Easun Reyrolle - Rs.475.00

Established in 1980, Easun Reyrolle Ltd (ERL) is a joint venture of Easun group-India and Va Tech Reyrolle-U.K. a part of Va Tech group-Austria, the world's third largest T & D company. Easun group has been in the field of power engineering for over six decades offering virtually all vital components for a substation. Starting as a producer of electro-mechanical discrete relays, ERL has today emerged as a strong and independent solution provider in the areas of power system protection, control, automation, metering and switching segments and offers its customers in India and abroad, the state-of-the-art technology and efficient customer support. Whether it be in power generation, transmission, distribution or utility, ERL offers products, system, solutions and services to manage these segments with reliability, efficiency and safety.

The company has three manufacturing plants in India located at Hosur, Bangalore and Chennai, which incorporate modern production facilities and the latest test equipment. Presently its traditional business, which consists of power systems and power protections solutions contribute about 80% of the total revenues while power automation, metering and switchgears contribute the rest. Interestingly, the company is a strong competitor for MNCs like ABB, Siemens and Areva (Alstom) etc. In line with the market trend and moving up the value chain, ERL has recently ventured into a new business area i.e. construction of projects on turnkey basis under which it will mainly concentrate on substation projects and power system automation project which has high potential in coming years. Moreover, it is setting up a 45,000 sq ft world class manufacturing facility at Hosur for medium voltage switchgear with an investment of Rs.12 cr. This will be further expanded to 75,000 sq ft later on.

Fundamentally, the company is quite strong and with the government stressing on National Rural Electricity Infrastructure and Household Electrification Programmes to provide access to electricity to all rural households in five years the future looks very promising for the company. For FY06, its turnover grew by 100% to Rs.106 cr. whereas the NP increased 270% to Rs.13 cr. resulting an EPS of Rs.39 on its tiny equity of Rs.3.33 cr. It has reported healthy numbers for the June’06 quarter as well. For FY07, it may register a topline of Rs.120 cr. and bottom-line of Rs.15 cr. i.e. an EPS of Rs.48. Hence at a single digit PE, scrip is trading grossly cheap compare to its peers. Importantly, Siemens is interested in acquiring this company and has probably bought the 23.54% stake held by Va Tech Hydo GMBH. Siemens was to make an open offer for 20% but the ERL board opposed the open offer, as it did not wanting Seimens to takeover. The fact that Siemens is eyeing the company gives a clue to its value in the electrical power space. Investors are strongly recommended to buy it at current levels or at declines and hold it for 2-3 yrs at least to reap a windfall profit.