Mobile Telecommunication - Rs.13.50

Incorporated in 1995, Mobile Telecommunication Ltd (MTL) is engaged in the business of telecom system development, manufacturing of electronic hardware, software development and trading in other products. In short, the company focuses on products and services related to the telecommunication infrastructure. It has gradually emerged as a reputed contract manufacturing service provider with its electronic manufacturing facility located at Nasik. It manufactures box assemblies as well as PCB assemblies and caters to clients from IT, Auto, Power, Medical and Telecommunications sector. In late 2005, however MTL diversified into the BPO business by acquiring the BPO facility of M/s Quantum eServices Pvt. Ltd.

Presently, MTL is focusing on three divisions – Internet technologies (VOIP & IP telephony), IT enabled services (International Call center) and manufacturing of telecom products (WLL handsets). The company is working on VOIP and IP Telephony technology and is in the process of establishing a network of Servers in USA, UK and India. Till such time as two-way telephony through Internet is allowed in India, MTL will be providing Voicemail through telephones. It is also setting up a subsidiary in USA to launch its services over there. On the BPO front, Quantum eServices has become a wholly owned subsidiary of MTL and has a 550-seater facility in the renowned Mindspace, Malad (W), Mumbai. The company is planning to enter into BPO space in a big way and the contract with one of the world's leading airline for its outsourcing requirement is underway. Thirdly, it is setting up a manufacturing plant for the production of WLL (Wireless in Local Loop) handsets based on corDECT technology. Notably MTL is the 5th licencee for this technology but has taken it solely for the export market.

Besides, MTL has got into APFC (Automatic Power Factor Controller) panels under the joint venture with Herodex Power Systems, who are one of the leading manufacturers of energy saving equipments related to industrial, commercial and power distribution applications. Hence the company has forayed into the energy - saving devices market and plans to enter into areas of light and energy saving products. With Herodex, the company is developing 'THAI CAP' APFC relays with the best technological features, which are definitely in a class apart from the other relays available in the market. Moreover, MTL is working towards a portal call Stdisdfree.com which will offer suite of services like PC-to-Phone, PC-to-PC, PC-to-Fax and voice mail, all integrated into one easy to use product. It has plans to launch the Automatic Meter reading system, which will collect the data automatically from meters and other devices via telecommunications at a remote central location of your choice. MTL also intends to enter the rapidly growing market of Wireless Brodband Services.

Although its future plans look very interesting, execution is the key to its growth. In spite of taking approval from the shareholders in November 2005 to raise around Rs.90 cr. through the FCCB/GDR route, nothing has been finalized till now. It was even decided to split the face value of shares to Re.1 but eventually it was dropped. For FY07, it may report a topline of Rs.23 cr. and bottomline of Rs.1.50 cr., which means an EPS of Rs.1.20 on its equity of Rs.11.90 cr. If things pan out well as per the company’s plans then for FY08 it can register total revenue of Rs.30 cr. with net profit of Rs.2.25 cr. i.e. an EPS of Rs.2. However, despite some promoter concerns, this company with a BPO facility of 550 seats is available extremely cheap at an Enterprise Value (EV) of Rs.20 cr. Long term investors can take an exposure as the scrip has bottomed out and can double in 6-9 months with operators support.

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.

STOCK WATCH

Kilburn Engineering Ltd. (Code: 522101) (Rs.46.70) belonging to the Williamson Magor Group operates in areas of process design, engineering, manufacturing, installation and commissioning of turnkey plants and systems catering to industries such as petrochemicals, chemicals fertilisers, refineries, oil & gas and food processing. It has already been discharged from the purview of SICA / BIFR as its networth has turned positive. For the year ending 31st March 2006, it may report sales of Rs.50 cr. with net profit of Rs.4.50 cr. i.e. EPS of Rs.3 on its current equity of Rs.13.50 cr. But the company is expected to make a smart turnaround from FY08 on the back of higher volumes as well as better margins. Currently, it has a very healthy order book position to the tune of Rs.100 cr. Hence for FY08, it can clock a turnover of Rs.80 cr. with profit of Rs.8.25 cr., which will lead to an EPS of Rs.6. Besides, the company is in the of relocating its manufacturing plant to a bigger premises and may sell its land admeasuring 8.42 acres in Bhandup, which may fetch around Rs.100 cr. After hitting a high of Rs.92, the scrip has tumbled down sharply to Rs.40 level. Investors can safely buy it at current levels with a price target of Rs.75 in the medium-term.

