Gandhi Special Tubes - Rs.143.00

Gandhi Special Tubes Ltd. (GSTL) was established in 1985 under technical collaboration with Benteler of Germany who supplied most of the critical machines and was involved in the installation and commissioning of the plant. Today, it is among the very few companies that manufacture specialty welded and seamless steel tubes for automobiles and refrigeration. In fact, the company is the pioneer in introducing cold drawn seamless steel tubes normalised/annealed in bright annealing furnace in India. It also produces small diameter welded steel tubes in range of 3.1 to 12.7 mm with inside/outside copper or zinc plating. Incidentally, it has also started manufacturing cold formed tube nuts for fuel Injection tube assemblies as well as hydraulic tube assemblies.

GSTL’s main plant is located at Gujarat and smaller unit is in Pune. It has the latest facilities including CNC machines for bending, hydraulic head forming, welding/brazing, flushing, pressure testing etc. The company also manufactures tubular components like condensers, compressor parts, fuel injection tube assemblies, hydraulic tubes etc. The company has an enviable clientele and is a preferred supplier to reputed manufacturers such as Tata Motors, Godrej, Maruti Udyog, M&M, Bajaj Auto, Imperial Auto, L&T, BHEL, Kirloskar, Rexorth, Carrier, Voltas, Daewoo, Bluestar, LG, Samsung etc. Since all these biggies are on a massive growth path GSTL has a promising future. Apart from selling its products all over India, the company also exports to Germany, UK, South East Asian countries etc. In order to meet the increase in demand for its product, the company is undertaking an expansion project by installing a bright annealing furnance from Germany with a capacity of 2400 MT per annum. This project is expected to be commissioned within this fiscal. To enhance its global presence, the company is exploring the possibility of tapping the European and US markets where production costs are substantially higher. To avail of to various tax benefits, GSTL has installed two windmills with capacity of 1.25 MW each at Dhalgaon in Maharashtra at an investment of Rs.11.50 cr.

Financially, GSTL is a debt free company with a good dividend payment record for the last 10 years. For FY06, its sales improved by 20% to Rs.55.50 cr. while net profit shot up by 65% to Rs.16 cr. on lower tax provisions. For the September’06 quarter, its revenue increased by 20% to around Rs.15 cr. and profit grew by 25% to Rs.3.40 cr. With automobile, refrigeration and general engineering industries displaying healthy signs of growth, GSTL is expected to report a top-line of Rs.60-65 cr. and bottom-line of Rs.16 cr. This works out to an EPS of Rs.22 on its equity of Rs.7.35 cr. The 52-week high/low of the scrip is Rs.208/Rs.100 respectively. At a reasonable P/E ratio of 8, the share price has the potential to touch Rs.180 and on an optimistic P/E ratio of 12, it can cross Rs.260. Hence investors are advised to accumulate this scrip at sharp dips for a price target of Rs.180 (30% return) in 12 months.