STOCK WATCH

Numeric Power (400.00) is India’s leading manufacturer of uninterrupted power supply (UPS) systems, stabilizers and power conditioners. It also undertakes turnkey projects and offers end to end solution for SCADA/EMS package, large network of industrial process, power transmission support systems and distribution management. It has been ranked as No.1 online UPS manufacturer & power electronic company of the year for the last 15 years in a row by Soft Disk journal. It has also been ranked as No 1 offline UPS manufacturer for second consecutive year by the same magazine. Recently, it ventured into solar power generation using Photo Voltaic Modules and initially intends to develop solar hybrid UPS systems. Accordingly, it aalked out of JV with SOCOMEC SA of France as it primarily prevented the company to tap the solar 3 phase UPS products. But at the same time it has developed its own products in higher range of 3 phase category which are fairly successful in the market. Ironically the share price has become one third from the high of Rs 1200 made in Jan’08. Investors are strongly recommended to buy, as the downward risk is minimal form current levels whereas share price can double in 12 months

Notably, on 15th August 2008 Dr. A P J Kalam felicitated Dr. P Sekhar – CMD of Micro Technology (124.00), for his significant contribution in the security segment. But unfortunately his company’s share price is on a distress sell mode and is now trading at a three and half year’s low. Couple of days ago company launched another innovative software product called Micro SAMS (Students Attendance Management System) which has various unique features related to automated system for access, attendance and effective communication. Company is a global provider of security, safety and life-support solutions with its first of its kind products for security of home, office, shop, vehicle, laptop, mobile etc. Last fiscal it invested almost Rs 100 cr, as its gross block increased to Rs 160 cr from 65 cr in FY07. After ending FY08 on quite a buoyant note, it reported encouraging results for the June quarter as well. Rising disposable income coupled with more and more people becoming conscious about security aspect, company’s product have huge potential. It may end FY09 with sales of Rs 250 cr and PAT of Rs 70 cr i.e. EPS of Rs 64 on current equity of Rs 11 cr. Considering the current market price, FCCB / Warrant conversion hasn’t been taken into consideration. At CMP it’s a steal.

Being India’s largest manufacturer of evaporator and condenser (E&C) coils with around 60% market share, Lloyd Electric & Engineering (52.00) has got itself forward integrated into lucrative business of contract manufacturing of window / split air conditioners for various MNCs in India. It is also into manufacturing of roof mounted packaged unit i.e. packaged AC for railway coaches on turnkey basis. Notably, it has entered into tie-up with Air International Transit, Australia to manufacture and supply AC Package units to Metro Rail Corporation in India which is adding up 800 new coaches to its fold leading to sizable business opportunity. But most importantly, few months ago it acquired 100% stake Luvata Czech s.r.o. in Prague, Czech Republic which is also into manufacturing of heat exchangers / coils and has good presence in European market. On a consolidated basis it is expected to clock a turnover of Rs 850 cr and PAT of Rs 65 cr i.e. EPS of Rs 21 on current equity. Unbelievably, due to current sentiment its share price has come down to a three year low, giving golden opportunity to long term investors to accumulate.

Tera Software (28.00) is one of the leading e-governance solution providers, undertaking data entry/scanning works for digitization of information maintained under Right to Information Act. It also undertakes short-term projects like issue of photo ID cards, ration cards and election commission cards. Of late company has been constantly bagging good order from various state governments like Andhra Pradesh, Rajasthan, Himachal Pradesh etc. Recently, it has been selected as empanelled vendor for rollout of IT services in govt sector through National Informatics Centre Services Inc. As of today it has a massive order book position of more than Rs 250 cr to be executed in coming years. Although company reported disappointing nos for Q1FY09 still it can report revenue of Rs 70 cr and profit of Rs 13 cr for FY09. This leads to an EPS of Rs 11 on current equity of Rs 12.50 cr. Moreover company has few acres of surplus land in Hyderabad, which it can either sell or enter into JV with infrastructure company. With a dividend yield of more than 7% it’s a screaming buy at current market cap of Rs 35 cr.

