STOCK WATCH

WS Industries (48.00) is a leading manufacturer of high voltage electro-porcelain transmission insulators and sub-station insulators. It deals in other products as well like dropout fuses, isolators, lightning arresters, coupling capacitors, capacity voltage transformers, instrument transformers, line traps and reactors. To cater the rising demand, company is setting up a Greenfield plant in Visakhapatnam to double the manufacturing capacity of substation insulators to 16,000 tons. The project is almost completed and expected to commence shortly. Besides, its transmission insulator unit with installed capacity of 8,000 tonne is running at full capacity. Lately company has also ventured into turnkey project execution i.e. designing, execution and construction work of transmission lines of below 220 KV. Meanwhile, its subsidiary company has completed the construction of the 1st phase (300,000 sq ft) of the Software Technology Park in association with TCG group. So from current year it will start generating additional lease rental of approx Rs 3 cr. With current order book of nearly 135 cr, company is expected to report a turnover of Rs 275 cr and profit of Rs 16.50 i.e. EPS of Rs 8 for FY09. A good bet in power ancillary space.

Tantia Construction (58.00) boasts of having presence in roads and highways, railways, tunnels, bridges and flyovers, urban instructure, sewerage and drainage, civil & housing construction etc. Lately, it also ventured into the lucrative marine infrastructure space, power transmission and distribution segment and aviation infrastructure. Infact, it is among the five Indian companies capable of providing ‘foundation-to-finish’ for mega railway bridges spanning 2-km or more. More importantly, company has a very strong presence in the eastern and north-eastern region which gives it an edge, as very few players are interested in bidding in these regions due to difficult terrain. Presently, it has diversified and massive order in hand position of more than 1000 cr to be executed in next 24 months. In near future company intends to foray into BOT & BOOT projects to boost up its margin. For Q1FY09 it recorded 40% rise in topline as well as bottomline to Rs 99 cr and Rs 5 cr respectively. Hence for entire FY09 it may clock a turnover of more than Rs 450 cr and profit of Rs 20 cr i.e. EPS of Rs 12 on diluted equity of Rs 16.30 cr. Relatively, a safer bet in infrastructure space.

Austin Engineering (60.00) is the leading manufacturers of all types of antifriction bearings namely ball, tapered roller, spherical roller, needle roller and thrust bearing. Despite being relatively small in size, it offers widest range of bearings from 50 gms to over half a tone. Infact it is among a handful of customized bearing manufacturers worldwide to produce bearings with 1200 mm diameter. It supplies bearings to the different category of buyers like automobiles, defence, state road transport corporation, steel plants, thermal plants, cements plants, sugar and paper industries, fan and pump industry and material handling equipments. For FY08 it registered 10% growth in sales to Rs 73 cr and 20% increase in NP to Rs 6.50 cr posting an EPS of Rs 18. Incidentally, company derives 40% of its revenue from export to most quality conscious markets like USA & European countries. It has even setup 100% subsidiaries in USA and Italy, which act as marketing front-end. In near future company intends to venture into manufacturing of geared slewing rim bearings for heavy earth moving and construction equipment and special bearings for aerospace application. For FY09 it may report sales of Rs 75 cr and profit of Rs 5.50 cr i.e. EPS of Rs 16 on small equity of Rs 3.50 cr.

Cera Sanitary (110.00) is the third largest company in the organized sanitaryware segment with over 20% market share in domestic market. Notably, in the last couple of years, company has evolved itself into a total bathroom solutions provider with a wide product range including WC’s, wash basins, whirlpools, bath tubs, shower panels, shower cubicles, shower temples, bath fittings, kitchen sinks, tiles etc. In line with today’s high technology it also provides automatic electronic flushing system, automatic water flow sensor tap, automatic hand dryers/soap dispensers, & perfume sprayer. It even has a strategic tie-up with Pozzi-Ginori, an Italian designer sanitaryware for importing premium sanitaryware and marketing it in India. To take the benefit of high demand, it has recently expanded its production capacity to 24,000 MTPA from 16,500 MTPA. To boost up its retail sales, company came up with novel idea of setting up live CERA bath studio where consumers, architectures, interior designers etc can actually see how the premium products will look, feel and function in their homes. It has already setup eight such studios across India and is now putting up Cera Bath Galleries with its retail partners. Further company is planning a major foray into taps as there is only one strong Indian brand, followed by mediocre brands. For FY09, it may register sales of Rs 160 cr and PAT of Rs 11 cr i.e. EPS of Rs 18 on current equity. Worth having a look at.

