Kamanwala Housing Construction Ltd - 125.00 Rs

Kamanwala Housing Construction Ltd (KHCL) was originally incorporated in 1984 as Kamanwala Housing Development Finance Company mainly to cater middle class buyers by constructing low cost housing and financing it at nominal rates. Attar Apartments and Kamanwala Nagar at Virar were built under this program. Subsequently it also ventured into acquiring few old building and tenements and then transferring the ownership to tenants at reasonable rates after carrying out repair and renovation. Later in 1995, company diversified into manufacturing of steel ingots for own construction requirement and got renamed as Kamanwala Industries Limited. However, company does not undertake this activity any longer. And hence in 2006 it finally changed its name KHCL, to reflect the focus on its core activity i.e. construction. Today, from the low cost housing projects it started out with, the company has now transitioned itself to executing prestigious projects of high quality in prime locations.

Having a track record of more than two decades, KHCL have completed the execution of 18 projects in Mumbai, with saleable area totaling more than one million square feet. Few of its well known constructions are Manavsthal-Andheri, Krishna Kunj-Goregaon, Mukta Apartment-Khar, Manavsthal I & II-Goregaon, Vaibhav Apartment-Bandra, Maker Kundan Garden-Anderi etc. However till now company was only into residential segment and that too in a small scale. But off-late, on the back of boom in real estate sector, company has entered into commercial segment as well and has drawn up ambitious expansion plan on a much larger scale. In the last couple of years, it has acquired good land bank in Mumbai for future projects. Its ongoing and future projects are:

Manavsthal - Saki Naka, Andheri(E): This project emerged as premier project which helped KHCL to come out of difficult times. It’s a residential project divided into three phases consisting of 240 Flats. Phases I and II have already been completed and sold off. Phase III is now on a completion stage with 70% area sold off.

Pinnacle Corporate Park – Bandra Kurla Complex: This is a commercial project comprising of 75,000 sq. ft. out of which 43,000 sq.ft. area has already been sold. It is expected to complete by 2008 and will enhance the image of the company in the construction Industry.

Residential Project - Malad (W): This project is being taken up at Marve Road under the Slum Rehabilitation Authority (SRA) scheme. Architectural plans for this Rs.33 cr project have already been approved, and financing obtained. Implementation is in full swing, and the project of 2,03,000 sq ft is slated for completion in September 2009.

Vallabh Terrace - Opera House: KHCL has purchased an existing building at Opera House admeasuring about 15,000 sq. ft. area for redevelopment/upliftment and subsequent conversion of tenancy rights into ownership rights. It will be completed during the current year.

Commercial cum Residential Project - Versova, Andheri(W): The total cost for this project is Rs. 40.50 cr for developing 1.00,000 sq. ft. area. As soon as the architectural plans are approved by the concerned authorities, the construction work will commence.

Rishi Tagore - Santacruz (W): Being in a prime location, company is planning to develop this into a luxurious 60,000 sq ft residential complex for which the land cost alone is 35 cr.

To de-risk the business model further, KHCL has undertaken geographical diversification as well and entered into a joint venture agreement having 20% share with M/s. Prajay Engineers & others for the development of a land admeasuring 35 acres at Patancheru, Hyderabad. It has also purchased additional 2 acre land in Hyderabad for 1.60 cr to construct commercial / residential buildings. Moreover KHCL has acquired some land in Mahim under SRA scheme. In a 33% joint venture with Aspen Property Pvt. Ltd., it is developing a property at the famous Filmistan Studio, comprising both residential and commercial units. Meanwhile it is negotiating for few projects at 4 bunglow, Andheri Kurla Road, Mulund, & BKC phase-II.

