Special DEEPAVALI Scrips (SI)
Transformer & Rectifiers (135.00) whose IPO issue @ Rs 465 per share got over subscribed by 91x times in Dec 2007 is finding no buyer at Rs 150 now. Company is one of the leading manufacturers of power & distribution transformers, furnace transformers, rectifier transformers and specialized transformers. It currently manufactures transformers up to 220 kV class and has an installed capacity of 7,200 MVA transformers per annum. To cash on the boom in power sector, company is setting up a Greenfield plant in Moraiya, near Ahmedabad with an installed capacity of 16,000MVA. The new plant, expected to be operational by March’09 would be capable of manufacturing transformers upto 756kV class, though the company initially intends to manufacture transformers of 220kV and 400kV classes. As of now, company has order book position of Rs 383 cr, out of which 70% comprises of power transformers. For the latest Sept’08 qtr, its sales as well as net profit increased by 60% to Rs 114 cr and Rs 12.70 cr respectively. Accordingly it may end FY09 with sales of Rs 400 cr and NP of Rs 36 cr i.e. EPS of Rs 28 on current equity of Rs 12.90 cr. However, it will report substantial growth in FY10, as new plant will begin operation.
Savita Chemicals (170.00) specializes in manufacturing of petroleum specialty products like transformer oils, liquid paraffin, petroleum jelly, white mineral oil, automotive and other industrial lubricants. Of the total sales, transformer oil constitutes around 45%, white oil/liquid paraffin’s around 35% and lubricating oil balance 20%. In lubricating oil segment, company is present in both automotive (85% of lubricant sales) and industrial (15% of lubricant sales) segment. It has a tie-up with Idemitsu Kosan, Japan to market its lubricating oils under ‘Idemitsu’ brand name thru network of dealers and auto part shops. Importantly, company enjoys 40% market share in transformer oil, hence will be immensely benefitted with huge capacities planned in power generation. Secondly, the sharp fall in crude oil prices will also boost up its margin as base oil forms its major raw material. Apart from petroleum business, company has also setup wind mills with an installed capacity of 26.3 MW which will be augmented to 34.9 MW in this fiscal. Although company is negatively affected by the rupee depreciation being a net importer, still it may register net sales of Rs 950 and PAT of Rs 58 cr leading to an EPS of Rs 40 on equity of Rs 14.60 cr for FY09. Buy at major corrections.
Easun Reyrolle (45.00) is engaged in field of power management encompassing protection control products, automation systems, automatic metering products & switchgears. Lately it has also ventured into EPC and turnkey business of erection of substations and the entire T&D projects. Notably, company has now fully absorbed the technology of 61850 domain in which only players like ABB, Siemens and Areva are present. 61850 domain is a protocol, which ensures connections in-between hybrid and complex substations so that the power transmission and distribution happens smoothly. For future growth it is aggressively eyeing companies in Europe and US, which are strong in technology. For this It raised round about Rs 250 cr in Jan’08 thru GDR & FCCB route to be converted into equity at the rate of Rs 315 and Rs 400 per share respectively. It hasn’t made any major acquisition and is still sitting on huge cash. With order in hand of nearly Rs 200 cr, it may end FY09 with sales of Rs 250 cr and profit of Rs 25 cr i.e. EPS of Rs 12 on current equity of Rs 4.15 cr having face value as Rs 2/- per share. Investors are strongly recommended to buy as scrip can double within a year.
Being Asia’s largest manufacturer of air compressors, Elgi Equipment (32.00) is involved with the design, development and manufacture of exhaustive range of electric and diesel powered screw air compressor (oil free, portable, world’s smallest etc), centrifugal air compressor, airends, reciprocating air compressors, borewell compressors, bare compressor pumps etc. Besides it also manufactures railway compressors and a variety of equipment solutions for railway applications. It can manufacture all these types of compressors covering a range from 0.75HP to 1500HP for volumes from 1.8 cfm (cubic feet per minute) to 80000 cfm. On the other hand it derives nearly 20% revenue by providing total service station solutions through the supply of a range of equipment and tools for two, three & four wheelers. Moreover, having rich experience of four decades and state-of-the-art infrastructure, company has also started offering end to end mechanical engineering solutions and contract manufacturing services of precision engineered part to clients who are looking for cost-effective, subcontracting solution. For future growth company is setting up a compressor manufacturing facility in China and warehousing facility in middle East and Brazil. On a conservative basis it may report a turnover of Rs 450 cr and PAT of Rs 35 cr i.e. EPS of Rs 5.50 for FY09. Accumulate at declines.