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KEI Industries Ltd

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Emco Ltd

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KEI Industries Ltd - Rs 28.00

Founded in 1968, KEI Industries Ltd (KEI) is a complete cable solutions company with the widest product range encompassing high tension and low tension power cables, control and instrumentation cables, rubber cables, flexible & house wires, submersible cables, OVC/poly wrapped winding wires, and stainless steel wires etc. It is also one of the few companies in country to manufacture speciality cables including braided cables, fire survival and Zero halogen cables. Infact, KEI has been ranked among the top three cable manufacturing company in India. It has the capabilities to address demand across a cross-section of sectors such as power, oil refineries, railways, automobiles, cement, steel, fertilizer, textile, real estate and retail segment. Company derives major revenue thru institutional sales to industry stalwarts like L&T, BHEL, NTPC, ABB, Alstom, Jindal’s, Tata’s, ADAG group, GAIL, Suzlon, SAIL, Power Grid, various state electricity boards, ONGC to name a few. Of late KEI has started focusing on lucrative retail segment as well thru aggressive advertising and marketing of house wires & flexible wires. From last fiscal company has also ventured into power EPC segment (Engineering, Procurement and Construction) and has already been awarded break through orders. To execute, it has set up an exclusive EPC division and hired key manpower to scale this new business multifold in next couple of years.

Currently, KEI has four manufacturing facility spread across Delhi, Silvassa, Bhiwadi (Rajasthan) & Chopanki (Rajasthan) with combined installed capacity of 47000 km of LT cables, 3000 km of HT cable and 25000 km of house wire. Incidentally, company commissioned its Chopanki plant, a 100% Export Oriented Undertaking (EOU), last fiscal only with an installed capacity of 10,000 kms of LT power cable. KEI has been exporting its products to Canada, South Africa, Australia, USA, France, Italy, Germany, USA, Italy, UK, Abu Dhabi, Malaysia, Mauritius, Sri Lanka, etc and recent EOU unit has given a further boost to export segment. On the back of robust demand, all the plants are working at 100% capacity utilization and moreover company is having an all time high order book position of more than Rs 400 cr. To cash on the buoyancy in the industry, KEI is undergoing expansion of LT cable by 7000 km at Bhiwadi plant and is also adding 1500 kms of HT cable capacity at Chopanki unit. The expansion project is near completion and is expected to commence production shortly. Further it is upgrading the HT cable capacity up to 132 kV, of which testing of 66 kV has been already successfully completed. To widen its product range, KEI is considering a technical collaboration or a joint venture for the Extra High Voltage (EHV) cable project. The EHV cables will receive excellent boost as massive demand exists from the underground cabling as cities across the country move from overhead cabling to underground cabling options.

KEI's focused advertising campaign has not only helped it to increase the visibility, increase retail sales but also helped it to further strengthen its dealer network and increase the number of vendor approval status from contractors to ensure repeat sales. The management is confident of expanding the export market, retail market and EPC segment besides maintaining the sales momentum to institutions. They have taken active steps to grow the export market presence by increasing the international marketing team's size, participating in international fairs and exhibitions, filing for certifications to sell in new geographies and strengthening of marketing office in Dubai. For FY08 it recorded 45% growth in sales to Rs 875 cr and nearly 10% rise in net profit to Rs 43.50 cr posting an EPS of Rs more than Rs 7 on equity of 12.20 cr. In FY07, company had raised around Rs 150 cr via FCCB which can be converted into equity @ Rs 81 per share. Out of the 7200 bonds, only 670 bonds have been converted till date and the chances of balance 6530 bonds getting converted is bleak considering the CMP. Although KEI has been reporting lower profit margin for last two quarters due to increase in raw material and other expenditure, still it is expected to clock a turnover of Rs 1200 cr and PAT of Rs 45 cr for FY09. This translates into EPS of more than Rs 7 on current equity. Despite higher interest cost & high debt equity ratio, KEI is trading fairly cheap at current enterprise value of around Rs 500 cr. Investors are advised to buy at current levels as share price can easily appreciate 50% within a year.