To conclude, KHCL has entered into an exponential growth trajectory and market is bound to re-rate this company sooner than later. For FY07 it made a strong turnaround for FY07 with sales of 83 cr (against 11 cr) and NP of 13 cr (against 0.50 cr) posting an EPS of 26 Rs on equity of 5 cr. To fund its working capital requirement, KHCL made pref allotment of 15.84 lakh equity shares and 19.95 lakh warrants @ 98 Rs per share in Dec 2006. In near future, company is planning to amalgamate its subsidiary called M/s. Doongursee Diamond Tools Ltd with itself. Meanwhile for the June qtr it recorded revenue and NP of 17 cr & 3 cr respectively. Hence for entire FY08 it is estimated to report total revenue of 125 cr and PAT of 16 cr. This works out to an EPS of 25 Rs on fully diluted equity of 6.50 cr. Although its profit margin seems too high and company has a debt of more than 50 cr, still it has the potential to give handsome return over a period of time. Considering its 52 week H/L as 314/47 Rs, investors are recommended to buy at declines only.

Numeric Power System Ltd - 440.00 Rs

Incorporated in 1995, Numeric Power System Ltd (NPSL) is a leading manufacturer of uninterrupted power supply (UPS) systems, stabilizers and power conditioners in India. Infact, it has been the undisputed leader for online, offline/ interactive UPS in India for more than a decade. Ranging from 0.5 KVA to 4800 KVA, company offers the total range of 1 Phase and 3 Phase UPS systems that are built with advanced technology and state-of-the-art features suitable for unitary and parallel redundant configurations addressing a wider band of the industry from PCs, servers, banks, data centers, healthcare and large IT network protection. Apart from products, it also undertakes turnkey projects and offers end to end solution for SCADA/EMS package, large network of industrial process, power transmission support systems and distribution management. It also provides services such as annual maintenance contracts of UPS and power conditioners of not only its own brands but also for other brands. NPSL has been regularly exporting its products to Canada, UK, China, South America, Singapore, Vietnam, Mauritius, Dubai, South Africa, Nigeria, Kenya, Ethopia, Uganda etc. Incidentally, NPSL is a national distributor for a range of ‘Panasonic’ brand of sealed lead acid batteries.

NPSL has eight world class manufacturing facilities spread across Pondichery-TN, Chennai-TN, Parvanoo-HP and Colombo-Srilanka, thereby emerging as the biggest integrated manufacture of UPS in India. The company's fully-owned subsidiary in Sri Lanka, Singapore, Mauritius and an export-processing unit in Chennai cater to the overseas markets. In India, it has a strong distribution network through 1800 channel partners spread across 400 towns. This is backed by 201 sales and service location apart from specialized 27 test and repair centre along with exclusive helpdesk which works 24x7. It has an enviable and high profile clientele including Infosys, Siemens, Intel, Philips, Microsoft, Veritas, HDFC, Citibank, ICICI, RBI, NIC, Reliance, ABB, BMW, NCR, Nokia, major stock exchanges etc. Interestingly, around 75% of the ATMs in the country are fitted with UPS supplied by NPSL. Last year, the company implemented an auxiliary power systems project for Power Grid Corporation in the entire north-eastern States, in a turnkey effort involving design, supply and installation of total power conditioning systems.

For future growth NPSL has adapted the latest power conversion techniques combined with advanced digital controls in the newly designed ‘NUMERIC DIGITAL HPX’ series in addition to the HP and HPE models which are already deployed in the market under power ratings from 2 to 60 KVA. This new version HPX series is designed to primarily address IT and Industrial requirements including intelligent monitoring using Internet. After terminating its 10 year tie-up with Meril Gerin Asia in 1996, company lately entered into a joint venture with the French UPS major SOCOMEC SA to distribute, market and service the 3 phase range of UPS systems (greater than 10 KVA) products to customers in India. To consolidate its operation, NPSL has recently demerged the UPS manufacturing business of Numeric Electronics Pvt Ltd (NEPL) and got merged it with itself against allotment of 52,920 equity share to NEPL.

With more and more businesses running on technology solutions, the need for power protection systems for reliability and quality has become vital. Given India's significant power deficits and the ubiquitous outages and voltage fluctuations; NPSL’s products have significant market potential in the country. For FY07, it recorded 20% growth in sales to 272 cr whereas NP increased by 10% to 18.80 cr posting an EPS of 38 Rs on small equity of 5 cr. For the first quarter, sales jumped up 30% to 76 cr but NP zoomed up 75% to 8.9 cr against 5.10 cr last year. Accordingly for full year FY08 it may report sales of 325 cr and profit of 24 cr. This works out to an EPS of 48 Rs on equity of 5.05 cr. At current market cap of 220 cr, company is available reasonably cheap and deserves better valuation being in a high growth sector. Hence investors are recommended to accumulate at declines with a price target of 575 Rs (i.e. 30% appreciation) in 9¬12 months.

