STOCK WATCH
Shanthi Gears (32.00) is the second largest player in industrial gear segment with 20% market share and at the same time is the undisputed leader in the customized product segment where the manufacturing is as per clients’ requirements. Remarkably, it is also the only listed manufacturer of gears for helicopters and light combat aircrafts to Hindustan Aeronautics Ltd. Of late, company has even started manufacturing gearboxes of 250 KV for windmills. For six months ending Sept’08, it recorded nearly 15% growth in sales and NP to Rs 126 cr and 23 cr respectively. Incidentally, the recent fall in steel and other metals will reduce its input cost considerably and may give a good fillip to its bottomline in coming qtrs. Accordingly it may end FY09 with sales of Rs 260 cr and PAT of Rs 40 cr i.e. EPS of Rs 5 on fully diluted equity of Rs 8.60 cr having face value as Rs 1/- per share. Moreover if rumors are to be believed then India’s largest windmill manufacturer Suzlon, through its subsidiary Hansen Transmission (world’s fifth largest maker of gearbox), was interested in taking a stake in SGL. If it happens, this may lead to re-rating of the company and share price may see a vertical rise
Elecon Engineering (30.00) is a leading manufacturer of bulk Material Handling Equipment (MHE) and Asia’s largest producer of industrial gear with 26% market share in India. For more than five decades, it has been supplying hi-tech equipment to core sectors such as steel, fertilizer, cement, coal, petrochemicals, lignite and iron are mines, power stations, defense and port mechanization in India and abroad. With a strategy of diversification, last fiscal company started a new business of setting up of Wind Turbine Generator (WTG) farms and manufacturing of WTG gear boxes. It has started manufacturing of WTG gear box having capacity of 1 MW to 2 MW, which is the import substitute, thereby becoming the first Indian company to manufacture gearboxes of such sizes. As on 30th Sept 2008, it has an pending order in hand of Rs 1772 cr comprising of Rs 1527 cr for MHE division and Rs. 245 cr for gear division. On the back of satisfactory H1FY09 nos, it is estimated to clock a turnover of Rs 950 cr and net profit of Rs 55 cr for FY09. This translates into EPS of almost Rs 6 on current equity of 18.60 having face value as Rs 2/- per share. Moreover the promoters are constantly buying shares from open market to increase their stake thru creeping acquisition. A solid bet.
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.
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.
Elecon Engineering (30.00) is a leading manufacturer of bulk Material Handling Equipment (MHE) and Asia’s largest producer of industrial gear with 26% market share in India. For more than five decades, it has been supplying hi-tech equipment to core sectors such as steel, fertilizer, cement, coal, petrochemicals, lignite and iron are mines, power stations, defense and port mechanization in India and abroad. With a strategy of diversification, last fiscal company started a new business of setting up of Wind Turbine Generator (WTG) farms and manufacturing of WTG gear boxes. It has started manufacturing of WTG gear box having capacity of 1 MW to 2 MW, which is the import substitute, thereby becoming the first Indian company to manufacture gearboxes of such sizes. As on 30th Sept 2008, it has an pending order in hand of Rs 1772 cr comprising of Rs 1527 cr for MHE division and Rs. 245 cr for gear division. On the back of satisfactory H1FY09 nos, it is estimated to clock a turnover of Rs 950 cr and net profit of Rs 55 cr for FY09. This translates into EPS of almost Rs 6 on current equity of 18.60 having face value as Rs 2/- per share. Moreover the promoters are constantly buying shares from open market to increase their stake thru creeping acquisition. A solid bet.
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.
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.
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