IMP Powers - Rs.104.00

Promoted by Shri Ramniwas Dhoot, IMP Powers Ltd. (IMP) was established in 1961 to make electrical instruments like Ammeters. Since then it has emerged as the leading manufacturer of the entire range of electrical and digital measuring instruments, testing equipments and test benches, distribution & power transformers etc. Today, almost 95% of its revenue comes from the transformer business and it enjoys 23% market share of transformers manufactured in the medium category. It enjoys a very strong reputation for auto HV & EHV Power, distribution, Special Purpose, Furnace, Thyristor duty Transformers & Reactors. Apart from being the first ISO-9001 certified transformer company in India, IMP is also a government recognized export house. Exports contribute nearly 30% of sales as it regularly exports transformers to countries across like Australia, Bangladesh, Dubai, Ghana, Jordan, Kenya, Malaysia, Nepal, New Zealand, Nigeria, Sri Lanka, UK etc.

IMP has two factories at Mumbai & Silvassa. Its 5 acre Silvassa facility has a total installed capacity of 3600 MVA and produces power & distribution transformers ranging from 10 KVA to 150 MVA in 230 KV class, which is a very wide range and meets all requirements of customers under one roof. Importantly, IMP is the only transformer company in India in the zero sales tax zone enjoying 15 years (till 2012) sales tax holiday for its Silvassa unit. On the other hand, its Mumbai (Kandivali) factory manufactures electrical instruments like ammeters, voltmeters etc. It also has in-house manufacturing facility for OLTC & RTCC, which are critical components, to enhance its operational synergy and reduce the cost of production. IMP has been supplying its transformers to various State Electricity Boards like MSEB, RRVPNL, APTRANSCO, GEB, MPEB etc. and to leading turnkey contractors like L&T, BHEL, Reliance, Crompton Greaves, Jyoti Structures, Siemens, ABB, Kalpataru, NTPC, KEC, Nagarjuna, Tata Power and many more. In short, it is among the few companies catering to all three sectors i.e. public, private & exports.

To increase its market share in the electrical instruments business, IMP has recently upgraded its Kandivali plant with state of art facilities to manufacture the complete range of electronic analog and digital meters including ammeter, voltmeter, frequency meter, dynamometer type watt meter, power factor meter, phase sequence indicator, KVA meter etc. in addition to high end meters like maximum demand indicator, trivector meter and KWH meters. To complement its transformer business, the company is also planning to launch new products like OLTC with both On Load and Off Load tap changers, disconnectors for substations, energy meters including prepayment meters etc. Massive fresh capacity addition in the power sector, rapid rural electrification and strong replacement demand ensures a bright future for IMP. It has current capacity of 3,600MVA and is currently operating 55% of its capacity. It plans to increase its capacity utilization up to 80% by FY08. The company had a total order book of Rs.110 cr. by end of December 2006 and majority of these orders are for transformers.

For the financial year ending 30 June 2007, it may report a net profit of Rs.8.25 cr. on net sales of more than Rs.100 cr. Considering its bulging order book position, it is estimated to clock turnover of Rs.150 cr. and net profit of Rs.14 cr. for FY08. This translates into an EPS of Rs.14 & Rs.21 for FY07 and FY08 respectively. Investors are strongly recommended to buy at current levels as its share price can double in a year’s time.

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Mobile Telecommunications Ltd. (Code: 532127) (Rs.16.91) manufactures box assemblies as well as PCB assemblies and caters to clients from IT, Auto, Power, Medical and the Telecommunications sector. But post acquisition of the BPO facility of M/s Quantum eServices, the company is now focusing on VOIP & IP telephony, BPO and manufacturing of WLL handsets. It has already acquired the licence for corDECT technology and is setting up a plant for the production of WLL handsets. It has also forayed into the energy-saving device business and has got into APFC (Automatic Power Factor Controller) panels under the joint venture with Herodex Power Systems. 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 the client’s choice. It also intends to enter the rapidly growing market of Wireless Broadband Services. It is expected to report a topline of Rs.23 cr. with a bottomline of Rs.1.50 cr. for FY07, which means an EPS of Rs.1.20 on its equity of Rs.11.90 cr. For FY08, it has the potential to clock an EPS of more than Rs.2. Buy at sharp declines.