STOCK WATCH

Gujarat Apollo Industries (182.00) is India's No.1 manufacturer of asphalt based road construction & maintenance equipment like asphalt plants, soil stabilization plants, indirect heating equipment, paver finisher, bitumen sprayer, rollers, kerb paver etc. For the June qtr it reported satisfactory nos as sales grew marginally by 7% to 36 cr but NP increased by 25% to 4 cr on the back of higher other income component. Importantly, couple of months back company has concluded an exclusive technical know how agreement with a German company for design and manufacture crushers and aggregate producing equipment. This will expand and compliments its current product line and will also enable it to address mining and re-cycling industry in coming years. Besides to cater to the increased demand, company is implementing brown field expansion plan for which it has made pref allotment of 5.50 lakh warrants @ 180 Rs to promoter group. For Fy08, it is estimated to report a topline of 175 cr and profit of 20 cr which translates into EPS of 18 Rs on diluted equity of 11.05 cr. Hence it’s one of cheapest scrip compare to its peer and has the potential to cross 250 Rs in short to medium term. Moreover, scrip has been recently listed in NSE also.

Belonging to the reputed Hero group, Shivam Auto (96.00) was formed due to demerger of Munjal Auto Industries. Hence, company is engaged in manufacturing of forging and machining components for two-wheelers of Hero Honda thru its plant at Binola near Gurgaon. Presently its product range consists of precision auto components including gear blanks, transmission gears, transmission shafts, warm forged ratchets etc. For FY07, its sales and NP stood at 130 cr and 16 cr respectively thereby posting an EPS of 16 Rs on equity of 10 cr. However for the June qtr, sales remained flat at 31.50 cr but PAT dropped sharply by 40% to 2.60 cr due to slightly lower margin coupled with higher interest/depreciation cost. Although its business is depended on Hero Honda, still it can register a topline of 140 cr and NP of 16 cr i.e. EPS of 16 Rs on current equity. Buy only at declines.

Bilpower Ltd (180.00) is one of the leading players in the field of manufacturing transformers of all types, electrical laminations, stampings and cores. Besides it’s a leading trader of CRGO & CRNGO and produces the largest range of transformer cores in India. For the June’07 quarter its sales grew by 35% to 60 cr but PBT jumped up 50% to 6.50 cr. However on the net profit level it recorded 15% rise to 5 cr. To cash on the ongoing power sector boom, company has chalked out very aggressive plans to grow organically as well as inorganically. As a step towards forward integration, company has acquired Tarapur Transformers and is now planning to merge SunTranstamp, a power ancillary equipment company with itself. It is interested in further acquisitions and is in talks with different companies, for which it may raise capital thru FCCB/GDR route in future. For FY08 it may clock a turnover of 300 cr and PAT of 21 cr which leads to an EPS of 23 on current equity of 9 cr. At a fair discounting by 12x times scrip can cross 275 Rs in medium term. Buy on declines.

Cement sector is once again in action in anticipation of price hike in coming days; hence JK Lakshmi Cement (162.00) can see a smart rally accordingly. Company has started the work on the projects for further expanding its capacity from the existing 3.4 million tonne to 5 million tonne per annum and is planning to complete it by October 2008. Importantly, it has fully commissioned both its captive thermal power plants of 18 MW, thereby making huge savings in power cost which will boost its bottomline. Moreover, it is already operating 5 RMC (ready-mix concrete) plants and hopes to add at least 5 to 6 plants more during the current year. It reported 40% growth in sales to 266 cr whereas NP zoomed up 75% to 68.50 cr for June’07, hence posting an EPS of whopping 12 Rs for the qtr. On a conservative basis, it is estimated to end FY08 with sales of 1000 cr and profit of 185 cr i.e. EPS of 30 Rs on fully diluted equity of around 61.20 cr. Despite having higher debt, scrip has the potential to cross 200 mark in medium term.