TIL Ltd - Rs 235.00

Established in 1944, TIL Ltd (erstwhile Tractors India Ltd) is one of the oldest and country’s leading providers of a wide range of technology intensive equipment for infrastructure development that represent some of the finest in global technology. It provides a complete gamut of support solutions ranging from equipment recommendation to total maintenance and repair contracts. Apart from manufacturing and marketing hi-tech equipments, TIL’s forte also lies in after sales service including equipment commissioning, inspection, overhauling and rehabilitation, training support, 365 days service and tailor made service contracts. It also offers field repair service and fleet maintenance management even if the equipments are deployed in the remotest location. And most importantly, TIL boasts of having a strong network of parts warehouses across various regions to minimize delivery lead time. Infact, its total stock of spare parts exceeds 2 lac line items which ensures that all the critical items are available off the self to its customers. Headquartered in Kolkata, company has four regional offices (Kolkata, Delhi, Mumbai and Chennai) and a network of 50 branches. Besides it has overseas office is in Phuntsholing (Bhutan) and subsidiaries in Nepal, Myanmar and Singapore. Its manufacturing locations are based in Kolkata (cranes, reach stackers and lorry loaders) and Ghaziabad (generator sets). To have cutting edge technology, TIL has several long term technical and strategic alliances with leading Equipment manufacturers in the world - Caterpillar Inc, Grove Worldwide USA, Manitowoc Crane Group - USA, Paceco Corp-USA [a part of Mitsui Engineering and Shipbuilding-Japan], FAMAK - SA, Poland. For effective management, TIL operates through following three strategic business groups

Material Handling Solutions (20%): This division designs, manufactures, markets and supports a comprehensive range of lifting and material handling equipment. Notably, it has many “first in India” to its credit – the first mobile yard crane, first truck mounted crane, the first rough terrain crane, the first 100 tonne crane to name a few. The broad product portfolio includes all types of Mobile Cranes, Lorry Loaders, Reach Stackers, Electric Level Luffing cranes, Rubber Tyre Gantry cranes, Lattice Boom Crawler cranes etc. The division caters to a wide array of infrastructure sectors such as Port, Aviation, Railways, Construction, Mining, Oil & Petrochemicals, Steel plants, Cement, Power and Defence through its product range. Presently, TIL is the undisputed leader commanding more than 60% market share in India and is infact the only manufacturer of higher capacity mobile cranes (40 tones and above) in India.

Construction and Mining Solutions (60%): This is basically the dealership division, as TIL represents “Caterpillar’ products across North and East India as well as Bhutan, Nepal and Myanmar. It markets, imports and services a comprehensive, range of equipment manufactured by Caterpillar- the world leader in construction and mining equipment. Remarkably, TIL partnered with ‘Caterpillar' in 1944 and since last 6 decades the bonding has only become stronger. The products offerings include Wheel Loaders, Backhoe Loaders, Excavators, Off Highway Trucks, Motor Graders, Track-Type Tractors, Compactors, Paving products, Wheel Dozers and Underground Mining equipment. Being a very reputed brand, the equipments are extensively used by the companies in mining & quarrying industry like coal, iron ore, metal and limestone. Its also popular in construction sector like building, Roads, Ports, Power (thermal and hydro), Airport, Urban and Rural infrastructure.

Power Systems Solutions (20%): For continuous and quality power and for critical standby applications, TIL offers a complete portfolio of diesel and natural gas generator sets powered by Caterpillar engines. The core focus products are diesel generators from 200 kVA to 3500 kVA and gas generators from 1000 kVA to 3500 kVA. It even markets only the engines for industrial, oil & gas, marine as well other applications. It also deals in engine and generator sets used for the Petroleum sector. Thus as a single source for complete power solutions, TIL provides application engineering, feasibility studies, supply chain management, onsite installation services, and uninterrupted product uptime thru on-site support & maintenance.

Apart from above three segments, TIL has of late started to focus on the global concept of providing equipment on Rent. In India, the rental business is gaining importance rapidly as it eliminates capital investments, risk of equipment idling, the need for cumbersome maintenance, as well as inventory management for the end users. To cash on this growing opportunity, company has already set up six rental stores in Sahibabad, Bhubaneswar, Asansol, Lucknow, Udaipur and Chandigarh. These rental stores offer new and relatively new rental equipment and reliable used equipment. To improve coverage and be close to the medium & smaller size companies, rental was also promoted from outlets in Dhanbad, Jamshedpur, Kolkata and Ranchi. Due to special thrust, company rented out more than 150 units for the first time in FY09 and is planning to grow this business at CAGR of 50% for next 5 years.