The share price of Rama Paper Mills Ltd. (Code: 500357) (Rs.35) is trading in the same price range over the past two years inspite of the sharp improvement in its fundamentals. It has already enhanced its capacity to 44500 TPA by installing some balancing equipment and is putting up an additional line to produce tissue and post paper with a capacity of 18380 TPA. Further, it has plans to augment its production capacity to 79500 TPA and is in the process of installing 6 MW power plant for captive consumption to reduce its power cost substantially. Although its December 2006 numbers were not great, still it is expected to report net sales of Rs.90 cr. with net profit of Rs.7 cr. i.e. EPS of Rs.9 on equity of Rs.7.60 cr. for FY07. During FY07, it raised Rs.8.75 cr. through preferential allotment of 25 lakh equity shares at Rs.35 per share and the promoters are infusing Rs.7.50 cr. by way of preferential allotment of 20.83 lakh equity shares at Rs.36 per share. With this, the promoter holding will shoot upto 41% from 25% currently. For FY08, it may register sales of Rs.110 cr. with PAT of Rs.9.50 cr. i.e. EPS of Rs.10 on its diluted equity of Rs.9.70 cr. At the current market cap of Rs.25 cr., it’s a screaming buy.

IMP Powers Ltd. (Code: 517571) (Rs.94) manufactures the entire range of power & distribution transformers, electrical & digital measuring instruments, testing equipments etc. It produces HV & EHV power transformers ranging from 10 KVA upto 150 MVA and has a total installed capacity of 3600 MVA. It is the only transformer company in the zero sales tax zone enjoying 15 years (till 2012) sales tax holiday
for its Silvassa unit. Recently, it manufactured and dispatched a 100 MVA, 230 KV class transformers worth Rs.4 cr. to Rajasthan Rajya Vidyut Nigam, which is an achievement by itself. Last year, it made preferential allotment of 9,15,000 equity shares and 5,10,000 equity warrants at Rs.85 per shares. For the year ending 30th June 2007, it is expected to report a topline of Rs.100 cr. and bottomline of Rs.8.25 cr. i.e. EPS of Rs.14 on its current equity of Rs.5.90 cr. Ironically, despite the strong demand for its product, its capacity utilization is barely 50%, which it intends to push around 80% in FY08. Hence for FY08, it is estimated to register sales of Rs.140 cr. with net profit of Rs.12.50 cr. i.e. EPS of Rs.19 on its diluted equity of Rs.6.70 cr. Available at a P/E ratio of less than 5, it is a very good buy.

Ahlcon Parenterals (India) Ltd. (Code: 524448) (Rs.54) is engaged in manufacture of life saving intravenous fluids including Dextrose, Saline, Electrolytes, Amino Acids, Fat Emulsion, Blood Substitutes, Small Volume Injectables, Eye Drops, medical disposals etc. Encouraged by the overwhelming success of its diversification into ophthalmic products, it has added more value-added ophthalmic products and is expanding its existing range of Infusions and Anti- microbial solutions. Further, it is in the midst of setting up a new project to almost double its production capacities, which will be operational by the second half of calendar year 2007. It may end FY07 with a total revenue of around Rs.50 cr. and profit of Rs.8.50 cr., which translates into an EPS of Rs.12 on its equity of Rs.7.20 cr. Importantly, the company has established a strong alliance with large local players in several key global markets and was been able to efficiently hedge the risk posed by a domestic market. Although the full impact of its capacity expansion will be felt in FY09, for FY08 it may report sales of Rs.60 cr. with net profit of Rs.10.50 cr. i.e. an EPS of Rs.15. Buy for a target of Rs.75 in 6-9 months.