Small & Beautiful

Gayatri Project (85.00) is engaged in execution of major civil works including concrete/masonry dams, earth filling dams, national highways, bridges, canals, aqueducts, ports, etc. Although the company has executed various projects in different sectors of infrastructure, its expertise lies mainly in the road and irrigation sectors. Of late company has moved up the value chain and is executing five lucrative BOT road projects having very healthy IRR of around 14%. It has also entered into joint ventures with DLF for construction of road on BOT basis and with ION Exchange for water transport projects. For the Sept’08 quarter its revenue increased by 45% to Rs 207 cr and PAT grew by 25% to 8.50 cr. Incidentally, it has already posted an EPS of Rs 20 for H1FY09. And as of now, it boasts of having a massive order book position of more than Rs 3000 cr which is 4x times its FY08 turnover thereby providing strong revenue visibility. Notably, irrigation projects constitute 30%, transportation projects 60% and industrial building constitutes the balance 10% of order book. Thus for FY09 it may register a topline of Rs 950 cr and profit of Rs 30 cr i.e. EPS of Rs 30 on current equity of Rs 10.10 cr. However, the huge debt of Rs 450 cr on its book is a cause of concern.

XL Telecom & Energy (55.00) has been the pioneer in solar module manufacturing since last 15 years. Due to gaining popularity of this non conventional energy, company is in advanced stage of implementing the 120 MW solar cell manufacturing facility in Rajiv Gandhi Nano Technology Park SEZ, Hyderabad with a capital outlay of Rs 360 cr. For this it has also inked a five-year contract with Chinese firm LDK Solar to supply multi-crystalline solar wafers which is a key component for solar cell and panel manufacturing. Remarkably, company has also got itself forward integrated in solar value chain by entering into EPC segment of solar farm establishment and has recently setup its first solar farm in Majorca, Spain with an installed capacity of 1.6 MW. With this it has become the world’s first and only solar company to capture the complete solar value chain from manufacturing of solar cell to solar module to setting up of solar farm. After getting this success, company is now exploring the opportunities to establish such solar farms in Italy, southern France and other European countries in next 3 years totaling about 300 MW. For the Sept’08 qtr, company derived 98% revenue from energy & only 2% from telecom (against 55% & 45% respectively in FY08), which indicates that company is betting high on energy segment. On the back of terrific Q1FY09 nos, it may clock a turnover of Rs 850 cr and PAT of Rs 25 cr for FY09 ending June 2009. This translates into EPS of Rs 13 on current equity of Rs 18.80 cr. Although the conversion price for FCCB has been reset downwards to Rs 160 from Rs 260 earlier, still bond holder may not opt for conversion in near future. A good bet in renewable energy sector.

Ratnamani Metals (58.00) is basically engaged in manufacturing welded and seamless stainless steel (SS) pipes & tubes, carbon steel (CS) LSAW, HSAW and ERW pipes. To cater the rising demand company is adding 3,000 TPA of capacity in stainless steel tubes and pipes segment, which is to be operational shortly thereby taking the total stainless steel pipe capacity to 22,000 tonne. In carbon steel segment, it is adding 100,000 tonne of HSAW capacity through brown field expansion in current fiscal, which will double its HSAW capacity of 200,000 TPA and take the total carbon steel capacity to 400,000 TPA. It meets its 100% power requirement from its own 24 windmills generating 20.54 MW of green power. It has also got itself partly backward integrated by establishing hot extrusion line which has reduced its dependence on imported material to some extent. As a part of forward integration, RTML has recently set up a 3 layer polyethylene and epoxy coating line with capacity of 2.7 million sq mtrs. About 50% of company’s turnover comes from oil, gas, petrochemical industry followed by 20% from power and rest from others. As of now RTML has a decent order book of more than Rs 500 cr to be executed over the next 6~9 months. The recent fall in steel and other metal prices augurs well for the company. Accordingly it may register sales of Rs 1000 cr and profit of Rs 80 cr for FY09 i.e. EPS of Rs 18 on equity of Rs 9 cr having face value as Rs 2/- per share. A solid bet.

J Kumar (65.00) is a Mumbai based EPC company with a primary focus on construction of roads, flyovers, bridges, railway over bridges, subways, irrigation projects, commercial and residential buildings, railway buildings and piling works. It also has a ready mix concrete plant for captive use. Its operations are largely confined in the state of Maharashtra with majority in Mumbai itself. The company is a class I A contractor with PWD, Government of Maharashtra. Importantly, company owns a large fleet of modern construction equipments like Hydraulic piling rigs, Putmiester Mobile boom placer concrete pump and stationery concrete pumps, RMC plants, transit mixers, various capacity cranes, poclains, front end loaders, JCBs and tippers. Due to govt’s special focus & aggressive spending on infrastructure, company is witnessing best of its time and boast of having an all time high order book position to the tune of Rs 1200 cr executable in next two years. Importantly major chunk of this order book has been recently bagged by the company with Rs 560 cr contract from MMRDA & MSRDC to construct 16 Skywalks in Mumbai. Company has earned an EPS of Rs 7 for H1FY09 and may report total revenue of Rs 375 cr and PAT of Rs 25 cr for entire FY09 which leads to an EPS of Rs 12 on current equity of Rs 20.70 cr. Accumulate at sharp declines only.