SKF India (170.00) is country’s largest bearing manufacturer commanding more than 30% market share across the country. It manufactures all types of roller bearing, ball bearing, bearing units, bearing housing, plain bearing etc in hundred of sizes thereby having an extensive product range and literally providing solution for any and every conceivable application. Last fiscal it launched power transmission products as a new product range to capture the growth in the energy sector. Of late, SIL also got engaged into marketing, sales and distribution of large size bearings for industrial segment being produced by another group company. For future growth company is putting up a new plant in Haridwar, Uttarakhand with a capacity of 48 million pieces of bearing which will cater to two wheeler market segment. The plant is expected to start commercial production by mid 2009. Due to rise in input cost and stiff competition coupled with pressure from customers, company may not be able to maintain its CY07 EPS of Rs 30 and may end CY08 with sales of Rs 1700 cr and profit of Rs 145 cr i.e. EPS of Rs 27. Despite taking de-growth into consideration, this debt free MNC is available fairly cheap. A very safe bet in current market sentiment.
International Combustion (165.00) is among the very few engineering companies which have been recording consistent and healthy growth in the last five years but still remains to be poorly discounted by the market players. Even for FY08 it registered 20% and 40% growth in sales and net profit respectively thereby posting an EPS of Rs 49. Currently its available at EV/EBIDTA of merely 2x times which is extremely cheap by any standard for this debt free and dividend paying engineering company. It is engaged in manufacturing of heavy engineering equipment, geared motors and gear boxes, vibrating screens and feeders, bulk material handling equipment, rubber/polyurethane screen decks and liners, Raymond grinding mills, air classifiers and flash drying system etc. Hence it makes sophisticated plant and machinery for core sector industries such as mining, steel, cement, petrochemical, construction, sugar, power, textile, paper, rubber, pharma, chemicals etc. Recently it reported satisfactory nos for the Sept’08 quarter and is poised to end FY09 with sales of Rs 110 cr and NP of Rs 12 cr i.e. EPS of Rs 50 on tiny equity of Rs 2.40 cr. Due to small equity, it also has an impressive ROCE of 40% and ROE of 25%. More importantly it has huge reserve of nearly Rs 45 cr which leads to a book value of Rs 192, making it a perfect bonus candidate. It’s a risk free bet which can give handsome return in the long run.
Savita Chemicals (170.00) specializes in manufacturing of petroleum specialty products like transformer oils, liquid paraffin, petroleum jelly, white mineral oil, automotive and other industrial lubricants. Of the total sales, transformer oil constitutes around 45%, white oil/liquid paraffin’s around 35% and lubricating oil balance 20%. In lubricating oil segment, company is present in both automotive (85% of lubricant sales) and industrial (15% of lubricant sales) segment. It has a tie-up with Idemitsu Kosan, Japan to market its lubricating oils under ‘Idemitsu’ brand name thru network of dealers and auto part shops. Importantly, company enjoys 40% market share in transformer oil, hence will be immensely benefitted with huge capacities planned in power generation. Secondly, the sharp fall in crude oil prices will also boost up its margin as base oil forms its major raw material. Apart from petroleum business, company has also setup wind mills with an installed capacity of 26.3 MW which will be augmented to 34.9 MW in this fiscal. Although company is negatively affected by the rupee depreciation being a net importer, still it may register net sales of Rs 950 and PAT of Rs 58 cr leading to an EPS of Rs 40 on equity of Rs 14.60 cr for FY09. Buy at major corrections.