To maintain its growth momentum, TIL is in the midst of constructing a 5-star state-of-the-art component rebuild centre at Asansol-West Bengal, as per the Caterpillar standards. Simultaneously, it is also putting up a Greenfield plant for manufacturing cranes and other new products. Of the required 200 acres of land, the company has already acquired 100 acres of land at Kharagpur, West Bengal. The total capex is estimated to be Rs ~200 cr and may begin operation in FY11. Meantime, to enhance its product range and increase its customer base TIL has entered into strategic tie up with NACCO-USA for marketing its Hyster range of Big Forklift trucks, Container Handlers & Reach Stackers. Besides its has also entered into technical collaboration with Astec Inc – USA for manufacturing Double Barrel Hot Mix Asphalt plant, used in the road making industry and for crushing and screening plants for mining and construction industry. This new indigenization process under the technology transfer and licensing agreement from Astec will enhance TIL’s cost competitiveness and ensure faster delivery and better value proposition.

During FY09, the infrastructure industry in particular, was impacted because of the freeze on fresh capital infusion into projects of a large size, given the contracted liquidity situation across the globe. Ironically, the Indian construction equipment industry at US$ 2.3 billion, is a fraction of the global market, whose size is over US$ 75 billion. However, it has been growing at a frenetic pace of 30%, in sharp contrast to the world average of 5 per cent. Today, India is one among the top ten markets for construction equipment and is one of the key international markets. The Government of India's focus on infrastructure development is the single biggest driver for the construction, mining and material handling equipment industry. With government planning to invest Rs. 2,002,000 cr in physical infrastructure (railways, roads, ports, airports, irrigation, urban and rural water supply and sanitation) as per Eleventh Five-Year Plan, the future prospect of the company looks robust.

Financially TIL is doing well although it didn’t recorded spectacular growth as it did in FY08 due to obvious reasons. For FY09 on a consolidated basis it recorded marginal decline in sales to Rs 1037 cr and 7% rise in PAT to Rs 45 cr leading to an EPS of Rs 44 on equity of Rs 10 cr. However for Q1FY10 it reported flat bottomline of Rs 5.80 cr despite 10% fall in topline to Rs 163 cr on a standalone basis. But considering all the factors like revival in construction sector & fall in metal prices, TIL is expected to clock a consolidated turnover of Rs 1200 cr and NP of Rs 48 cr i.e. EPS of 48 on current equity. Recently, the 30 lac convertible warrants (@ Rs 326) which were issued in Dec’07 to promoter group & ENAM to fund the expansion got lapsed due to poor market sentiment. But it doesnt make much difference as company can easily raise debt and complete the project. Its debt equity ratio stands low at 0.50x. At current Enterprise Value of Rs 300 cr, TIL is trading grossly cheap at PE ratio of less than 5x times, EV/EBITDA of less than 3x times & Price/book value of almost 1x times. Investors are strongly recommended to buy at current levels for 50% gain within 12~15 months.

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For the latest June’09 quarter TIL Ltd (250.00) reported flat bottomline of Rs 5.80 cr despite 10% fall in topline to Rs 163 cr on a standalone basis. Company is engaged in three business segment namely construction and mining solutions, material handling solutions & power systems solutions. It has long term technical and strategic alliances with leading equipment manufacturers in the world- Caterpillar Inc, Manitowoc crane Group, USA Famak S.A, Poland and Paceco Corp, USA. Pioneering the manufacture of mobile cranes in India, company deals in hundreds of specialized construction equipment like excavators, loaders, pavers, rollers, concrete mixers, batch plants, forklifts, conveyors, tower cranes, crushing plants, dumpers, demolition equipments etc. To cater the global clients effectively it has set up subsidiaries in Singapore, Myanmar & Nepal etc which are doing well. For FY09 on a consolidated basis company has recorded sales of Rs 1037 cr and PAT of Rs 44 cr leading to an EPS of Rs 44 on equity of Rs10 cr. With government planning to invest Rs. 2,002,000 cr in physical infrastructure (railways, roads, ports, airports, irrigation, urban and rural water supply and sanitation) as per Eleventh Five-Year Plan, the future prospect of the company looks robust. Thus company is even setting up a Greenfield plant in West Bengal under a capex of Rs 175 cr which may get ready by late 2010. Meanwhile the 30 lac convertible warrants (@ Rs 326) which were issued in Dec’07 to fund this expansion got lapsed due to poor market sentiment. But it doesnt make much difference as company can easily raise debt and complete the project. For FY10, on a consolidated basis it is expected to clock a turnover of Rs 1200 cr and PAT of Rs 48 cr i.e. EPS of Rs 48 on current equity. A solid bet