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Man Industries (India) Ltd - Rs 58.00

Established in 1988 as an aluminium extruder, Man Industries India Ltd (MIIL) today is one of India's largest producers and exporter of large diameter Longitudinal submerged arc welded (LSAW) pipes and Helically submerged arc welded (HSAW) pipes. These pipes are made from steel plates and steel coils. LSAW line pipes are generally used in transportation of oil and natural gas in high temperature and pressure applications in refineries and petrochemical units apart from finding application in fertilizers and dredging industry. On the other hand HSAW pipes are used under low pressure condition for transportation of oil, water, sewerage, agriculture and in construction sector. Company has the capability to manufacture LSAW pipes with outer diameter ranging from 16~60 inches and wall thickness of 6~38 mm upto maximum pipe length of 12 mtrs. Whereas for HSAW it can make pipes having 16~84 inches of outer diameter upto maximum length of 18 mtrs. Infact it is the only company in India to manufacture 18 mtr long HSAW pipe. Well, MIIL is also a leading provider of anti-corrosion coatings and cement mortar coatings for SAW pipes. Besides it is a significant size player in spirally welded pipes as well.

Currently, MIIL has two manufacturing plants – one at Pithampur, MP and other at Anjar, Gujarat having combined installed capacity of 500,000 MTPA of LSAW pipes and 300,000 MTPA of HSAW pipes. Out of this new production line for 200,000 MTPA of HSAW pipes was commissioned only from Sept 2007. But more importantly, couple of days back MIIL has started another production line for HSAW pipes with a name plate capacity of 200,000 MTPA thereby equalizing the total production capacity to 500,000 MTPA each. Along with this company has bagged new orders to the tune of Rs 1100 cr (domestic Rs 700 cr & export Rs 400 cr) taking the current order book position to Rs 1500 cr. It has a recent track record of bagging a single order worth nearly Rs 1000 cr from a single US client which proves the strong credentials and execution capability of the company. With a vision to become a true global player, MIIL has acquired 155 acres of land in Little Rock, USA for putting up state-of-the-art HSAW pipe manufacturing plant having capacity of 300,000 MTPA at an estimated investment of Rs 400~450 cr. This project is expected to commence operation by FY10, if things worked out as per plan.

The demand for SAW pipes is significantly dependent upon the level of exploration activities and transportation of oil and natural gas in India and globally, which is currently being driven up by strong crude oil prices. Incidentally, concentration of source of crude in the Middle East augurs well for Indian pipes manufacturers as they have the advantage of being in the close proximity to Middle East vis-a-vis other major pipe manufacturers in Japan or Europe. A recent entrant in the growth drivers of pipes is the demand arising from the replacement of old pipelines, dominantly in the USA and Russia. Moreover the domestic demand is also high with various organizations have put their plans to lay pipeline infrastructure for oil transportation. To conclude, the easing of steel availability post Beijing Olympics with downward trend in the metal prices globally and significant correction in shipping freight will have positive impact on the company’s bottomline going forward.

In order to fund its expansion, MIIL had raised around Rs 200 cr in May 2007 thru FCCB route to be converted into equity shares @ 143.50 per share. Since then, not a single bond has been converted and considering the CMP the chances of conversion in near future is minimal despite downward revision of conversion price. For FY08, its sales as well as net profit increased by 30% to Rs 1500 cr and Rs 71 cr respectively. Hence it posted an EPS of Rs 13 on equity of Rs 26.65 cr having face value as Rs 5/- per share and declared 30% dividend. Although company posted disappointing nos for Q1FY09 still on the back of expanded capacity it may report a topline of Rs 1750 cr and bottomline of Rs 75 cr i.e. EPS of Rs 14 on current equity. Ironically, company’s share price has drastically corrected by 70% from its high of Rs 177 in Jan’08. Investors can safely buy this scrip at current levels for a price target of Rs 90 within 9~12 months.