Alufluoride Ltd. (Code: 524634) (Rs.17.40) is a reputed manufacturer and exporter of aluminium fluoride, which is used as flux in reducing the melting point of Alumina in the production of aluminium. Of late, the company has succeeded in sourcing an alternate supplier for Hydrofluosilicic acid for conversion on ad-hoc basis and is now working at higher capacity utilization. For the March’07 quarter, its sales grew by 10% to Rs.5.40 cr. and the PBT was Rs.1.20 cr. against a loss of Rs.0.20 cr. last year. However, due to tax provision of a whopping Rs.1.60 cr. including Rs.1.20 cr. as deferred tax, it reported a net loss of Rs.0.40 cr. Importantly, it clocked a record high OPM of 27% for this quarter. For the full year FY07, its sales and net profit were Rs.21 cr. and Rs.2.05 cr. respectively i.e. an EPS of Rs.3 on its equity of Rs.7 cr. Considering the strong improvement in its profit margin, it is estimated to end FY08 with topline of Rs.25 cr. and bottomline of Rs.3.50 cr., which means an EPS of Rs.5. Scrip has the potential to touch Rs.30 in the medium-term.

Batliboi Ltd. (Code: 522004) (Rs.107.55) is engaged in the business of machine tools, textile engineering, air conditioning and refrigeration. Its machine tools division manufactures and sources leading brands from across the world to meet the domestic requirements. It is a well-known supplier of a wide range of world-class textile machinery for spinning, weaving, knitting, processing and garmenting. It also executes turnkey HVAC (humidity, ventilation and air conditioning) projects across the globe. Moreover, it is actively involved in the design, selection, engineering, fabrication, supply, installation and commissioning of air and water pollution control equipment and systems for a variety of industrial and municipal application. Under a joint venture Batliboi enXco, it provides operation, service and maintenance for all types of wind turbine generators. Recently, it acquired 100% stake in Quickmill Inc., a Canada based machine tools company, for a consideration of approximately Rs.22 cr. in an all cash deal. For FY07, it is expected to register a total revenue of around Rs.130-135 cr. with PAT of Rs.13 cr. i.e. an EPS of Rs.10 on its equity of Rs.13.50 cr. For FY08, it can report an EPS of Rs.13 on a standalone basis. A good bet for 50% gain in a year’s time

Gontermann Peiper (I) Ltd. (Code: 504701) (Rs.50.90), an Ispat Group company is one of the leading manufacturers of Cast rolls and Forged rolls which find application primarily in the steel industry. Not only in India, its products are widely appreciated in USA, Canada, China, South Africa, Taiwan, South Korea, Thailand, Indonesia and many other countries. With the domestic and global steel industry adding capacity at a fast pace, the company is implementing an expansion-cum-modernization plan of Rs.40 cr. to enhance its production capacity to 18,000 MT of finished roll from 12,000 MT. This project is likely to be completed by end of 2007. Considering the future trend of the business globally, the company has given thrust to new product development – enhanced carbide rolls in ICDP variety and High Speed Steel Rolls. It is also scouting for inorganic growth opportunities in Europe to capitalize on the current boom in the steel industry and cater to European and US markets. It may end FY07 with net sales of Rs.150 cr. with net profit of around Rs.12.50 cr., which means EPS of Rs.9 on its equity of Rs.13.90 cr. With 52-week high at Rs.72, it’s a good buy at current levels.

Shree Hari Chemicals - Rs.29.50

Established in 1987, Shree Hari Chemicals Export Ltd. (SHCEL) is among the reputed manufacturers and exporters of a wide range of dyes & intermediates. Its Dyes division manufactures reactive dyes, acid dyes and direct dyes whereas under Intermediates it produces H-acid, Gamma Acid, Peri Acid, Toblas Acid, J.Acid, K.Acid etc. In addition to this, it also makes F.C.Acid, Vinyl Sulphone etc. with its updated technology and zero error in-process control system. The eventual product of the company is an intermediate for various types of dyestuffs. Interestingly 75% of India's total dyestuff production is intended for the textile industry and the balance 25% is used in leather, paper, food, soap/detergents and cosmetics etc. And with these sectors growing rapidly, the demand for the company’s products is bound to increase.