Once again Jupiter Bioscience (48.00) has reported satisfactory performance for the June’09 quarter. Sales improved by 15% to Rs 33 cr but PAT remained flat at Rs 7 cr posting an EPS of Rs 4.50 for the single quarter. Even for FY09, company had clocked 10% rise in sales to Rs 143 cr and 20% increase in profit to Rs 32 cr thereby posting an EPS of Rs 20 on a standalone basis. Although the consolidated nos are not available but it estimated to be marginally better. Company is operating in a very niche segment and is among the few companies in the world to have competency in synthesis of peptides. The technology focus of the company has enabled it to develop more than 400 products in its catalogue and establish a leadership position in the peptide business internationally. It is poised to become a global peptide solutions group having a broad canvas of peptide chemistry products, peptide reagents, coupling reagents, protective agents and supplier of key ingredients used in peptide based pharmaceuticals. However few experts have concerns over the non performance of its subsidiaries despite considerable capital being employed into them. Despite this investors can accumulate the scrip at current levels. The days its subsidiaries start performing scrip will see a vertical rise.

After witnessing the worst time of its history, things are gradually improving for Phillips Carbon Black (100.00). Due to economic meltdown and slump in auto sector, demand for carbon black also nose-dived during late 2008 which forced the company to cut down the production. Moreover the carbon black prices also fell due to dumping & inventory clearance by international players. Incidentally, company’s capacity utilization for FY09 stood at merely 79% (against 93% in FY08). However in the last few months the price as well as demand has improved to some extent. Also anti-dumping investigation against import of carbon black from Thailand, Australia, China, Russia, etc. is in progress and it is expected to be concluded in due course during FY10. In the meantime company reported encouraging performance for the June’09 quarter. After reporting significant operating loss in the preceding two quarters it recorded an operating profit of Rs 32 cr (OPM of 11%) for this quarter. Interestingly it reported only 10% fall in sales and PAT to Rs 291 cr & Rs 20.50 cr respectively against corresponding quarter last year. In order to generate extra revenue from sale of power, company has put up a huge 30 MW power generation plant which commenced commercial operation from April, 2009. For future growth company is looking to expand its installed capacity by whopping 140,000 tonne thru Greenfield as well Brownfield expansion along with adding another 32 MW of captive power generation facility. In short, post all expansion by end of 2010, its carbon black production capacity will stand augmented to 410,000 MTPA and power generation capacity to 80.50 MW. Worth a punt.

Ironically, the net profit of Balaji Amines (85.00) remained same at Rs 5 cr despite 25% fall in topline to Rs 59 cr. It recorded a healthy OPM of 17% against 12% in the corresponding quarter last year. For FY09 its sales as well as net profit were up 15% to Rs 252 cr & 15 cr respectively. Company is among the few handful manufacturers across the world producing methylamines, ethylamines and their derivatives, as amine manufacturing technology is a closely guarded process. Ironically company is using indigenously developed technology i.e. without any technical foreign collaboration. It also produces specialty chemicals which are import substitutes like Morpholine,hydroxylamine, N-Methyl Pyrrolidone etc and few natural products (herbal extracts) such as solanesol, calcium sennosoid, coleus forskohlii, camptothesin etc. Infact couple of weeks ago it commissioned Gamma Butyro Lactone (GBL) plant with a capacity of 18 MT / day which is first of its kind in India and is a 100% import substitute. However being in a petrochemical industry with crude based feed stock, company’s performance is affected to some extent by the volatility in crude oil prices. For FY10 it is expected to register sales of Rs 250 cr and PAT of Rs 15~16 cr i.e. EPS of Rs 25 on equity of Rs 6.50 cr. Only long term investors can accumulate at declines.

