Alphageo (India) Ltd - Rs.60.00

Incorporated in 1987, Alphageo is the first private sector company to enter the field of seismic data acquisition. It is the pioneer seismic contractor engaged in the business of seismic data acquisition, processing and interpretation. It also undertakes seismic surveys and offers a whole range of services for oil exploration & drilling like evaluation, reservoir and production services. It has been acquiring seismic data contracts for Oil India Ltd (OIL) and Directorate General of Hydrocarbons (DGH). Armed with technical know-how from Alphageo of USA, it has acquired equipments to map 2-D and 3-D seismic data, of which the latter is a versatile technique and a precise geo-physical tool to understand the earth's crust in geologically complex areas.

Looking at the opportunities unfolding in the oil & gas exploration and prospecting business, the company is making all efforts to train its personnel and introduce state-of-the-art equipment to meet the growing demand. Seismic surveys are undertaken to identify and study the migration paths, geometry and size of the ‘trap formation’, which enable the explorers to locate the existence of a hydrocarbon structure and decide on drilling an exploratory well or not. The company also has a tie-up with Alphageo, USA, for human resource development (HRD) for conducting advanced geo-seismic surveys in difficult terrains.

The Government of India's continued emphasis on increasing oil and gas production and the farming out of oil fields to private oil companies in the 4th round of National Exploration & Licensing Policy (NELP) has contributed to intense activity in the area of oil exploration. Also, the policy of oil majors to concentrate on their core activity of production and contracting out other related services like seismic surveys implies huge growth opportunities for the company. Moreover, the market for three dimensional seismic surveys is growing and is expected to register an exponential growth in the coming few years. In short, the company has bright future prospects and will grow at a good pace in months to come.

During H1FY05, its sales increased by 70 per cent to Rs11.10 cr. whereas profit doubled to Rs2.34 cr. recording an EPS of around Rs5. The best part is that the company has a very small equity of Rs4.95 cr. and any increase in profit leads to a handsome rise in EPS. The company is also expected to declare a dividend for FY05. Although Alphageo expects to face competition from MNCs going forward, India's aggressive policy to increase oil production given the upward spiral in crude oil prices, the company can register sales of Rs24 cr. and NP of around Rs5 cr. for FY05 which may further increase to Rs40 cr. of sales and NP of Rs7.5 cr. in FY06. The stock is currently discounted at 6 times its projected FY05 earning and 4 times the expected FY06 earning. It is a strong buy which can give 50 per cent returns in 12 months time and double in 24 months from the current level.