ANG Auto Ltd - 175.00 Rs

ANG Auto Ltd (ANG) was established in 1991, primarily as a merchant exporter in the name of ANG Exports, to market automotive component to some of the USA based companies. Subsequently, it set up a plant to manufacture brake pins & rollers, camshafts, brake shoes and other critical components like dummy axles, gear sets, slack adjusters etc. Later in 2005, it further widened its product portfolio by merging two of the group companies namely ANG Auto pvt ltd and ANG Automotive Industries pvt ltd with itself. Today, under the dynamic leadership of Mr. Premjit Singh, ANG is among the few companies in the world to be completely integrated – from the manufacture of components to sub-assemblies and assemblies and finally to vehicles. It boasts of having a portfolio as vast as 15 different products with expertise in two critical auto-component families i.e. braking system and transmission system for heavy commercial vehicles, trailers and other vehicles. Notably, with the commencement of its trailer plant in April 2007, ANG has become the largest trailer manufacturing company in India with a capacity of 3600 trailers per year, against a cumulative competing capacity of 600 trailers per year.

As on today, ANG has eight world class manufacturing facilities with five units in Noida, one in Nalagarh-HP, one in Faridabad-Haryana and latest trailer manufacturing unit in Sitarpur-Uttranchal. From July 2007, company started producing trailer axles based on a new friction welding technology which is first of its kind in India. Off late, it also launched two unique products viz. the automatic slack adjuster and the single piece dummy axle which have become the major growth drivers for the company. Its automatic slack adjusters offers a continuous running life of 75,000 km (before adjustment) compared with the prevailing industry standard of about 20,000 km and has even got a US patent for that. Now, ANG is among the selected companies in the world, having a patented Auto Slack that too developed and engineered by its in-house technical team. However the biggest achievement by the company is its trailer manufacturing plant set up by ANG Auto Tech, a 75% subsidiary in collaboration with FUWA Engineering of China. Unbelievably the entire trailer, except for the tyre, rim and spring leaf is manufactured in-house, enhancing asset utilization, cost management, quality control and superior return on employed capital. Hence, within four months of the commencement of operations, ANG possesses the expertise to offer 18 trailer variants in multiple configurations (24 ft, 32 ft, 36 ft and 40 ft) and customized around different payloads with different structures and attachments for diverse applications. In order to be the largest trailer manufacturer in Asia, ANG is augmenting its capacity to 6000 trailers per year with an investment of 36 cr within this fiscal. This product commitment resulted in Ashok Leyland selecting the company for an alliance partnership whereby ANG would manufacture trailers and Ashok Leyland would market them as a co-branded product. This five year contract is valued at 1500-1800 cr, which is a huge breakthrough for ANG.

Currently 70% of revenue, ANG derives from exports to quality conscious US and European markets in addition to Australia, Brazil and Mexico, among others. Going ahead, company has drawn out a blueprint to extend one step further to the manufacture of suspension systems and is also looking for backward integration to set up a forging unit at Bhiwadi, Rajasthan at capex of Rs 37. To consolidate its operations further, company has decided to merge ANG Auto Tech also with itself. Incidentally, the market for trailers in India is virtually unexplored although it forms a major mode of logistic solution in developed economies due to cost and various other factors. Therefore with the massive investment & rapid developments taking place in road infrastructure, the future prospect of trailers is mind boggling. Recently, company raised around 50 cr thru FCCB route to be converted into equity shares @ 325 Rs per share. Although the first quarter result was not that encouraging, still it is expected to clock a turnover of 175 cr and PAT of 25 cr on a standalone basis. This translates into EPS of 19 Rs on fully diluted equity of 13.40 cr. And as ANG Autotech has started commercial production of trailers from this fiscal only, the consolidated nos will be much better. However the sharp rupee appreciation is a cause of concern for which the share price has tumbled badly and is hitting 52 week lows. Despite this, investors are recommended to buy at current levels as scrip has the potential to appreciate 50% from hereon in a year’s time.