Vivimed Labs Ltd - Rs 76.00

Incorporated in 1989, Vivimed Labs Ltd (VLL) is a speciality chemical manufacturer with prime focus on the Home and Personal Care (H&PC) segment. Its extensive range of speciality chemicals caters to segments including oral care, sun care, skin care, hair care, natural extracts, preservatives, anti microbial, anti oxidants, anti-aging molecule etc. In short company’s primary strength is in synthetic organic chemistry. Remarkably, VLL is the worlds 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. Thru acquisitions of Creative Health Care and merger of associated company VVS Pharmaceuticals & Pharmaceuticals Pvt Ltd, VLL has entered into the speciality pharma business as well. This specialty division has its inherent strengths in drug delivery and drug discovery with focus on providing cures in the oncology space, arthritis, syndrome X, macular degeneration, psoriasis and stress. Moreover, VLL is an active player in CRAM (Contract Research and manufacturing) segment providing vendor partnerships ranging from molecular research to collaborative manufacturing. It holds a unique position in the international H&PC industry with supply-chain relationship with global leaders including - Unilever, L'Oreal, Procter & Gamble, Johnson & Johnson etc. Having exclusive tie ups with global logistics companies, VLL has been offering shipment, warehousing, redistribution and door delivery services to large global majors. It has global network of offices, representatives and distributors across America, Europe, Far East and the Asia Pacific region.

Importantly, in May 2008 VLL acquired 100% stake in M/s James Robinson,UK (JR) which is an international manufacturer and supplier of speciality chemicals used in hair dyes, pharmaceuticals and photographic films/prints to ophthalmic sunglasses. Infact, one out of every three hair dyes in the world has a specialty chemical from JR. With manufacturing plants in UK, Germany and India, JR now a 100% subsidiary of VLL also offers a novel range of photochromic dyes for a wide variety of applications including ophthalmics, plastics, coatings and inks, and fluorescent dyes for both textile and non-textile applications. Thus this acquisition has seamlessly positioned VLL in the larger and high value space of high-end specialty chemicals. In order to avail the benefits of lower cost of production, manufacturing of most of the products of JR is being shifted to India.

As of today, VLL has two speciality chemicals plants – one in Bidar (Karnataka) and second in Hyderabad(AP). Apart from these it has three other pharmaceutical finished dose plants one each at Hyderabad (AP), Kashipur (Uttaranchal) and Haridwar (Uttaranchal) where it manufactures all types of solid oral, liquid orals, topical applications, small volume parenterals, cytotoxic etc. As the demand for end products in H&PC industry (like skin care, hair care, oral care products) is growing substantially, VLL is also witnessing robust demand for its chemicals. It has been constantly expanding its capacity and has chalked out capex plan for coming years as well. It has already bought land in Uttranchal for Greenfield expansion and another 23 acre land in Hyderabad to set up state-of-the-art R&D centre and pilot plant. Meanwhile its CRAM division, is focusing on exploring joint ventures / strategic alliances with manufacturers and IP companies in the specialty chemicals sector to partner in areas ranging from custom synthesis to commercial production. It offers contract manufacturing services from less than 1 metric tonne to more than 100 metric tonne. On the other hand its R&D section, is busy in researching and collaborating for creating new drug delivery systems with special thrust on anti-obesity dieting products, anti arthritic drug, anti-wrinkler, an anti oxidant, an anti cancer drug and an anti acne products. Notably, it has undertaken new formulations in urinary disorder and psoriasis treatment and the results are very encouraging.

Meanwhile, VLL is also open for inorganic growth. To increase its global footprint further and cut down the time to market for global customers, company recently in Dec 2008 finalized to acquire & merge Har-met International Inc, USA which is an importer of pharmaceutical and cosmetic ingredients since last two decades. To fund the JR acquisition and expansion plan, VLL had raised roughly Rs 60 cr thru FCCB of US$ 15 million in June 2007 to be converted @ Rs 185 per equity share. However out of this, company has now bought back US$ 12.50 million of FCCB with only US $ 2.50 million outstanding as on date. For FY09, on a consolidated basis VLL reported a turnover of Rs 280 cr (up 55%) and PAT of Rs 22 cr (up 40%) i.e. EPS of Rs 24 on equity of Rs 9.40 cr. Even for recent June’09 quarter it recorded 50% rise in sales to Rs 80 cr whereas net profit zoomed up 70% to Rs 7 cr. Accordingly for FY10, it is estimated to report a consolidated sales of more than Rs 325 cr and net profit of Rs 25 cr. This leads to an EPS of Rs 27 on current equity of Rs 9.40 cr. Investors are strongly recommended to buy at current levels as share price can double within 15 months.

