Sunil Hitech - Rs.74.50

Sunil Hitech Engineers Ltd. (SHEL) is an engineering turnkey service provider in the power sector. It is engaged in the niche segment of fabrication, erection, testing and commissioning of bunkers, electrostatic precipitators, boilers and turbine generator sets in power plants. Its service profile includes civil works for thermal power stations, ash handling, repairs, modification, rehabilitation and major maintenance of power plants. The company has executed many projects varying from 30 MW to 500 MW like Korba STPS (Super Thermal Power Station), Chandrapur STPS, Vindhachal STPS, Talcher STPP (Super Thermal Power Plant), Rihand STPP etc. Its clientele includes heavyweights like BHEL, REL, NTPC, L&T, Tata Power, Punj Lloyd, JSW Steel, Sterlite, Tata Power and major SEBs across India.

Currently, SHEL derives 85% revenue from its projects division whereas 15% comes from its operations & maintenance division. Its present service offering on the generation side is strongly backed by a manufacturing facility through a 100% subsidiary-Sunil Hitech Engineers & Manufacturers and a huge fleet of heavy equipments and machineries. Recently, SHEL has diversified into manufacturing of Transmission Towers with an initial investment of Rs.10 cr. For this purpose, it is setting up a fully automated German technology galvanizing plant at Butibori, Nagpur, with an annual production capacity of 20,000 MTPA expandable upto 40,000 MTPA for a total capex of Rs.110 cr. Of late, the company has also forayed into power distribution-related contracts and is executing the Rs.19 cr. Accelerated Power Development and Reforms Programme (APDRP) project in Kalyan, near Mumbai. Besides this, it has participated for Bhandup and Thane APDRP tenders worth Rs.130 cr. Thus, the company is now into each part of power sector viz. generation, transmission & distribution. Importantly, the company is regularly bagging prestigious orders and is constantly bidding for various public and private projects. At present, its 25 projects are at the execution stage and its order book stands at whopping Rs.500 cr., which is nearly 3 times its expected FY07 topline.

Moreover, the central government has planned an addition of 1,00,000 MW by 2012 in the 10th and 11th Five Year Plans and huge investment for upgradation of old power plants in addition to power sector reforms would create huge business opportunities for the company in coming years. In February 2006, SHEL launched its maiden IPO by issuing 34.8 lakh equity shares at Rs.100 aggregating to around Rs.35 cr. For FY07, it is expected to clock a turnover of around Rs.150 cr. with net profit of Rs.6.50 cr. recording an EPS of Rs.6.50 on its current equity of Rs.10 cr. However, on the back of aggressive order execution, it may report total revenue of Rs.220 cr. and profit of Rs.11 cr. i.e. EPS of Rs.11 for FY08. This means that the scrip is currently trading at a P/E multiple of merely 7 against its FY08 earnings. Although the company may raise capital to fund its working capital requirement and which may dilute the equity to some extent, investors are still recommended to buy it at current levels as the share price may double in 15-18 months.