Ansal Housing & Construction Ltd - 203.00 Rs

Incorporated in 1983, Ansal Housing & Construction Ltd (AHCL) – part of the high profile Ansal group is one of the reputed real estate developers with a predominant presence in North India. AHCL has been the pioneer to introduce the concept of large integrated residential townships in the country. Moreover, it has been the first to enter Tier - II & III cities like Ghaziabad, Noida, Allahabad, Lucknow, Ludhiana, Agra, Bhopal, Haridwar etc. Till now company has constructed massive 67.6 million square feet of commercial and residential project across India. Despite residential segment being the biggest contributor, AHCL is now seeing increased activity in commercial division since it has aggressively forayed into shopping malls and retail space. Under the collaboration of Radisson worldwide, company is setting up chain of restaurants across India with “The Great Kebabs Factory” and “Superstars” already operational in Noida. It also owns and manages club houses under the ‘Chancellor’ brand name in Ansal Townships. As a part of diversification, company has also forayed in automobile business thru a joint venture with Itochu Corporation of Japan. And on the back of excellent prospects, it is now setting up state-of-the-art sales cum service centre facility of Honda Cars at Ghaziabad.

Ironically, out of the total development done by the company till today, more than 95% have been carried out in the Tier II or Tier III cities which stands out as the USP of the company. Few of popular townships developed by the company are Aashiana - Lucknow(477 acres), Golf Link I & II - Greater Noida(140 acres), Tronica city - Ghaziabad(87 acres), Bachittar Enclave - Ludhiana(34 acre) etc. In the commercial space, Imperial Tower, Majestic Tower, Classique Tower, Vikas Deep etc in Delhi and Ansal Plaza - Ghaziabad(5,45,000 sq ft), Fortune Arcade - NCR(91,35,000 sq ft), Mega Arcade - Noida(750,00 sq ft) are some of its landmark creations.

On the back of boom in housing sector and strong demand for commercial property, AHCL is aggressively expanding and has launched residential townships branded as “Ansal Town” across seven cities namely Agra, Indore, Jammu, Rewari, Karnal. Meerut and Ghaziabad which are spread over 1400 acres with an investment of Rs 2000 cr. In all, company has lined up gigantic 56.10 million sq. ft of development (80% in the residential segment) spread over 22 cities in the next five years. Interestingly, it has construction plans in much smaller towns like Kurukshetra, Narnaul, Yamuna Nagar & Panchkula in Haryana, Ajmer & Alwer in Rajasthan, Muzzaffer Nagar & Jhansi in UP, Parwanoo & Poanta Sahib in HP. At the same it also has ongoing projects in Mumbai metro whereby it is building two towers under the name “Whispering Meadows” and “Ansal Heights” at Mulund and Worli respectively. Company also intends to develop Holiday Homes in Shahpur - Thane spread over 150 acre. Couple of weeks back, it launched a new residential group housing project named “Ansal’s Woodbury Apartment” at Zirakpur near Chandigarh.

Currently, AHCL has a rich land bank of 2500 acres with about 50% under its own name while the rest under firm collaborators agreement. And more importantly the acquisition cost of these lands is reasonably low, for which company has been able to register better profit margin compare to its peers. Financially, its topline increased by 60% to 199 cr and PAT more than doubled to 42.75 cr for FY07, posting an EPS of 25 Rs on equity of 16.80 cr. Incidentally, AHCL follows the percentage of completion method of accounting and hence the revenue is recognized in proportion to the actual cost incurred. It reported encouraging result for the June qtr registering a healthy OPM of 40%. Conservatively, on a standalone basis it may end FY08 with total revenue of 275 cr and profit of 50 cr i.e. EPS of 29 Rs on fully diluted equity of 17.50 cr. The consolidated nos will be much better with an EPS of more than 32 Rs. However, against order book of 2500 cr, company is available at market cap of 350 cr. With 52 week H/L as 405/190 Rs, it is one of the safe bet in real estate sector. Investors are strongly recommended to buy at current levels as scrip can easily appreciate 50% in a year’s time.