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JMC Projects (India) Ltd

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Man Industries Ltd

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Small & Beautiful

Currently, Godawari Power (128.00) is the 4th largest manufacturer of coal based sponge iron and also one of the leading manufacturers of mild steel in India. It completed its Phase-II expansion in Sept 2007 and boasts of having an installed capacity of 495,000 TPA for sponge iron, 400,000 TPA for steel billets, 120,000 TPA for HB wire rod alongwith 53 MW of captive power plant. Importantly, company has acquired mining license for iron ore and coal in Chhattisgarh. It has also made investments in two JV companies - Chhattisgarh Captive Coal Mining Ltd and Raipur Infrastructure Company Ltd. for development of coal mines and setting up railway sliding for captive use. Recently company has decided to venture into cement production along with executing backward integration plan which includes setting up of 0.6 mtpa iron ore Pelletization plant, 0.1 mtpa iron ore Beneficiation plant, 1.2mtpa iron ore Crushing plant etc. For the June’08 qtr its sales increased by 90% to Rs 320 cr and PAT jumped up 80% to Rs 38 cr posting an EPS of Rs 13.50 for the quarter. Last month one of its subsidiary has signed a MOU with the govt of Chhattisgarh for setting-up of 1000 MW thermal power project. For FY09 company is estimated to clock a turnover of Rs 1350 cr and PAT of Rs 150 cr i.e. EPS of Rs 54 on current equity. A strong buy

Post the amalgamation of Rain Calcining with itself, Rain Commodities (190.00) has been posting encouraging nos on a consolidated basis. Currently, it is one of the largest producers of Calcined petroleum coke with 7 plants in USA and one plant in India and having total installed capacity of 2.40 million tonne of CPC. Besides, it also produces cement at its 1.60 million tonne cement plant in South India and sells it under the “PRIYA” brand. For the quarter ending June’08 it posted a net profit of Rs 94 cr on net sales of Rs 1081 cr. This is despite the fact company provided Rs 42 cr on restatement of foreign currency loan as per June exchange rate. Remarkably, its OPM stood at more than 25% and with CPC price expected to remain robust its margins may increase in H2FY08. In order to maintain its growth momentum in future and cash on the robust CPC demand, company is setting up two additional facilities for another 0.6 million tonne of calcined coke which will be operational by 2010. Meanwhile for CYFY08, it may report consolidated sales of Rs 4250 cr and NP of Rs 350 cr i.e. EPS of Rs 46 on fully diluted equity of approx Rs 76 cr. Keep accumulating at sharp declines.

From a high of more than Rs 1000 early this year, share price of KLG Systel (225.00) has been battered down badly and 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 285 cr. For FY09 it is expected to clock a turnover of Rs 350 cr and profit of Rs 60 cr i.e. EPS of Rs 41 on estimated diluted equity of around Rs 14.50 cr.

Aegis logistic (110.00) owns and operates one of India’s largest private sector liquid terminal located on a 20-acre plot at Trombay having storage capacity of 165,000 KL. With two other terminals it boasts of having a total capacity of around 290,000 KL. Considering the robust future outlook, it is setting up a third terminal in Trombay with a capacity of nearly 55,000 KL by FY10. On the other hand it also imports, markets and distributes bulk propane, propylene and LPG to a variety of industrial customers in the western region and is one of the largest private sector suppliers in India. Lately company has ventured into lucrative business of marketing and retailing of LPG thru auto gas dispensing stations under the brand name ‘AEGIS Autogas’. From the present 38 retail outlets across five states, company intends to open 100~150 more such stations in next couple of years. Recently company took over Hindustan Aegis LPG and became the owner of 20,000 MT fully refrigerated LPG terminal. For FY09 it may clock a turnover of Rs 475 cr and profit of Rs 35 cr i.e. EPS of Rs 18 on equity of Rs 19.90 cr. A solid bet

PBA Infrastructure Ltd - Rs 46.00

Incorporated in PBA Infrastructure Ltd, (PBA) formerly known as Prakash Building Associates Ltd, is engaged in execution of civil engineering projects and specializes in construction of highways, runways and heavy RCC structures, bridges and other infrastructure projects of NHAI. However, road infrastructure construction is the company's forte that it has developed after over 30 years of dedicated work. The prestigious projects successfully completed by company include a portion of Mumbai Pune Expressway for MSRDC Ltd, Bachau Bhuj Gandhidham Road, Lucknow By-pass, Udaipur By-pass of NHAI to name a few. Its major clients include NHAI, Government of Maharashtra and J&K, AAI, JNPT, CIDCO, MMRDA, MSRDC, MCGM, MIDC, MES, other State PWD etc. PBA is registered with PWD, Government of Maharashtra in class - 1A category and registered with `Municipal Corporation of Greater Mumbai as AA Class in civil division. Notably, company is executing projects from Kashmir to Kanyakumari.

