment of 20.83 lakh equity shares at Rs.36 per share. With this, the promoter holding will shoot upto 41% from 25% currently. For FY08, it may register sales of Rs.110 cr. with PAT of Rs.9.50 cr. i.e. EPS of Rs.10 on its diluted equity of Rs.9.70 cr. At the current market cap of Rs.25 cr., it’s a screaming buy.

IMP Powers Ltd. (Code: 517571) (Rs.94) manufactures the entire range of power & distribution transformers, electrical & digital measuring instruments, testing equipments etc. It produces HV & EHV power transformers ranging from 10 KVA upto 150 MVA and has a total installed capacity of 3600 MVA. It is the only transformer company in the zero sales tax zone enjoying 15 years (till 2012) sales tax holiday
for its Silvassa unit. Recently, it manufactured and dispatched a 100 MVA, 230 KV class transformers worth Rs.4 cr. to Rajasthan Rajya Vidyut Nigam, which is an achievement by itself. Last year, it made preferential allotment of 9,15,000 equity shares and 5,10,000 equity warrants at Rs.85 per shares. For the year ending 30th June 2007, it is expected to report a topline of Rs.100 cr. and bottomline of Rs.8.25 cr. i.e. EPS of Rs.14 on its current equity of Rs.5.90 cr. Ironically, despite the strong demand for its product, its capacity utilization is barely 50%, which it intends to push around 80% in FY08. Hence for FY08, it is estimated to register sales of Rs.140 cr. with net profit of Rs.12.50 cr. i.e. EPS of Rs.19 on its diluted equity of Rs.6.70 cr. Available at a P/E ratio of less than 5, it is a very good buy.

Ahlcon Parenterals (India) Ltd. (Code: 524448) (Rs.54) is engaged in manufacture of life saving intravenous fluids including Dextrose, Saline, Electrolytes, Amino Acids, Fat Emulsion, Blood Substitutes, Small Volume Injectables, Eye Drops, medical disposals etc. Encouraged by the overwhelming success of its diversification into ophthalmic products, it has added more value-added ophthalmic products and is expanding its existing range of Infusions and Anti- microbial solutions. Further, it is in the midst of setting up a new project to almost double its production capacities, which will be operational by the second half of calendar year 2007. It may end FY07 with a total revenue of around Rs.50 cr. and profit of Rs.8.50 cr., which translates into an EPS of Rs.12 on its equity of Rs.7.20 cr. Importantly, the company has established a strong alliance with large local players in several key global markets and was been able to efficiently hedge the risk posed by a domestic market. Although the full impact of its capacity expansion will be felt in FY09, for FY08 it may report sales of Rs.60 cr. with net profit of Rs.10.50 cr. i.e. an EPS of Rs.15. Buy for a target of Rs.75 in 6-9 months.

Visu International - Rs.13.00

Started in 1983, Visu International Ltd. (VIL) erstwhile known as Visu Consultants was promoted by Mr. C. C. Reddy, an NRI from USA who is currently the Chairman of the company. From a humble beginning, he has succeeded in the uphill task of dispelling all the myths usually associated with 'study abroad' and have brought the concept of overseas education to the doorstep of every student by making it affordable and devoid of cumbersome procedures. Hence, VIL has been a pioneer in global education and consultancy business apart from being a household name for providing unparalleled coaching and training in pre-requisite tests such as TOEFL, GRE, SAT, GMAT & IELTS. Its core activity lies in assisting students to make the right choice with regard to higher education overseas. It has more than 73 offices all over the world and has placed more than 75,000 students in universities abroad. Its reach extends to five continents and universities in most countries like the USA, UK, Canada, Ireland, Singapore, Malaysia, Nepal, Kenya, Tanzania, Uganda, France and Spain. VIL is also into software development and services, merchant export-import & trading and also offers E-Learning through satellite enabled virtual class rooms.

In brief, VIL offers comprehensive counselling with regard to country of study, programme, tuition fees, location, pre-requisite tests and admission requirements according to the candidate's profile. Besides, it also explains about education systems in different countries, importance of the documentation, Visa procedures, financial requirements, scholarship chances, programme curriculum, living conditions, career options in the country etc. Coaching India, the training division of VIL with 40 centres across India successfully trains 30,000 students per annum for pre-requisites tests with very scientific standards. The company has a banking desk, which assists students in securing educational loans for pursuing their studies abroad. The students can enroll themselves for a step-by-step Visa mock interview to boost their confidence in facing the consulate officer and presenting themselves in an accurate mode. Travel assistance, foreign exchange assistance, student Insurance plans etc are the post visa services provided by the company. Meanwhile, VIL is on the anvil of launching ‘Visu Testing Service’, which is computer generated automation software that enables a student to test his/her strengths and weaknesses in a given area at any given point of time. Moreover, it is setting up a international boarding school from 5th to 12th grade in Hyderabad aimed at preparing students on par with world standards with state-of-the-art campuses, modern amenities equipped with latest technologies and inculcate contemporary skill sets, imbibe self confidence with wide international exposure. 30 acres land for the project has already been already acquired on the Mumbai - Hyderabad highway. Besides, a subsidiary is being set up in Dubai to improve the scale of software operations in foreign countries. VIL is also on the look out for acquiring a foreign company/firm to increase competency and economies of scale.

To fund its Hyderabad school project and its other growth plans, VIL raised around Rs.15 cr. through the GDR route last year to be converted into Rs.2.175 cr. equity at Rs.6.90 per share. Earlier in 2005, it raised capital by allotting 35 lakh equity shares. Thus its current equity stands at Rs.35.33 cr. compared to Rs.10.08 cr. in March 2005. Further, it has allotted 40 lakh warrants and has taken the approval to raise Rs.110 cr. more by allotting not more than Rs.5 cr. equity shares. That means a massive equity dilution can take place in future. However for FY07, VIL is expected to report total revenue of Rs.95 cr. with PAT of Rs.12.50 cr. This translates into EPS of Rs.3.50 on its current equity of Rs.35.33 cr. For FY08, its revenue can rise up to Rs.125 cr. and profit maybe Rs.16.50 cr. On its diluted equity of Rs.39.33 cr., the FY08 EPS works out to more than Rs.4. Hence at the current market price, the VIL scrip is available at around 3 times FY08E earnings. Although it’s a dividend paying company, there are promoter concerns as they hold only 3% stake. Moreover, the management hasn’t clarified at what rate they had made preferential allotment and also the GDR conversion price is very low. But since the share is trading near its 52-week low of Rs.12, investors can expect 30-50% appreciation in a year’s time.