International Combustion (India) Ltd - 390.00 Rs

Established in 1936, International Combustion India Ltd (ICIL) is recognized to be a leading manufacturer of sophisticated plant and machinery for core sector industries such as mining, steel, cement, petrochemical, construction, sugar, power, textile, paper, rubber, pharma, chemicals etc. From a modest beginning as a trading house, ICIL today boasts of manufacturing specialized range of engineering products under technical collaboration and license agreement from various global leaders. According to its product profile, company has broadly segmented its revenue model into following two divisions:-

I. Heavy Engineering Division :

This is the main division as nearly 80% of total revenue comes from it whereas it contributes more than 95% of earnings. This division has been further divided into following three categories:-

a. Vibrating equipments: ICIL manufactures and markets a wide range of mechanical and electro-magnetic vibrating screens, feeders, sizers, & conveyors which can handle all types of bulk solids, whether large lumps or very fine grains, wet or dry, or whether abrasive such as scrap, flux and sinter. As accessories it also makes exciters, DC brake unit & monitoring system for vibrating machines.

b. Bulk Material Handling: Under this category, ICIL deals in spiralling belt elevators, scooping belt conveyers, girdle pocket elevators, apron feeder, mining haulages etc. as an intelligent solutions to suit even difficult to handle materials.

c. Grinding, Classfication and Drying system: ICIL offers complete grinding mill systems designed to pulverise and classify various kinds of material, including non-metallic minerals, fertilisers, chemicals and many other manufactured products. Importantly, it markets ‘Raymond” American brand roller mill, pulverisers, grinding mills, mechanical air separators and flash drying system, which can reduce many products by 95~98% or refine them below 10 microns

II. Gear Motors & Gear Box Division

Under license from Danfoss Bauer, Germany, ICIL offers a comprehensive range of geared motors, gear boxes and electric motors manufactured on specially designed inter-linked CNC production lines. It also exports these products to neighboring markets including Iran and Sri Lanka. Besides company has been chosen as the outsourcing partner by Danfoss Bauer itself and has even started exporting cast iron machine parts to them.

Currently, ICIL is having three fully equipped manufacturing facilities spread across Calcutta, Nagpur and Aurangabad. To have a cutting edge technology for manufacturing premium quality equipment, ICIL has made several tie-ups with international majors like Danfoss Bauer(Germany), Mogensen(Germany), IMS Engineering(South Africa), Alstom Power(USA), Gummi Kuper (Germany) and Tredomen Eng (UK) for each product group. Offlate, it has also entered into a license agreement with Ecutec(Spain) to manufacture microfine classifiers. Ironically, all the players in user industries are ramping up their capacities translates into a huge opportunity for company's products. To meet the increasing demand, an expansion programme has been initiated by the company for augmenting the manufacturing capacity of the gear box/geared motor division. It is also upgrading the manufacturing capacity of the Heavy Engineering Division. On the back of its wide product range and high engineering skill, ICIL is contemplating to enter the lucrative turnkey project segment in foreseeable future.

Fundamentally, ICIL is on a strong footing with expected reserves of around Rs 45 cr i.e. book value of nearly Rs 200 by end of this fiscal. Besides being a debt free company it has an impressive ROCE of 40% and ROE of 25%. Financially, ICIL has recorded 20% growth in sales to Rs 66 cr and 50% increase in PAT to 8.25 cr for nine months ending Dec’07. Accordingly for this fiscal it is expected to clock a turnover of Rs 95 cr and profit of Rs 11.50 i.e. EPS of Rs 48 on a tiny equity of Rs 2.40 cr. Hence with expected CEPS of more than Rs 60, and EV/EBIDTA of less than 5x, company is available fairly cheap at current market cap of merely Rs 95 cr. For FY09, company has the potential to register an EPS of around Rs 60. So investors are strongly recommended to buy at current levels as at a reasonable discounting by 14x times against FY09 earning, scrip can double in 15~18 months. Moreover scrip is a strong bonus candidate as well.

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