Pitti Laminations Ltd - 48.00 Rs
Established in 1983 and promoted by Mr Sharad Pitti, Pitti Laminations Limited (PLL) is primarily engaged in manufacture of electrical steel laminations and stampings which form a critical part in all types of industrial motors, alternators, pump sets, aeronautics, windmill generators and DG sets. Besides it also manufactures die cast rotors, press tools, progressive tools, jigs, fixtures and moulds as per customers requirement. IT even produces small laminations via High Speed Press for compressors. It is supplying not only laminations but also value added sub-assemblies involving several operations using castings, aluminium, copper etc. On the domestic front, the company has been catering to some of the biggest and best names in the industry which include Siemens, Areva T&D, Crompton Greaves, ABB, BHEL, KSB Pumps, Bharat Bijlee, Kirloskars, Suzlon etc. On the other hand exports contribute more than 40% of revenue with GE (USA) being one of its major customers. Further, pursuing its goal of broadening the customer base in the overseas market PLL is regularly participating in the exhibitions and negotiations are on at various stages, with a few prospective customers in Europe and USA.
PLL’s manufacturing facilities at Hyderabad; Andhra Pradesh is equipped with all modern support equipment for press shop, notching shop and tool room. After regular expansion and modernization, company’s total installed capacity currently is 25,000 MTPA. However for FY08 it is estimated to have made sales for 18000 MTPA. Meanwhile, to leverage its considerable expertise and competitiveness and move up the value chain, company has implemented certain forward integration measures and activities related to the laminations industry. Earlier it was outsourcing the fabricated and casted stator bodies and was also out sourcing the machinings, but now under Phase III expansion of Rs 48 cr it has put up a project for fabrication of steel stator bodies, machining of stator bodies and dropping of assembled stator core into the stator body. However it will continue to outsource the casted bodies. These forward integration activities were quite complex and demanded a high degree of precision but eventually it will result in value addition and significant improvement in the margins. Notably, this Phase-III expansion was completed only in Jan 2008 and is done basically to cater its GE (USA) client and other big domestic customers. Interestingly, company has taken approval to diversify its business so as to include generation of power by way of wind energy, solar energy, thermal energy, hydro energy, bio energy or any other form or source of energy.
Earlier, to fund the expansion, company raised around Rs 14 cr thru preferential allotment of 12 lakh equity shares @ 120 Rs per share. Now, PLL is having no capex plan for next two years at least as it is having sufficient capacity to fulfill customers demand. For FY08 it is expected to report sales of Rs 160 cr and NP of Rs 7.50 cr. This translates into EPS of Rs 8 on equity of Rs 9.45 cr. Because of the sharp rupee appreciation during the year, company took a hit of almost 300 basis points on its operating margin. But on the back of forward integration with increased volumes and management taking various steps to avoid forex loss, it can report better margins for FY09 and is estimated to clock sales of Rs 200 cr and PAT of Rs 11 cr i.e. EPS of Rs 12. Considering the book value of Rs 55 and market cap of merely Rs 45 cr scrip is available fairly cheap at a PE ratio of 4x times against its FY09 earnings. Moreover company is currently entered into its silver jubilee year and may reward shareholders with bonus or special dividend. Investors are recommended to buy with a price target of Rs 75 (i.e. 50% returns) within a year.
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