Easun Reyrolle (45.00) is engaged in field of power management encompassing protection control products, automation systems, automatic metering products & switchgears. Lately it has also ventured into EPC and turnkey business of erection of substations and the entire T&D projects. Notably, company has now fully absorbed the technology of 61850 domain in which only players like ABB, Siemens and Areva are present. 61850 domain is a protocol, which ensures connections in-between hybrid and complex substations so that the power transmission and distribution happens smoothly. For future growth it is aggressively eyeing companies in Europe and US, which are strong in technology. For this It raised round about Rs 250 cr in Jan’08 thru GDR & FCCB route to be converted into equity at the rate of Rs 315 and Rs 400 per share respectively. It hasn’t made any major acquisition and is still sitting on huge cash. With order in hand of nearly Rs 200 cr, it may end FY09 with sales of Rs 250 cr and profit of Rs 25 cr i.e. EPS of Rs 12 on current equity of Rs 4.15 cr having face value as Rs 2/- per share. Investors are strongly recommended to buy as scrip can double within a year.
Being Asia’s largest manufacturer of air compressors, Elgi Equipment (32.00) is involved with the design, development and manufacture of exhaustive range of electric and diesel powered screw air compressor (oil free, portable, world’s smallest etc), centrifugal air compressor, airends, reciprocating air compressors, borewell compressors, bare compressor pumps etc. Besides it also manufactures railway compressors and a variety of equipment solutions for railway applications. It can manufacture all these types of compressors covering a range from 0.75HP to 1500HP for volumes from 1.8 cfm (cubic feet per minute) to 80000 cfm. On the other hand it derives nearly 20% revenue by providing total service station solutions through the supply of a range of equipment and tools for two, three & four wheelers. Moreover, having rich experience of four decades and state-of-the-art infrastructure, company has also started offering end to end mechanical engineering solutions and contract manufacturing services of precision engineered part to clients who are looking for cost-effective, subcontracting solution. For future growth company is setting up a compressor manufacturing facility in China and warehousing facility in middle East and Brazil. On a conservative basis it may report a turnover of Rs 450 cr and PAT of Rs 35 cr i.e. EPS of Rs 5.50 for FY09. Accumulate at declines.
SKF India (170.00) is country’s largest bearing manufacturer commanding more than 30% market share across the country. It manufactures all types of roller bearing, ball bearing, bearing units, bearing housing, plain bearing etc in hundred of sizes thereby having an extensive product range and literally providing solution for any and every conceivable application. Last fiscal it launched power transmission products as a new product range to capture the growth in the energy sector. Of late, SIL also got engaged into marketing, sales and distribution of large size bearings for industrial segment being produced by another group company. For future growth company is putting up a new plant in Haridwar, Uttarakhand with a capacity of 48 million pieces of bearing which will cater to two wheeler market segment. The plant is expected to start commercial production by mid 2009. Due to rise in input cost and stiff competition coupled with pressure from customers, company may not be able to maintain its CY07 EPS of Rs 30 and may end CY08 with sales of Rs 1700 cr and profit of Rs 145 cr i.e. EPS of Rs 27. Despite taking de-growth into consideration, this debt free MNC is available fairly cheap. A very safe bet in current market sentiment.
International Combustion (165.00) is among the very few engineering companies which have been recording consistent and healthy growth in the last five years but still remains to be poorly discounted by the market players. Even for FY08 it registered 20% and 40% growth in sales and net profit respectively thereby posting an EPS of Rs 49. Currently its available at EV/EBIDTA of merely 2x times which is extremely cheap by any standard for this debt free and dividend paying engineering company. It is engaged in manufacturing of heavy engineering equipment, geared motors and gear boxes, vibrating screens and feeders, bulk material handling equipment, rubber/polyurethane screen decks and liners, Raymond grinding mills, air classifiers and flash drying system etc. Hence it makes sophisticated plant and machinery for core sector industries such as mining, steel, cement, petrochemical, construction, sugar, power, textile, paper, rubber, pharma, chemicals etc. Recently it reported satisfactory nos for the Sept’08 quarter and is poised to end FY09 with sales of Rs 110 cr and NP of Rs 12 cr i.e. EPS of Rs 50 on tiny equity of Rs 2.40 cr. Due to small equity, it also has an impressive ROCE of 40% and ROE of 25%. More importantly it has huge reserve of nearly Rs 45 cr which leads to a book value of Rs 192, making it a perfect bonus candidate. It’s a risk free bet which can give handsome return in the long run.
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