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Small & Beautiful

Vakrangee Software (152.00) has emerged as the only provider of document management and printing management solutions in the organized sector. With more than 15 years of experience in servicing various government organizations, company forayed into the private sector for the first time during last fiscal, which includes large companies from the BFSI, retail and telecom sector in both its DMS and PMS vertical. It digitized various inbound documents (including application and KYC forms) and developed customized software for each project. To meet the growing customers need in the print management segment, it tied up with Eastman Kodak and installed Asia’s biggest large scale variable color data printers. It is setting up a new hub office at Gurgaon equipped with second printer of same type. Last year it opened 32 new offices and has plans to open 100 more in couple of years. Meanwhile, India is reporting the fastest global growth in e-governance, catalyzed by the implementation of the RTI Act, which makes it mandatory for all government departments to digitize their physical documents. Keep accumulating at declines.

Ironically, share price of Quintegra Solutions (34.00) has almost crashed to one tenth since it lost nearly 90% from its high of Rs 247 during Jan’08. Company’ss broad capabilities include application management, product engineering, enterprise solutions such as SAP, testing & validation, technology consulting, professional services and proprietary product suites. Presently, company focuses on six main business verticals including BFSI, Heatlhcare, Education & Training, Engineering Services, Logistic and Telecom. Unlike other companies, Quintegra has invested in creating products in its chosen verticals. It has more than dozen offices spread across USA, UK, India, Germany & Africa with five world class offshore development centers in India, Singapore and Malaysia. Of late company has ventured into Knowledge Process Outsourcing Services by setting up additional 70,000 sq ft of IT space in Chennai. As a strategy to grow inorganically, in Oct 2007 it acquired M/s. PA Corporation, USA which specializes in high end IT consulting and leadership in middle-space IT services. Financially, for FY08 Quintegra’s reported an impressive top line and bottom-line of Rs 390 cr and Rs 35 cr respectively thereby posting an EPS of Rs 13 on equity of Rs 26.80 cr. At current market cap of merely Rs 90 cr its worth a punt.

WS Industries (48.00) is a leading manufacturer of high voltage electro-porcelain transmission insulators and sub-station insulators. It deals in other products as well like dropout fuses, isolators, lightning arresters, coupling capacitors, capacity voltage transformers, instrument transformers, line traps and reactors. To cater the rising demand, company is setting up a Greenfield plant in Visakhapatnam to double the manufacturing capacity of substation insulators to 16,000 tons. The project is almost completed and expected to commence shortly. Besides, its transmission insulator unit with installed capacity of 8,000 tonne is running at full capacity. Lately company has also ventured into turnkey project execution i.e. designing, execution and construction work of transmission lines of below 220 KV. Meanwhile, its subsidiary company has completed the construction of the 1st phase (300,000 sq ft) of the Software Technology Park in association with TCG group. So from current year it will start generating additional lease rental of approx Rs 3 cr. With current order book of nearly 135 cr, company is expected to report a turnover of Rs 275 cr and profit of Rs 16.50 i.e. EPS of Rs 8 for FY09. A good bet in power ancillary space.

Indo Asian Fuse Gear (62.00) manufactures wide range of electrical circuit protection equipment including distribution boards, switch boards, switch panels, fuse switches, MCCBs, HRC Fuses, MCBs, RCDs, etc. Besides, it’s one of the largest manufacturers of CFLs and MCB’s in India. To capitalize the ongoing boom, it is diversifying into power distribution business on behalf of state electricity board on franchise basis. Lately, it has forayed into cables & wires manufacturing business as well with a planned investment of 100 cr in phases. For the higher end segment, company is setting up a plant in Haridwar under a joint venture with Simon Holding (Spain) for manufacturing home and building automation products for the first time in India. At the same time it is putting up a facility in Saudi Arabia thru a tie up with Saudi National Glass for production of Compact Fluorescent Lamps (CFLs) and High Intensity Discharge Lamps (HID Lamps). For FY09 it is expected to clock a turnover of Rs 325 cr and PAT of Rs 15~16 cr on a conservative basis which works out to an EPS of Rs 10 on current equity of Rs 15.30 cr. At current market cap of Rs 100 cr its available fairly cheap.