Established in 1987, Accurate Transformers Ltd (ATL) is the flagship company of the Delhi based Accurate group which has diversified interest in transformers, overhead line conductors, energy meters, insulating oils & chemicals. Notably, ATL pioneered the manufacture of transformers at a time when most electrical equipments were imported. With an installed base of nearly 1500 transformers, company is now amongst the foremost manufacturers of transformers. Presently it manufactures power as well as distribution transformers ranging from 1 MVA to 160 MVA - in up to 220 KV class. Power transformers are used to transform power voltage from the generation point to the transmission point whereas distribution transformers are used to transform power voltage from transmission point to distribution of power to the end user. These transformers are mainly supplied to state electricity boards across the country including those of Uttar Pradesh, Rajasthan, Punjab, Maharashtra and West Bengal on a made-to-order basis. As its transformers are in operation for years, the quality and reliability of company’s products is well established. Infact, company boasts of having highest rates of repeat orders from state electricity boards. In addition, it also offers total technical support and customer service throughout the life of the its transformers – may it be spare parts or repairing of transformer in case of breakdown
Being a two decade old company, ATL has set up huge manufacturing facilities spread across Ghaziabad, Sikandrabad, Greater Noida, Dehradun & Haridwar. All its plants have ISO 9001 : 2000 certification from DNV, however two of its plants which are in tax exemption zone i.e. Dehradun and Haridwar plants are relatively new. Although these plants are not equipped with latest hi-technological equipments, still it has a total installed capacity of more than 8000 MVA, which is quite huge. Besides, ATL has recently ventured into fast growing rural electrification project which involves the complete setting up of electricity in remote areas including the laying of lines, poles and substations. It has already implemented two such projects one at Etah district of Uttar Pradesh and another at Nainital District of Uttaranchal. However unfortunately, due to mounting debtors and shortage of funds company has been working at very low capacity utilization of around 50%. Hence it has ample scope to ramp up its operation provided it manages to get sufficient money as working capital. Moreover to cash on the infrastructure boom, ATL has taken forward steps in the business of rural electrification being upcoming and thrust area under the Rajeev Gandhi development program of the central government. Besides, it wants to further diversify in energy sector and has ambitious plans of venturing into power generation & distribution in future.
The government’s rural electrification initiatives such as APDRP, Power for all by 2012 program, restructuring of SEBs, entry of the private sector into the transmission and distribution segment etc, all these have led to substantial jump in demand of transformers. Accordingly, ATL also recorded 20% growth in sales to Rs 180 cr and 40% rise in profit to Rs 6 cr for FY07 i.e. EPS of Rs 20 on tiny equity of 2.96 cr. Notably, ATL is earning very low profit margin compare to its peers and has scope of improving its margin in future. For the first three quarters, sales increased by 10% to Rs 102 cr but NP shot up 50% to Rs 4.50 cr on back of higher margin at operating level. Traditionally the Q4 is the best quarter and on a conservative basis company is estimated to report a turnover of more than Rs 200 cr and PAT of Rs 8 cr for FY08 i.e. EPS of 27 Rs on current equity. This means the scrip is currently trading at P/E ratio of less than 3x times. However as per market rumors SEBI has halted its preferential issue of 31 lac warrants @ 56 Rs, hence now company has to go for fresh fund raising program as per SEBI guidelines. In one way it is positive for shareholders as now the placement will be done at higher price with low equity dilution. Hence a transformer company having an installed capacity of massive 8000 MVA is available for a song at a market cap of merely Rs 23 cr. Therefore, investors are very strongly recommended to buy at current levels as share price can easily double in a year’s time.
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