Gujarat Apollo Equipments - Rs.122.00

Incorporated in 1987, Gujarat Apollo Equipments Ltd. (GAEL) is the flagship company of the Rs.300 cr. Apollo group, which has diversified interest in industrial finance, road building, ship breaking, electronics, software development and environment control. GAEL is India's No.1 manufacturer of Asphalt based road construction & maintenance equipment and manufacturers the entire range of equipments for building roads like Asphalt plants (batch mix plants, drum mix & mobile drum mix plants), wet mix plants or soil stabilization plants, indirect heating equipment, paver finisher, bitumen sprayer, rollers, kerb paver and road maintenance equipments like milling machines and recycling machines. In fact, it is one of the few companies to make higher capacity Asphalt batch mix plants in 120-240 TPH range. Today, GAEL can boast of having over 1,400 customers and an equipment population of about 3,500 units. The company derives revenue from the sale of road construction equipments, spares, annual maintenance contracts (after sales service) and road construction.

GAEL’s IS0 9001: 2000 certified state-of-the-art manufacturing plant is located in Gujarat and caters to all three categories viz. government & semi-government agencies, private corporate customers and small contractors. It also exports its equipment to African countries, Afghanistan, Iraq, Bangladesh, Nepal, Sri Lanka, Maldives and the Middle East for which it has been awarded One Star Export House status by the Ministry of Commerce & Industry. To bring in the latest technology and produce best quality products, GAEL has technology tie-ups and joint ventures with world-renowned companies like Niigata Engineering Co. Ltd., Japan, Barber Greene, USA, Wheelaborator Clean Water Systems of the USA, Famaro Ermont, France, Atlas Weyhausen, Germany, etc. In order to capitalise on the potential demand, the company is scaling up its capacity by 100% over the next two years. The first phase will be of brown field expansion wherein it will expand its capacity by 50% from the current 180 units to 270 units. In the second phase, the company will go for green field expansion and plans to set up an export-oriented unit with 90 units capacity in a Special Economic Zone.

The Central Government is currently awarding contracts for the National Highway Development Project (Phase III) covering 4,000 km of national highway while 2,497 km of roads under Phase I and Phase II are currently under construction. Various other projects such as NSEW, expansion of the Golden Quadrilateral and port connectivity projects have been lined up for the next 5-6 years. This will ensure that the outlook for the company remains bright for many years ahead. Moreover, GAEL is putting special thrust on lucrative exports market and intends to take its share to 40% by 2008 from the current 15-20%. To fund its expansion, the company is coming out with a right issue in the ratio of one share for every two shares held at Rs.100 per share. For FY06, its turnover grew by 70% to Rs.105 cr. but the net profit doubled to Rs.10.50 cr. registering an EPS of Rs.15 on its equity of Rs.7 cr. and it declared Rs.2 as dividend. For FY07, the company is expect to report sales of Rs.135 cr. and net profit of Rs.14 cr. i.e. an EPS of Rs.13 on its expanded equity of Rs.10.50 cr. Investors are strongly recommended to buy at the current level as the share price can easily appreciate 50% i.e. to Rs.180 in 9-12 months.