Yuken India Ltd - 200.00 Rs

Yuken India Ltd (YIL) was set up in 1976 in technical and financial collaboration with Yuken Kogya Co Ltd – Japan mainly for the manufacture of oil hydraulic equipment. Since then it emerged as the leading and reputed manufacturer of power saving hydraulic pumps & valves. Its product range consist of all types of hydraulic pumps like vane pumps, piston pumps, gear pumps, pal pumps etc. Under valves, it boasts of manufacturing various types of hydraulic valves for industrial and mobile applications including pressure control valves, modular valves, flow control valves, logic valves, electro proportional valves, servo valves, direction control valves & mobile control vavles. Besides it also manufactures complete hydraulic power units as per customer specifications, cylinders, parison controllers, actuators, accumulators and power packs. Moreover it also supplies related accessories such as cartridge kits, pipe flanges, air bleed valves, act pressure switch, sub plates, MMC manifolds, modular bolt kits, pump mounting brackets, coolers etc. Hydraulic devices are very popular in heavy engineering industry as effective means of automation, hence company’s product find extensive use in various key sectors like machine tools, material handling equipment, construction machinery, drill rigs, automobiles, defence, steel, power & cement plants, plastic machinery etc.

YIL’s operates thru its main foundry plant at Bangalore and four subsidiary companies spread across Bangalore, Hyderabad & Chennai. Its subsidiary Yuflow Engineering manufactures hydraulic cylinders for industrial use, Sriplas Engineering act as an ancillary unit for machined components, Coretec Engineering manufacture iron cores for solenoid valves and Prism Hydraulics to manufacture solenoid coils. Earlier in 1991, company formed a joint venture to manufacture radial piston motors in collaboration with Sai of Italy, the largest manufacturers of radial piston motors in the world. Presently, in order to fulfill the rising demand YIL is implementing a gradual expansion plan to increase its capacity multifold. Accordingly, it has recently doubled its hydraulic casting products capacity to 2400 TPA and is further augmenting it to 6000 TPA within next 2~3 years by installing additional hi-tech machineries in the existing foundry unit. Recently it made a tie up with Hydrocontrols SPA Italy to produce and market state-of-the-art mobile control valves especially for agriculture, construction, earth moving and lifting machineries. Importantly, YIL has forayed into Chinese steel industry by successfully commissioning hydraulic system for a cold rolling mill line in China for M/s Changshu Everbright. In short, apart from catering to domestic market YIL is looking to increase its foothold in international market as well.

Interestingly, YIL runs a 'Hydraulic School' at different levels for its customers to provides hands-on experience and has already trained more than 6,000 engineers from a large number of organizations, both from India and abroad. Financially, company is doing well and has reported a 20% rise in sales to Rs 39 cr and 70% jump in bottomline to Rs 3.90 cr for nine months ending Dec’07. Considering company’s expansion plan and strong demand for its product, it is estimated to report a topline of Rs 100 cr and bottomline of Rs 5.50 cr for FY08. This translates into EPS of Rs 18 on very tiny equity of Rs 3 cr. For FY09, EPS is estimated to shoot up to around Rs 25. Thus investors are strongly recommended to buy as at a reasonable discounting by 12x times, scrip can easily touch Rs 300 in 9~12 months.

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Avantel Softech Ltd - 65.00 Rs

Incorporated in 1990, Avantel Softech Ltd (ASL) is a technology driven, ISO 9001 - 2000 accredited company which offers telecom products and software solutions. It has over the past few years developed expertise in telecom hardware, relevant embedded software and network management systems. In order to provide better solutions in communications and computing, ASL has made strategic alliance with renowned entities like Space Applications Centre, ISRO, L 3 Communications - Narda, USA and Vedang Radio Technology. Thru its govt recognized R&D division, ASL has developed a number of products for defence sector by ensuring compliance of stringent defence standards. Infact, it was the first Indian company to supply HDSL (High speed Digital Subscriber Line) and DSL equipments. Hence company primarily caters to the telecom and defence sector organizations. Broadly, its business model can be divided into following two segments:

A. TELECOM

ASL is actively involved in design and development of products based on high power broadband Wireless, Satellite communication and broadband access technologies. The design, development and integration of wireless and access products are carried out using its own proprietary software tools. Besides, company has a test and measuring facility for design, development and manufacture of wireless products (up to 20 GHz) and various access products supported by compilers and evaluation modules to test and integrate the software and hardware. This segment can be further subdivided into following two divisions:-

· Wireless : ASL designs and manufacturers repeaters, filters, splitters, tappers, combiners, couplers & amplifiers to enhance the capacity and coverage of wireless communication networks for use in GSM, CDMA and 3G networks. In short it offers products for indoor and outdoor environment to improve signal quality, coverage and capacity

· Satelite Communication: Ironically, ASL’s design and engineering team has developed a range of subsystem for satellite earth stations in collaboration with ISRO. It has developed customized solutions for INSAT based mobile satellite services with advance microwave, digital wireless communication and signal processing products for military and commercial market. Hence it offers mobile satellite services for messaging, tracking and all locations based services with appropriate network security. Using this same technology it provides specialized products like Ship borne terminal, handheld terminal, S-band receiver, UHF transmitter, burst demodulator etc which are one of its kind.

B. SOFTWARE

ASL provides services in the areas of ERP, web enabling of business processes as well as maintenance / enhancement of legacy systems, network management systems, remote monitoring & management, automation of test equipments and corporate portals. Its ERP software produc called “FunWork” covers all core and extended business critical functions of the enterprise such as marketing and sales, finance and accounts, manufacturing operations, customer support, personnel and administration. It also has expertise in electronic design services for product development, re-engineering, PCB design etc. Uner multimedia, ASL offers complete in-house creative and production capabilities-from concept development and script writing to programming, assembly, and testing.

Prsently, ASL is having development centers at Hyderabad, India and Boston, USA. Its client base comprises of telecom service providers like Airtel, BSNL, Ericsson, Vodafone, Idea, L3Communications, Nokia and Siemens and many other government organizations like BEL, Defence Labs, ECIL, Indian Army, Indian Navy, ISRO Centres etc. Notably, ASL could successfully develop transmitters and receivers to offer mobile satellite services for applications in Indian defence as well as other sectors. Secondly, its products for EW and COMINT applications have been well received by defence PSU'S such as BEL and ECIL. Company is also developing network manager to offer wide range of VSAT services with cost effective indigenous technology. It has also signed a Transfer of Technology (TOT) agreement with ISRO for supply of hubs and satellite interactive terminals for EduSat networks. Moreover it is developing various products for GPS based vehicle tracking system. To increase its presence company is in talks with some international players involved in the system integration business for strategic tie-ups and alliance. In future it plans to address requirements of railways, coast guards, fishing trawlers and transport vehicles. To conclude, company has huge potential for future growth. For nine months ending Dec 2007, its sales jumped up 135% to Rs 19 cr whereas Pat zoomed up to Rs 3.40 cr against 0.60 cr last fiscal. Historically, Q4 is the best quarter for the company and hence it may end FY08 with sales of Rs 35 cr and profit of Rs 5 cr. This works out to an EPS of Rs 10 on equity of Rs 5.15 cr. At a current EV of less than Rs 35 cr it’s a good bet and can give 50% return is a year’s time.

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STOCK WATCH

Hind Rectifiers (140.00) is one of the leading manufacturers of locomotive transformers, rectifiers, inverters, and power electronics like diodes and thyristors (types of semiconductor devices) etc which are basically used in converting the current from AC to DC and vice versa. Incidentally, it derives more than 50% of its revenues from railways and 20% from power industry. For Dec qtr, sales improved by 15% to Rs 23 cr and NP grew by 10% to Rs 2.80 cr. Offlate, company has set up two new units in tax free zone of Uttranchal, but in order to get the Cenvat paid on raw material it is still operating from its old plant in Mumbai and Nagpur. However the new orders booked by the company will be manufactured at Uttranchal plant only. Moreover, recently company has signed a technical collaboration agreement with M/s. Infineon Technologies AG, Germany for manufacturing of IGBT based primeSTACK which will complement its existing products. It may end FY08 with sales of Rs 95 cr and PAT of around Rs 11 cr i.e. EPS of Rs 15 on a very tiny equity of Rs 1.50 cr having a face value of Rs 2/- per share. Importantly, company is estimated to report an EPS of more than Rs 20 for FY09 and at a modest discounting by 12x times share price can double in 12~15 months.

