TIL Ltd - 186.00 Rs

Established in 1944, TIL, earlier known as Tractors India Ltd. is India's leading providers of technology intensive, application specific heavy engineering equipment for use in core infrastructure sectors. In fact, it is the pioneer and undisputed leader in mobile crane manufacturing and has now emerged as an integrated provider of total material handling solutions. Importantly, TIL enjoys exclusive marketing rights in the northern and eastern India for the Caterpillar (USA) range of construction/earth moving equipments and engines. TIL’s product profile is broadly segmented into three divisions:

1. Material handling equipment (30% revenue): This division manufactures material handling equipment such as cranes, forklifts trucks, reachstakers, articulated self loading cranes, anode transport vehicles etc. Besides, it also markets imported heavy duty crawler cranes, heavy logistic vehicles, aerial work platforms etc. Notably, TIL produces mobile cranes of 10 to 100 tonnes in diesel, electric and hydraulic versions and is the only domestic manufacturer of cranes in the range of 30 – 100 tonnes.

2. Construction equipment (50% revenue):This division markets earthmoving, construction and mining equipments like hydraulic excavator, skid steer loader, motor grader, wheel loader, off highway trucks & dumpers, track type tractor etc. manufactured by Caterpillar (USA), one of the world’s biggest manufacturer of construction equipment with a very strong reputation. It also trades in critical spares parts and provides after-sales service to customers.

3. Power systems (20% revenue): This unit is engaged in assembly, supply, erection and commissioning of power generating sets (diesel-based) driven on Caterpillar engines in the 180 - 2250 KVA range, which find diverse use in several industry segments like hospitals, railways, hotels & restaurants, cinema houses, multiplexes, residential colonies and factories. It also offers higher range of gas/heavy fuel based ‘CAT’ power systems and engines with capacities from 1.6 MW to 12MW.

TIL has two plants, one at Kolkata for material handling equipment and the other near Delhi for power systems. Besides, it has 34 service centres all across the country and has technical collaborations with international manufacturers like Boss (UK), Grove (USA), National Crane (USA), Luna Euipos (Spain) & Hencon (Holland) for making equipments in India. It is also bringing in higher technology from Manitowoc, USA, for competing with other foreign players in crane sizes of above 100 tonnes. Due to better margins, TIL has started focusing more on value added high tonnage offerings such as Reach Stackers (container handling mobile equipment) and Electric Level Luffing cranes (for Bulk Cargo). It has a very healthy order book position with good orders flowing from Tata Steel, Reliance Petroleum, Bharat Coking Coal, Punj Lloyd, ONGC, Madhucon, Soma, KMC etc. Of late, it has also started renting equipment, which is growing rapidly and has a huge potential. Meanwhile, TIL plans to introduce high technological products like 40 tonnes RTG, 10-35 tonnes Electrical Level Luffing Cranes, Refuse Collection Vehicles & Fire/Crash Rescue Vehicle. Moreover, as the company is working at optimum capacity utilization it intends to enter into the used equipment market and may even go for a greenfield expansion to increase capacity.

Incidentally, TIL’s wholly-owned subsidiaries in Union of Myanmar, Singapore and Nepal are also doing well. With the Government’s emphasis on infrastructure development and the investment plans of industries such as cement, steel, coal, etc. as well as the port and mining sectors, the future prospects of TIL look very promising. Also, as the peak load shortage continues, its Power System business will continue to grow. On a standalone basis, it may earn a profit of Rs.18 cr. on revenues of around Rs.550 cr. This means EPS of more than Rs.18 on its equity of Rs.9.73 cr. For FY08, its EPS can increase upto Rs.22 and consolidated EPS may stand at Rs.30. Thus, the scrip is trading at forward P/E multiple of 8, which is extremely cheap. Investors are strongly recommended to buy it at current levels with a price target of Rs.260 in a year’s time. Long-term investors can expect much higher levels.