With an administrative office in Mumbai, SHCEL’s main manufacturing plant is situated on a 13,500 sq. mts. plot at the premier industrial estate in Mahad, about 175 km from Mumbai. It is in proximity to the main market of Mumbai, as well as to the ports of Mumbai & Nhava Sheva. The company also has production facilities with its associates in Gujarat. Nearly 40-50% of the production is exported to blue chip companies around the world. It has been awarded quality management system ISO 9001:2000 by SWISO, Switzerland. Last year, the company set-up a Solvent plant system, which is the latest technology available in the world, to increase the yield and improve quality. Besides, it has its own full-fledged Effluent Treatment Plant as per norms prescribed by the Maharashtra Pollution Control Board. It is also a member of Common Effluent Treatment Plant (CETP) managed by the Mahad Manufacturing Association and has contributed Rs.27.46 lakh to it. Importantly, earlier China was an exporter of dye & intermediates to India whereas recently it started importing some of these intermediates from India. Due to this, the company is witnessing a phenomenal increase in demand as well as better price for some of its products.

This is clearly visible in its December 2006 quarter numbers. Sales have more than doubled to Rs.20.52 cr. whereas its OPM shot up to 19% compared to 6% last year. Net profit stood at Rs.1.36 cr. against Rs.0.10 cr. in the last fiscal i.e. quarterly EPS of Rs.3. This means that the company has made a very smart turnaround from December’06 quarter. Whether it continues to report such performance is to be keenly watched. However, the annual per capita consumption of dyestuffs in our country stands at a merely 50 grams compared to the world average of over 200 grams. Hence there is a great potential growth of the dyestuffs demand in the domestic market. Also, India's share in the global dyestuff market is around 6.8% with an annual growth rate of around 20%. Assuming that the company repeats its December 2006 performance, it may end FY07 with net sales of Rs.70 cr. with net profit of around Rs.3.50 cr. This works out to an EPS of approx Rs.8 on its equity of Rs.4.50 cr. Eventhough the scrip is near its 52W high, it is trading at a P/E ratio of 3.5. And the company reports an OPM of more than 15% for the March 2007 quarter, the scrip can zoom up 50% in no time. Only speculative investors can take some exposure with the chance of getting handsome gains in short-term.

Patels Airtemp - Rs.34.00

Incorporated in 1973, Patels Airtemp (India) Ltd (PAL) is one of the leading designers, manufacturers and suppliers of the complete range of heat exchangers such as shell & tube type, finned tube type and air cooled heat exchangers, pressure vessels, columns & air-conditioning and refrigeration equipments like coils, air handling units, fan coils, fans & blowers, condensers & chillers etc. All these industrial process plant equipments are supplied to leading industrial sectors like power projects, refineries, fertilizers, cements, petrochemicals, engineering, pharmaceuticals, textiles, chemical etc. Importantly, the company also undertakes turnkey projects in the highly specialized and related area of Humidification, Ventilation and Air-Conditioning i.e. HVAC. Its expertise in HVAC project includes industrial air conditioning, pharmaceutical plant air conditioning, textile humidification, pressurization and ventilation systems, evaporative cooling systems etc. Besides, it also undertakes project work for air-conditioning multiplexes, offices, educational institutions, halls, theaters, hospital etc.

PAL has two manufacturing units in Gujarat – one at Mehsana and another at Ahmedabad. It has technical collaboration with M/s. TEK FINS Inc., USA, for design and manufacture of air-cooled heat exchangers. To support its turnkey HVAC projects, the company has even backward integrated its facility to manufacture package air conditioners, ductable air-conditioners, split air-conditioners, window air-conditioners etc. to cater to the domestic industrial segments. Importantly, all the products that it manufactures in the plant are designed in-house using the most advanced software. The company is accredited by the American Society of Mechanical Engineers (ASME) and the National Board of Boilers & Pressure Vessels. It maintains quality standards to satisfy third party inspections from leading agencies such as Lloyds, EIL, BVIS, IBR, CCOE, PDIL, LINDE, H&G, Technimont ICB, UHDE, CHEMTAX, BAXCOUNSEL etc. For updating its heat transfer technology, it has also become member of HTRI (Heat Transfer Research Inc., USA). It caters to a very huge clientele including leading companies from across the industry and is an approved supplier for most of them. Although miniscule, it also exports equipments to Indonesia, Srilanka, UAE, Jordan UK, Ukraine etc.

Due to strong industrial growth and the fast growing economy, this engineering fabrication company is doing extremely well. For the first nine months ending 31st December 2006, its sales and net profit have increased by 50% and 60% respectively. It is expected to end FY07 with a topline of Rs.45 cr. with bottomline of around Rs.2.35 cr. This works out to an EPS of Rs.5 on its equity of Rs.5.07 cr. For FY08, it can easily register 20% growth which means an EPS of Rs.6. This fast growing engineering company is trading fairly cheap at a P/E multiple of less than 6 and is available at a market cap of merely Rs.17 cr. Investors are strongly recommended to buy this scrip at current levels with a price target of Rs.50 i.e. 50% appreciation in 9-12 months.