STOCK WATCH

Indag Rubber (46.00) is one of the reputed players in tyre retreading business. It operates thru franchisee business by offering the technology, specialized equipment, retreading material, technical back up etc to the franchisee. It has a state of the art manufacturing unit to produce precured tread rubber along with allied items like cushion gum, repair gum, envelopes, other accessories and specialized equipment for retreading. Retreading is basically a process of bonding a new flap of pre-vulcanized rubber in place of the worn-out flap which increases the tyre life. For the June qtr it posted stuning nos. Sales increased by 30% to 17 but NP jumped up 185% to 1.70 cr on back of higher operating margin. Notably, it registered an OPM of whopping 15% against 9% last fiscal. Moreover company has recently set up a new plant in Himachal Pradesh which will give a fillip to its topline this fiscal. Accordingly it is expected to clock a turnover of 70 cr and PAT of 5 cr i.e. EPS of 10 Rs on equity of 5.25 cr for FY08. Scrip can move up to 75 Rs in 12~15 months

Belonging to well known Rane group, Rane Madras (82.00) is a market leader in manufacturing of critical automotive components like steering linkages, ball joints, axial joints, suspension joints and manual steering gears. It is a preferred supplier to most of the OEM’s in India and caters to every segment of automobile industry viz. passenger cars, multi utility vehicles, light commercial vehicles, heavy commercial vehicles and farm tractors. In October last year it established a new facility in Chennai for producing outer ball joints with an investment of 14 crore. It has also set up a manufacturing facility at Uttrakand for supply of steering gears exclusively to Tata Motors Limited. For FY07, its sales increased by 20% to 330 cr but PAT shot up 60% to 13.60 cr posting an EPS of 13 Rs. It gave 40% dividend leading to a high yield of around 5% at CMP. Although its first qtr nos were not that encouraging, still it is estimated to clock a turnover of nearly 400 cr and profit of 15 cr i.e. EPS of 15 Rs on equity of 10.10 cr. However the rising interest cost due to higher debt is a negative aspect. Hence once should buy only at sharp declines.

Simmonds Marshall (54.00) is the market leader in Nyloc nuts and manufactures wide range world class nuts like flange, cage, weld, cap, castle, couplings, u-nuts, wheel nuts etc. It also has a cold forged automotive components division which is capable of cold forging small and shallow components for automobile manufacturers and their ancillaries. For the June qtr its sales grew by 15% to 6 cr but NP remained flat at 0.55 cr on back of higher interest and depreciation cost. On the back of strong demand, company has undertaken aggressive expansion plan to almost double its production capacity by this fiscal end. Moreover it is having healthy order book position which is considerably higher than its entire FY07 sales. Accordingly it may report sales of approx 30 cr and NP of 2.50 cr which works out to an EPS of 12 Rs on a tiny equity of 2.10 cr. Due to very low floating stock, scrip can easily appreciate 50% in a short term. Investors can buy at current levels with a price target of 75/- Rs in 6~9 months.

Uttam Galva (46.00) is the second largest manufacture of cold rolled and galvanized products like coils, plain sheets, corrugated sheets, CRCA and colour coated steel. It is undergoing massive expansion estimated to complete soon this year which will take its cold rolling capacity to 10,00,000 MTPA and galvanizing to 7,00,000 MTPA. Besdies, it already has a colour coating line with a capacity of 80,000 MTPA. In April’07 it raised 85 cr thru GDR @ 40 Rs per equity share. Earlier it had raised approx 200 cr thru FCCB which is yet to be converted into equity shares. Although the conversion price is Rs 64.50 per share we assume it to be finally converted into 44/- Rs per share. Hence after conversion we estimate fully diluted to be nearly 150.00 cr. With zinc prices remaining stable and steel price on an uptrend, company is expected to end FY08 with topline of 3500 cr and bottomline of 120 cr which means an EPS of 11.50 Rs on current equity. However on a fully diluted equity of approx 150 cr the EPS works out to 8 Rs. Technically, scrip has made a strong breakout and looks good for short term with a price target of 58 Rs.