Austin Engineering - Rs.82.00

Austin Engineering Company Ltd. (AEC) was incorporated as private limited company in 1978 and was subsequently converted into public limited company in 1985. Founded by 5 technocrats, AEC today manufactures the widest range of ball and roller bearings in a single manufacturing unit in India. AEC manufactures all types of bearings, which include Ball Bearings, Cylindrical Roller Bearings, Needle Roller Bearings, Tapered Roller Bearings, Spherical Roller Bearings and Flexible Roller Bearings etc. It makes more than 2500 different types of bearings in sizes ranging from 10mm inner diameter to 1000 mm outer diameter. . Its products are mainly consumed by the auto and engineering industry apart from steel plants, textile machinery manufacturers, power plants, defence industry, railways and the replacement market. The company has a strong, reputed clientele including Tata Motors, SAIL, Premier Automobiles, Punjab Tractors and Defence. It also exports to developed countries like USA, UK, Germany, Italy etc.

AEC’s has two manufacturing plants spread across 3,50,000 sq ft at Patla in Gujarat with an installed capacity of 3 million bearings. Due to rapid development and flexible manufacturing system, batch size is not a constraint and is its strong point to meet its customers' needs. It has an in-house R&D staffed by well-qualified engineers, a metallurgical lab using the finest gauges to critically follow the material behaviour after every process. The company continuously undertakes comprehensive modernization and technology upgradation as its product is well accepted by OEMs as an import substitute. AEC is planning to launch a number of new and high value added products, which will further strengthen its competitive edge in future. It has also established subsidiaries in Italy and USA to increase its exports.

Due to the huge demand from user industries and the strong industrial growth, AEC is witnessing the best of times. For Dec.’05 qtr. its Sales rose by 53% to Rs.15 cr. and NP almost tripled to Rs.1.10 cr. reporting a quarterly. EPS of Rs.3.35 on its current equity of Rs.3.28 cr. For full FY06, company is estimated to clock sales of Rs.55 cr. and NP Rs.3.50 cr. For FY07, sales may further rise to Rs.65 cr. with NP Rs.4.50 cr. This means an EPS of Rs.11 and Rs.14 for FY06 and FY07 respectively. The company is also expected to return to the dividend list from this fiscal itself. With reserves of nearly Rs.15 cr. i.e. book value of Rs.55 and a market cap of only Rs.26 cr., the scrip is trading reasonably cheap in the fast growing engineering sector. Investors are strongly recommended to buy it at CMP for 100% appreciation with a price target of Rs.150 in 15~18 months.