STOCK WATCH
For the latest Sept’08 quarter Accurate Transformers (30.00) has come out with encouraging set of nos. Although its sales declined marginally by 5% to Rs 32 cr but its operating profit shot up 60% to Rs 5.50 cr. Remarkably, its OPM improved substantially to 16% this quarter against 10% last year. However due to higher interest cost, PAT increased by 25% to Rs 1.40 cr thereby posting an EPS of almost Rs 5 for the qtr. Company is engaged in manufacturing of power as well as distribution transformers ranging from 1 MVA to 40 MVA - in up to 220 KV class. It is looking to venture into manufacturing of higher capacity power Transformers of 160 MVA from FY10. It also carries out rural electrification project which involves the complete setting up of electricity in remote areas including the laying of lines, poles and substations. Unfortunately company is working at very low capacity utilization due to high working capital requirement and shortage of funds. Despite this it can clock sales of Rs 200 cr and PAT of Rs 6 for FY09 leading to an EPS of Rs 20 on a very tiny equity of Rs 2.96 cr. It’s a steal at current market cap of merely Rs 9 cr.
Bharat Gears (28.00) has once again declared excellent result for the Sept’08 qtr. Sales grew by 30% to Rs 74 cr whereas NP shot up 120% to Rs 2.90 cr. Accordingly it has already earned a PAT of 6 cr on sales of 140 cr for H1FY09 against profit of Rs 2.50 cr on sales of Rs 108 cr for H1FY08. Company manufactures a wide range of ring gears and pinions, transmission gears and shafts, differential gears, gear boxes etc which find application in heavy, medium and light duty trucks, buses, tractors, passenger cars, utility vehicles, and forklift trucks, etc. After a gap of 7 years it again became a dividend paying company be giving 10% dividend for FY08. More importantly it has successfully brought its total debt to Rs 50 cr from Rs 80 cr in FY05. However the share price has tumbled down sharply in the recent meltdown and is now become one third from its high of Rs 90 in Jan’08. Despite the slowdown in auto sector, company may report sales of Rs 250 cr and net profit of Rs 10 cr for FY09. This works out to an EPS of Rs 13 on equity of Rs 7.80 cr. With a healthy book value of Rs 46, scrip is trading fairly cheap at an EV of hardly Rs 75 cr and P/E multiple of less than 3x times. Only aggressive investors are advised to accumulate at declines.
Savita Chemicals (155.00) 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.
For the Spet’08 qtr Gremach Infrastructure’s (35.00) revenue increased by 45% to Rs 78 cr but NP declined by 15% to Rs 7.90 cr on the back of sharp fall in operating margin. Company’s main activity is to provide rental of construction/earthmoving machineries to infrastructure companies including L&T, Punj Lloyd, Shapoorji Pallonji, Gammon India, HCC, Gannon Dunkerley etc. It has a huge asset bank of heavy equipments ranging from compacters, rollers, concrete mixers, dozers, forklifts, loaders to excavators, PTR, dumpers, electronic sensor pavers, kerb laying machine, concrete batching and mixing plant. In addition to renting its owned equipments, it also hires equipments owned by other parties and rent to its own clients. For the six months ending Sept’08 it has already registered an EPS of Rs 13 by earning PAT of Rs 20 cr on topline of Rs 180 cr. Accordingly for FY09, on a very conservative basis it may clock a turnover of Rs 300 cr and NP of Rs 24 cr i.e. EPS of Rs 16 on equity of Rs 15.20 cr. Although in near future company may see a sharp fall in revenue due to unprecedented slowdown in construction sector, but going forward it is expected to regain normal business post liquidity crisis. Interestingly, it has got in-principle approval for 100 hectar Metal SEZ at Kolhapur & another at Dhule in Maharashtra. It has also taken 75% controlling stake in 11 Coal mine licenses in Mozambique. To fund its growth plant company has raised almost Rs 200 cr in Feb 2008 thru FCCB route to be converted into equity @ Rs 376 per share. Ironically, share price which hit a high of Rs 504 in Jan’08 is not finding any buyer even at Rs 35. Aggressive investor can buy at current levels.
Bharat Gears (28.00) has once again declared excellent result for the Sept’08 qtr. Sales grew by 30% to Rs 74 cr whereas NP shot up 120% to Rs 2.90 cr. Accordingly it has already earned a PAT of 6 cr on sales of 140 cr for H1FY09 against profit of Rs 2.50 cr on sales of Rs 108 cr for H1FY08. Company manufactures a wide range of ring gears and pinions, transmission gears and shafts, differential gears, gear boxes etc which find application in heavy, medium and light duty trucks, buses, tractors, passenger cars, utility vehicles, and forklift trucks, etc. After a gap of 7 years it again became a dividend paying company be giving 10% dividend for FY08. More importantly it has successfully brought its total debt to Rs 50 cr from Rs 80 cr in FY05. However the share price has tumbled down sharply in the recent meltdown and is now become one third from its high of Rs 90 in Jan’08. Despite the slowdown in auto sector, company may report sales of Rs 250 cr and net profit of Rs 10 cr for FY09. This works out to an EPS of Rs 13 on equity of Rs 7.80 cr. With a healthy book value of Rs 46, scrip is trading fairly cheap at an EV of hardly Rs 75 cr and P/E multiple of less than 3x times. Only aggressive investors are advised to accumulate at declines.
Savita Chemicals (155.00) 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.
For the Spet’08 qtr Gremach Infrastructure’s (35.00) revenue increased by 45% to Rs 78 cr but NP declined by 15% to Rs 7.90 cr on the back of sharp fall in operating margin. Company’s main activity is to provide rental of construction/earthmoving machineries to infrastructure companies including L&T, Punj Lloyd, Shapoorji Pallonji, Gammon India, HCC, Gannon Dunkerley etc. It has a huge asset bank of heavy equipments ranging from compacters, rollers, concrete mixers, dozers, forklifts, loaders to excavators, PTR, dumpers, electronic sensor pavers, kerb laying machine, concrete batching and mixing plant. In addition to renting its owned equipments, it also hires equipments owned by other parties and rent to its own clients. For the six months ending Sept’08 it has already registered an EPS of Rs 13 by earning PAT of Rs 20 cr on topline of Rs 180 cr. Accordingly for FY09, on a very conservative basis it may clock a turnover of Rs 300 cr and NP of Rs 24 cr i.e. EPS of Rs 16 on equity of Rs 15.20 cr. Although in near future company may see a sharp fall in revenue due to unprecedented slowdown in construction sector, but going forward it is expected to regain normal business post liquidity crisis. Interestingly, it has got in-principle approval for 100 hectar Metal SEZ at Kolhapur & another at Dhule in Maharashtra. It has also taken 75% controlling stake in 11 Coal mine licenses in Mozambique. To fund its growth plant company has raised almost Rs 200 cr in Feb 2008 thru FCCB route to be converted into equity @ Rs 376 per share. Ironically, share price which hit a high of Rs 504 in Jan’08 is not finding any buyer even at Rs 35. Aggressive investor can buy at current levels.
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