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Eastern Silk Inds. Ltd. (Code: 590022) (Rs.243.05) is a leading manufacturer & exporter of silk fabrics with nearly 30% share of the organised silk market. It is present across the entire value chain from yarn to basic/design fabrics to embroidered fabrics and made-ups. It is now aggressively shifting towards the lucrative machine-made fabrics instead of handloom and powerloom fabrics. Secondly, it is implementing a huge capex of Rs.300 cr. to expand its weaving capacity and foray into home furnishing and made-ups business in a big way. Since the last four years, its OPM is constantly improving and is expected to be 20% for FY07 compared to 10% in FY03 and is expected to register net sales of Rs.475 cr. with net profit of Rs.63 cr. This translates into an EPS of Rs.40 on its current equity of Rs.15.80 cr. Currently, the scrip is trading at a P/E multiple of just 6 and has the potential to touch Rs.320 in the medium-term. It has also decided to split the face value of its Rs.10 paid-up share to Rs.2, which will improve its liquidity going forward.

Coral Laboratories Ltd. (Code: 524506) (Rs.119.50) manufactures a variety of formulations in capsules, dry syrup, tablets, liquid orals, special diagnostic kits, ointments, creams, injections, eye/ear drops etc. catering to inflammatory, bacterial, biotic, protein deficiencies and skin conditions. Last year, after expanding the capacity of its Daman plant, the company set up a new UK MHRA and US FDA compliant formulations plant n at Dehradun in Uttarkhand, which enables it to enter the regulatory export markets of developed countries. Its second project for the manufacture of 'Betalactum' is almost completed and the third project for injectibles is under implementation. Although its third quarter was not so great, it may still end FY07 with sales of Rs.32 cr. and net profit of Rs.6.50 cr. This translates into an EPS of Rs.18 on its current equity of Rs.3.57 cr. For FY08, it can report sales and net profit of Rs.40 cr. and Rs.8.50 cr. respectively. Buy on sharp declines only.

ITL Industries Ltd. (Code: 522183) (Rs.28.40) is a reputed metal cutting solutions provider offering a wide range of machine tools and cutting lubricants besides trading in hydraulic power packs and hydraulic presses. Apart from making Industrial Blades, Power Hackshaw Machines, Special Purpose Machines, Hydro Testers, Lubricants and other supporting equipments, it also manufactures Tube and Pipe Mills, Section Mills, Straightening Machines, Draw Benches, Automatic Cut-offs, Accumulators etc. It has already completed its modernization and expansion project with a capex of Rs.2.5 cr. last year and has also acquired the land in the SEZ in Pithampur for meeting global opportunities. Notably, it has healthy orders in hand due to good demand for tubes & pipes manufacturing machines along with its newly launched circular saw machine. The company is expected to declare very good numbers for the March’07 quarter and may end FY07 with sales of Rs.21 cr. with net profit of Rs.1.50 cr. i.e. an EPS of Rs.5 on its tiny equity of Rs.3.25 cr. At the current market cap of merely Rs.9 cr., it’s a risk-free buy, which can double in a year’s time

Few days back, GM Breweries Ltd. (Code: 507488) (Rs.89.90) came out with average numbers for the March’07 quarter. It made an all time high sales of Rs.47 cr., although it’s just 7% higher on YOY basis. It seems that the company made some accounting adjustment in FY06 and reported Rs.7.40 cr. net profit for the March 2006 quarter. However, for March 2007 quarter, it earned a decent OPM of 15% whereas its net profit stood at just Rs.3.60 cr. For the full year FY07, net sales increased by 12% to Rs.173 cr. whereas its OPM worked out to 13%. After a tax provision of Rs.6.20 cr. (i.e. 34% on the PBT), it reported a PAT of Rs.11.90 cr. This translates into an EPS of Rs.13 on its equity of Rs.9.36 cr. In spite of fall in profit in absolute terms, the company declared 18% dividend compared to 15% last year. For FY08, the company can clock a turnover of Rs.190 cr. with net profit of Rs.15 cr. i.e. an EPS of Rs.16. At a forward discounting by 8 times, the scrip can easily touch Rs.125 in a good market.