Shanti Gears (65.00) is engaged in the manufacture of gears, gearboxes, geared motors and gear assemblies both standard and custom-made. Its product portfolio includes a range of worm gear boxes, helical & bevel gear box, geared motor, custom built gear box, mill gear box, ppen gearing, CNC machine tools and products for the textile industry. It also manufactures high precision gears for marine and aviation industries. It has recorded 25% growth in sales to Rs 176 cr and 30% rise in net profit to Rs 32 cr for nine months ending Dec 2007. Notably, company makes gearboxes of 250 KV for windmills and is looking for technical collaboration to manufacture higher capacity gears for windmills. On the back of strong industrial and economic growth company is sitting on a strong order book of more than Rs 100 cr currently. For FY08 it can clock a turnover of Rs 250 cr and profit of Rs 45 cr which leads to an EPS of Rs 5.25 on fully diluted equity of Rs 8.60 cr with a face value of Rs 1/- per share. Moreover for FY09 it has the potential to register an EPS of Rs 6.50 which means scrip is trading fairly cheap at P/E ratio of 10x times. Besides, compay is having around 18 acres of surplus land in prime location of Coimbatore which can fetch handsome value once sold.

Hitachi Home & Life Solutions (127.00), a 68% subsidiry of Hitachi-Japan is amongst the top airconditioning companies in India with an installed capacity of 250,000 units per year. It maufactures high technological home and commercial air conditioners like window AC, split AC, concealed splits, ductables, chillers and specific telecom cooling solutions. Its plant at Kadi, Gujarat is among the seven Hitachi room air conditioner facilities worldwide. Couple of years back company also introduced 3-Door refrigerators and big capacity washing machines which are basically imported from Hitachi factory in Thailand. Its topline grew by 45% to Rs 83 cr but PAT shot up 240% to Rs 5.40 cr for the latest Dec’07 qtr. Importantly, due to strong brand equity company has managed to retain the high quality position as well as price realisation in spite of stiff competition. Accordingly it is expected to report total revenue of Rs 425 cr and PAT of around Rs 37 cr for FY08. This works out to an EPS of Rs 16 on equity Rs 23 cr. Accumulate at every decline.

L.G.Balakrishnan & Bros (22.00) is enaged into auto transmission & metal forming business thereby manufacturing products like chains for both automotive and industrial segment, sprockets, tensioners and belts on one hand and fine blanking, forging (cold, hot and warm), machined components, wire drawing on the other hand. In order to cater to the requirements of major OEMs customers, last year company has put up a new manufacturing plant in tax free zone of Pantnagar, Uttarakhand. Notably, company meets 100% of transmission requirements of Bajaj Auto and TVS, and nearly 80% of Hero Honda's. For the nine months ending Dec’07 it registered 12% growth in sales to Rs 394 cr but profit grew marginally to Rs 10.80 cr. Offlate, it has also set up a Greenfield forging plant near its existing plant at Annur. Interestingly, it is demerging its forging division into LGB Forge Ltd and will be allotting one share of it for every one share held in the company. For entire FY08 it may clock a turnover of Rs 525 and NP of Rs13.50 cr i.e. EPS of Rs 1.70 on equity of Rs 7.85 cr having face value of Rs 1/- per share. However, the continuos pressure for price reduction by OEMs and severe competition in the after market coupled with volatile input cost are causes of conern. But only at sharp declines.

