Small & Beautiful

Bharati Shipyard (60.00), second largest private shipyards in India is engaged in design and construction of bulkers, cargo/container ships, tankers, dredgers, passenger vessels, chemical carriers etc. It has special expertise in construction of offshore support vessel required for oil exploration industry and is the first Indian player to bag an order of an oil rig. However, the shipyard sector is going thru rough phase as Baltic freight index has crashed dramatically and no shipping company is placing fresh order for ships. On the contrary, there is the great risk of order cancellation if the current situation persists for longer duration. Secondly the crude oil prices have also fallen substantially forcing the oil companies to reduce their E&P activities. Meanwhile, company has an all time high order book position of Rs 4800 cr which is almost 7x times its FY08 revenue, thereby ensuring a strong revenue visibility. Although company hasn’t got any order cancellation, still it may have to renegotiate some orders with lower realization. Due to slump in business, it has slowed down its Greenfield expansion and other capex plan. Notably, 50% of its FCCB has already been converted into equity and the balance FCCB of more than Rs 200 cr may come up for redemption in Dec 2010. For FY09, company is estimated to clock a turnover of Rs 825 cr and PAT of Rs 65 cr without taking govt subsidy into consideration. This translates to an EPS of 24 on current equity of Rs 27.60 cr. It seems all the negative has already been factored in the share price and technically also scrip seems to have bottomed out.

Supreme Infrastructure’s (28.00) core competency lies in construction/widening of roads & highways, but it also undertakes other infrastructure projects like integrated nallah development, drainage work, laying of railway tracks, construction of minor bridges, development of IT Park, residential tower, RCC building, strengthening of sea wall and laying of tetra pods etc. Its area of operation is mainly concentrated in Mumbai region and few parts of Maharashtra & Bangalore with major clients like NHAI, MCGM, MMRDA, MSRDC, MUTP, PWD, BMC, AAI, BPT, TMC and also private agencies like Hiranandani, K. Raheja, Pratibha Ind, BARC, Sadbhav Eng, Mundra Port etc. Importantly, company has its own captive ready mix concrete plant, asphalt mix plant, quarrying and crushing unit & paver block manufacturing unit. For the latest Sept’08 qtr it posted revenue of Rs 66 cr and profit of Rs 6 cr against Rs 18.50 cr & Rs 1.50 cr last year. It has already clocked an EPS of Rs 11 for six month ending Sept’08. To cater the increasing demand for RMC, company is contemplating to almost double its RMC capacity to 300 cum. per hour by adding two new RMC plants in Mumbai and other city. With a massive order in hand of more than Rs 500 cr, it may register a topline of Rs 250 cr and NP of Rs 18 cr. This translates into EPS of Rs 13 on equity of Rs 13.90 cr. A decent buy for agressive investors.

From a high of more than Rs 1000 early this year, share price of KLG Systel (70.00) has become one fifteenth and is still hitting new lows. Company specializes in offering technological solution for entire business life cycle i.e. right from concept and creation, through plant design, project execution and management operations & optimisation to expansion/ revamp. It also provides on-line IT solutions to distribution utilities, using its self-developed software Vidushi, SG61 Technology and solution for determining the transmission & distribution losses, fixing the areas of power theft, on-the spot billing & cheque collection, increasing revenue collection efficiency of the utilities and addressing consumer grievances. Recently it has demerged the power systems solutions business into a new subsidiary named KLG Power in which IBM group company has invested Rs 12 cr for taking 1.20% stake, thereby putting the valuation of KLG Power Ltd to whopping 1000 cr. Ironically against this, KLG systel - the parent company which is holding the rest 98.80% is available at a market cap of Rs 90 cr. For FY09 on a standalone basis it is expected to clock a turnover of Rs 240 cr and profit of Rs 30 cr i.e. EPS of Rs 24 on current equity of Rs 12.60 cr.

Till now cement industry was facing double whammy with falling cement prices and rising input cost. Now, although the input cost have soften but at the same time demand has also taken a hit due to slowdown in construction activities. Despite this JK Lakshmi (30.00) appears to be one of the safest & cheapest bet in current sentiment. It has recently expanded its production capacity to 3.65 million TPA and is in the midst of taking it further to 4.75 million tonne by end of this fiscal. The recent fall in coal and pet coke prices augurs well for company as it has fully stabilized the working of the 36MW captive thermal power plant. To maintain its margin, company has increased the sale of blended cement which now constitutes more than 75% of total sales. Secondly it is also constantly expanding its RMC business and currently has a total of 9 RMC plants in operation with an overall production capacity of 5.58 lacs cu.mtr. Depending upon the market situation, company is also contemplating to setup a new cement plant in Chattisgarh with a capacity of 2.7 million tonne of cement. Last year company got nearly Rs 40 cr on allotment of 41 lac shares @ 97.50 Rs against convertible warrants. Incidentally, company has already posted an EPS of Rs 11 for H1FY09 and is expected to end FY09 with sales of Rs 1050 cr and PAT of Rs 85 cr i.e. EPS of Rs 14 on equity of Rs 61.20 cr. However, a huge of debt of Rs 700 cr on its books is a cause of concern.