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For the latest June’09 Genus power (190.00) reported 20% growth in revenue to Rs 120 cr but bottomline remained flat at Rs 8.00 due to higher interest cost. Company is amongst the leading integrated metering solutions' providers and the pioneer in implementing AMR (Automatic Meter Reader) technology. It has diversified into engineering construction and currently derives more than 50% from EPC power T&D projects where it provides absolute solutions for power transmission & distribution system. As a step forward, company has also launched IT enabled distribution transformer metering system, feeder monitoring and management system, smart street light management system with value added software application for providing end to end solutions for energy management. For FY09 it had recorded 6% rise in bottomline to Rs 51 cr on 25% higher sales of Rs 586 cr thereby posting an EPS of Rs 35. Recently, company cancelled the 16 lac convertible warrants and forfeited the advance amount received as the allottee’s didn’t exercised the option of conversion. Now there is no outstanding stock position which can dilute the equity. As power sector being the least affected due to slowdown, company is having an impressive order book position of more than Rs 1000 cr which is almost double its FY09 revenue. Moreover it has participated in tenders of around Rs ~1300 cr, out of which it is already 'L-1' bidder in tenders worth Rs.283 cr. Accordingly for FY10, it is estimated to do sales of Rs 700 cr and net profit of Rs 55 cr i.e. EPS of Rs 37 on current equity of Rs 14.80 cr.

J Kumar (115.00) has once again reported excellent set of nos for the latest June’09 quarter. Total revenue jumped up 70% to Rs 153 cr whereas net profit increased by 60% to Rs 12 cr. Notably, company has been able to scale up its operation without any compromise on margin. Its OPM for the quarter stood at healthy 15%. For FY09 company had recorded 85% growth in topline to Rs 389 cr and 70% jump in bottomline to Rs 33 cr posting an EPS of Rs 16 on equity base of Rs 20.70 cr. Despite challenging times and overall slowdown company has been constantly bagging good orders. Last fiscal it had bagged huge orders to the tune of Rs 560 cr from MMRDA and MSRDC. Couple of months back it was awarded Rs 130 cr order for construction of nallah & Railway Bridge (Jogeshwari) in Mumbai. This week it has won another 155 cr order for construction of flyover and other dam/canal related marine project thereby taking its total order book position to nearly Rs 1300 cr. In order to fund its various project, company recently made a preferential allotment of 40 lac convertible warrants to promoters and others at the rate of Rs 60 per warrant. For FY10 it may clock a turnover of Rs 550 cr and PAT of Rs 38 cr which works to an EPS of Rs 15 on fully diluted equity of Rs 24.72 cr. Buy at declines only.

JB Chemicals (42.00) - flagship company of the Unique Group, manufactures and markets a wide range of pharmaceutical formulations, herbal remedies, bulk drugs, intermediates and radio-diagnostics products for domestic and international market. Headquartered in Mumbai, it has a large global presence with operations in over 50 countries across the globe. Exports contribute ~70% of total revenue with major chunk coming from key market like Russia/Ukraine/CIS countries. Infact it is one of the top three Indian companies in Russia with its flagship brand "Doktor Mom", being the most trusted and undisputed leader in its segment. Though company would continue to concentrate on its existing markets, it has identified South Africa, Australia, Brazil, Venezuela and other Latin American countries as future growth drivers. It has identified high potential for its herbal and ethical formulations in central European countries. In order to tap this potential, the company, during the year, has set up a wholly owned subsidiary in Romania. For the June’09 quarter its sales as well as net profit remained flat at Rs 139 cr and 13 cr respectively clocking an EPS of Rs 1.60 for the quarter. With an expected EPS of Rs 7 for FY10, scrip can be accumulated at declines.

Despite clocking good performance quarter after quarter, Aditya Birla Chemicals (64.00) is being ignored by the market for quite some time now. Even for the latest June’09 quarter its topline grew by 15% to Rs 60 cr and PAT improved by 20% to Rs 16 cr. It is one of the few companies which have been consistently reporting an OPM of ~40% and NPM of ~25%. Earlier known as Bihar Caustic, it is among the leading caustic soda producer in the northern and eastern region of the country having an installed capacity of 265 TPD of caustic soda, 200 TPD of liquid chlorine, 130 TPD of hydrochloric acid, 150,000 Nm3/day of compressed hydrogen and 3 TPD of sodium hypo chlorite. It has also set up a 25 TPD stable bleaching powder plant and 12000 TPA of aluminum chloride unit. To maintain its future growth, company is in the process of further augmenting the capacity of its caustic soda from 265 TPD to 300 TPD at a capital investment of Rs 30 cr. With nearly 70% its production being taken by Hindalco, company has an assured and ready market for its product. During Q2FY09, company faced minor disruption in production due to some problem in the power plant boiler which affected its bottomline. Hence, company is expected to report comparatively higher bottomline in the current quarter i.e. Q2FY10. And for entire FY10 it may post sales of Rs 240 cr and PAT of Rs 60 cr i.e. EPS of Rs 26 on current equity of Rs 23.40 cr. A screaming buy at current levels.