Smart Investment (Guj)

Hind Rectifiers Ltd

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Numeric Power System Ltd

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Shringar Cinemas (61.00) is an integrated film exhibition and distribution company operating chain of multiplexes under the brand name -'FAME'. It is also in food and beverage business thru one of its wholly owned subsidiary. It has major presence in Mumbai apart from Bangalore, Ahmedabad, Surat, Nasik, Pune Kolkatta & Aurangabad. It currently operates 14 properties with 48 screens. For the nine months ending Dec’07 its revenue increased by 60% to Rs 60 cr whereas NP shot up 70% to Rs 12.80 cr. Because of rising disposable income, increasing mall culture and various tax benefits from govt, the future growth potential for the company is quite huge. It has plans to scale up its multiplexes to 150 screens with pan India presence. For partial funding, last year it raised around Rs 90 cr thru FCCB route to be converted @ Rs 90 & 107 per share. Ironically scrip is still available near its IPO price of Rs 53 per share in April 2005. On a standalone basis for FY08 it may register a topline of Rs 85 cr and bottomline of Rs 17 cr i.e. EPS of Rs 5 on diluted equity of Rs 33.85 cr. Meanwhile company is contemplating to get in to film production as well. Share price can easily appreciate 50% within a year.

Gujarat Alkalies (160.00) is the single largest producer of caustic soda in India, with a production capacity of 358,760 TPA. Besides it also produces various other chemicals like sodium chloride, liquid chlorine, hydrochloric acid, chloroform, methyl chloride, hydrogen peroxide, sodium cyanide, aluminium chloride, phosphoric acid etc. Ironically, company’s plants are working at more than 100% capacity utilization against industry average of 70%. In order to reduce the power cost, company has undertaken a windmill project of 24 MW expected to go on stream in coming few weeks. It is further setting up additional windmills for a capacity of 40 MW. On the other hand, company has already finalized monetization of CERs generated from three of its CDM projects and has infact become the first PSU in the country, to get the approval of the host country from MOEF for its CDM Project. To maintain its future growth it is exploring the possibilities of putting up additional projects like expansion of caustic soda by 500 TPD, expansion of hydrogen peroxide by 75 TPD (100% basis) and another captive power plant with a capacity of 90 MW at a capex of Rs 1,100 crore. For FY08 it may clock a turnover of Rs 1150 cr and PAT of Rs 250 cr on a conservative basis. This translates into EPS of Rs 34 on equity of 73.40 cr. Keep accumulating at declines.

Patels Airtemp (70.00) is involved in the design and manufacture of industrial process plant equipments like pressure vessels, heat exchangers, air cooling & air heating equipment, dehumidification plants, air conditioning and refrigeration equipment and coils etc. Hence company’s products that find use in key sectors like oil and gas, refineries, power, fertilisers, chemicals, cement and textiles. It is also into HVAC business, which currently contributes about 15% to the total revenues. Its clientele include Ingersoll Rand, BHEL, Reliance group, NTPC, Indo Gulf, ONGC, Nirma, Nuclear Power Corporation etc. On the back of strong industrial and economic growth, company is sitting on a healthy order book position of Rs 45 crore. On the export front, company is expecting to get more orders from Germany and Singapore. It is negotiating for a waste management project in Singapore and is hopeful to get the same soon. For FY08 it is estimated to report sales of Rs 50 cr and PAT of Rs 5 cr i.e. EPS of Rs 10 on equity of Rs 5 cr. Share price can easily double in 12~15 months. Buy at every declines.

Rajendra Mechanical Industries (135.00), part of the Mumbai based REMI group, is a pioneer in manufacturing of stainless steel welded and seamless pipes & tubes. These pipes and tubes are used extensively in critical process industries such as refineries, petrochemicals, paper and pulp, fertilizers, pharmaceuticals, nuclear plants, etc. IOCL, IPCL, GNFC, IFFCO, Madras refineries, Mangalore refineries, Ranbaxy Laboratories are few among its reputed clientele. It has also developed specialized stainless steel tubing especially for critical power industry. To cash on increasing demand, company has been constantly expanding its production capacity which now stands at 7500 MTPA from 4500 MTPA in 2005. Notably, company has also ventured into power generation thru wind mill and has total installed capacity of 2.25 MW. For the Dec qtr, sales jumped up 55% to Rs 43 cr whereas NP zoomed up 290% to Rs 2.60 cr. Accordingly it can report a NP of Rs 10.00 cr (incl. extra ordinary income of Rs 1.50 cr on sale of property) on sales of Rs 185 cr for FY08 which leads to an EPS of Rs 21 on equity of Rs 4.80 cr. Besides it has the potential to earn an EPS of 25 Rs for FY09 from business operations only.

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