Nile Ltd. (Code:530129) Rs.73

Nile Ltd. was originally incorporated as a private limited company as Navabharat Industrial Linings and Equipment Pvt. Ltd. in 1984 and was later converted into a public limited company as Nile Ltd. (NIL) in 1994. NL has three main businesses viz. Glass Lining, Lead and Wind Energy. It is one of the leading manufacturers of Glass Lined Equipment, primarily used in pharmaceutical, specialty chemicals, agro chemicals and other similar industries. It has a technical collaboration with Hakko Sangyo Company Ltd., Japan and Comber of Italy. It also makes stainless steel glass-lined reactors, which meet some critical very-low-temperature applications. The lead and lead alloys are supplied to manufacturers of lead acid batteries, plastic stabilizers and metal oxides. The Wind energy generated is sold to Andhra Pradesh power Coordination committee.

NL manufacturing plant is located at Nacharam Industrial Estate, Hyderabad where it has totally integrated fabrication, machining and glass lining facilities. Recently, NL invested in augmenting its infrastructure and increased the installed capacity of the glass lining division from 12 lakh litres to 16 lakh litres. It has also been able to establish itself as a quality supplier of lead/ lead alloys, and has entered into long-term supply arrangements with Amara Raja Batteries apart from other customers in the plastic stabilizer business. Moreover, the company has now started focusing on export markets to boost its sales. Its wind farm is at Ramagiri and is generating power at a reasonable efficiency. The entire energy generated is sold to AP Power Coordination Committee at over Rs.3 per unit under a power purchase agreement.

Fundamentally, the company is quite strong and has a healthy growth track record. For FY06, its sales increased by 25% to Rs.57 cr. whereas PBT jumped 50% to Rs.3.55 cr. On a Net Profit basis, it recorded 35% gain to Rs.2.60 cr., which means an EPS of Rs.9. It declared Rs.3 as dividend, which works out to an yield of more than 4% at CMP. Although its margins are slightly under pressure due to the rising steel prices, still it is estimated to report a top-line of Rs.75 cr. and PAT of Rs.3.50 cr. for FY07. This will translate into an EPS of Rs.12 on its small equity of Rs.3 cr. This means that the scrip is available at a P/E ratio of around Rs.6. Notably, its competitor GMM Pfaudler is trading at much higher valuation. With its 52-week high/low at Rs.139/ Rs.63 and a good dividend yield, this scrip seems to have bottomed out at the current level and may start moving up anytime. Hereafter, investors are advised to buy, keeping a price target of around Rs.110 (50% return) in 15-18 months.