JMC Projects (India) Ltd - Rs 155.00

Founded in 1982, JMC Projects (India) 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 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 setting up industrial plants for automobiles, textiles, heavy engineering, chemicals, cement, pharmaceuticals, sugar, power 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.

However in the last few years JMC has started focusing on infrastructure and power projects. It now undertakes several projects to construct bridges & flyovers, roads & highways, railways stations, marine work, water supply & irrigation projects and construction of power plants. It is aggressively bidding for government contracts and is even executing big road projects for NHAI. 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, Godrej, Brigade Ent, Wipro, MPRDC, NHAI, Vedanta Aluminium, JP Associates etc. It has been hardly two year that JMC ventured into power sector and it is already getting repeat orders from biggies like Reliance Energy, Reliance Infrastructure, BHEL, Alstom, Elecon Engineering etc. It has also achieved a major breakthrough during the first year of operation, in the Eastern India region, in terms of securing and successfully executing large value projects. However due to economic & political factors, JMC received new contracts of approx. Rs. 1030 cr during the entire FY09 (against Rs 1840 cr for FY08). Despite this it boasts of having order book position of Rs 2200 cr (i.e. 1.7x times its FY09 turnover) of which nearly 50% consists of industrial construction/buildings segment, 30% of infrastructure related and 12% of power projects. JMC is also executing major fast track projects in Delhi for the Commonwealth Games 2010. For future growth, it is focusing on the infrastructure sector especially roads, urban infrastructure and power Sector which are relatively less affected by the economic slowdown. It also intends to take up railways, airports and water management projects on an EPC basis which will further add to its execution capabilities.

Since the beginning of the last year construction industry has been affected to a major extent due to the economic meltdown. Infrastructure projects are witnessing a slow down and the real estate sector is in a slump. Private investors have pushed back several big projects planned earlier, either due to lack of funds or these becoming unviable. But in the view of the latest developments, it appears that the situation might begin to look positive by the end of the year 2009-10. Moreover sustained focus of the government to improve infrastructure especially roads, ports, power, housing and increased allocation to various schemes such as NHDP, Bharat Nirman, RIDF, Jawaharlal Nehru National Urban Renewable Mission (JNNURM) would result in continued growth for the construction industry. Some areas like roads, rail lines, ports and airports are already operating at saturation, so further expansion is inevitable for economic growth. As per Eleventh Five Year Plan, more than US$ 500 billion worth of investment is planned to flow into India’s infrastructure by 2012. And the construction industry accounts for a significant portion of the proposed investments. So construction and modernization of airports, Urban Development Projects, Bus Rapid Transit System (BRTS) and Metro Rail Projects in mega cities, major power projects and SEZs has opened up a plethora of business opportunities for construction companies in general and JMC in specific. Thus except for the ailing real estate sector, the overall scenario for the construction industry looks to be optimistic.

Fundamentally, JMC is doing well as it clocked 45% growth in topline to Rs 1309 cr and 20% rise in PAT to Rs 37 cr for FY09 posting an EPs of Rs 19 on equity of Rs 18 cr. Incidentally, company’s bottomline was affected on stoppage of work in Agra Bypass Road Project of NHAI due to non-availability of land. Meanwhile for the recent Q1FY10, its revenue declined by marginally to Rs 292 cr but net profit remained flat at Rs 6.50 cr. Recently, JMC converted the 12,50,000 Optionally Convertible Preference Shares of Rs. 202/- each into Non-Cumulative Redeemable Preference Shares as the holders didn’t exercise their option for conversion into equity shares. Further company has decided to redeem these preference shares of Rs 25 cr for which it is coming out with a right issue of Rs 40 cr in the ratio of 1:5 @ Rs 110/- per share. The issue has been priced in line with FY09 book value which is Rs 111 as on 31st March 2009. Unfortunately, the issue will be EPS dilutive as most of the money will be utilized to redeem the preference shares and rest will utilized for working capital. The scrip has already gone ex-right on 24th July 2009. For FY10 company is expected to clock a turnover of Rs 1500 cr and NP of Rs 42 cr i.e. EPS of Rs 19 on diluted equity of Rs 21.75 cr. Looking at the market dynamics its possible that scrip may see a correction upto Rs 125~130 where investors can accumulate for a price target of Rs 210 in 15~18 months.

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