PBA's in-house engineering skills have allowed it to maintain the required precision and quality by effectively integrating design with construction expertise. The company is ably backed and supported by a team of dedicated and motivated professionals. Based on its excellent track record and execution capabilities, PBA has been constantly bagging huge orders round the year due to which it boasts of currently having massive order book position of more than Rs 900 cr including orders in hand to be executed along with other joint venture partners. This is equivalent to 2.5x times its FY08 turnover, thereby ensuring strong visibility for future revenue. Moreover, of late PBA has also diversified into new business segments like toll collection and quarrying, sale of RMC, metal, supply of paver block and mining etc to boost its topline. To maintain the growth momentum, company is expanding geographically across various regions of the country to achieve its goal of strategic growth in terms of volume as well as geographical spread. Ironically, PBA is now in a position to undertake projects on BOT basis on account of substantial increase in retained earnings. Besides, its operating cash flow will improve further as soon as the BOT Project, at Aurganabad-Jalna come into operation which is expected to commence from April 2009.

The Government's initiative and the global demand for improving and expanding the infrastructure facilities is expected to show a considerable increase in the coming years. Secondly, government is encouraging private sector participation in road projects through three routes-BOT/BOOT, Annuity and Special Purpose Vehicle (SPV) which enables direct private sector investments in large-scale projects such as road bridges and power. These all augurs well for the company as it has tremendous opportunity to grow in this area. Ironically, PBA came out with an IPO @ Rs 60 per share in 2005, post which it hit an high of almost Rs 200 in 2006. But of late scrip has corrected drastically and is now trading at an all time low levels. For FY08 it posted an EPS of Rs 11 with 30% rise in sales as well as PAT to Rs 371 cr and 14.60 respectively. It declared 20% dividend which gives a yield of more than 4% at CMP. However, company is having a huge debt of Rs 250 cr due to which its interest cost is very high. Hence to fund its working capital requirement and reduce the high cost debt, company is contemplating to make preferential allotment of 30 lac warrants to promoter and promoter group. Meanwhile for FY09 it is estimated to clock a turnover of Rs 425 cr and PAT of Rs 16 cr. This translates into EPS of Rs 12 on current equity of Rs 13.50 cr. Although rising interest cost is cause of concern, still investors are recommended to buy at current levels as scrip can appreciate 50% in 12~15 months.

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FAG Bearings India Ltd - Rs 325.00

Incorporated in 1962, FAG Bearings India Ltd (FBIL) is a 51% subsidiary of Schaefer FAG group Germany – who are the second largest supplier of bearings in the world next to SKF Sweden. Thus, FBIL is primarily engaged in manufacturing of different types of ball bearings (deep groove, four point, self aligning) & roller bearings (cylindrical, spherical, tapered). These bearings are mainly used in the automotive, mechanical and electrical engineering industries as well as the Railways. Bearing market size in India is estimated at Rs. 5400 cr. Approximately 45% of this demand is met through imports and the balance is met through indigenous products. In domestic market (without Imports), the sales of the organized bearing industry are estimated at Rs. 2400 cr. And with nearly 13% market share in organized segment, FBIL is the second largest player in India. It caters to the OEM market, the replacement market and the export market. Currently it derives 40% of revenue from automotive segment, 15% from railways and balance from other core industries. At the same time company also trades by importing bearing from its German parent and selling it domestically.

FBIL’s production facility is located at Vadodara, Gujarat and is equipped with one of the most advanced manufacturing technology. Post the capex of Rs 80 cr in 2006, company’s current production capacity stands at around 47 million pieces of bearing per annum. Importantly, company has been operating at over 100% capacity utilization since the last five years. It has a huge list of clientele from across the industries like Tata Motors, Maruti Udyog, Ashok Leyland, M&M, GM, Hero Honda, Ford, Hyundai, Bajaj Auto, TAFE, TVS, ABB, BHEL, Crompton, Siemens, Greaves Cotton, NTPC, SAIL, LMW etc. To cater the rising demand, company is further contemplating massive expansion plan for production of needle bearing with an investment of approximately Rs 350 cr. Incidentally, the fortunes of the bearing industry in India are mainly linked to the growth of the automotive industry. Hence the bearing industry recorded a growth of 7% during the year 2007 in terms of sales value. Besides, the prices of major raw material like steel etc also shot up substantially. Moreover, OEM industries such as two-wheelers & four wheelers are facing price competition in their own markets and continue to exert price pressure on the local bearing suppliers. Despite all these, FBIL was able to maintain a decent double digit growth for calendar year 2007.

Accordingly for current fiscal also, FBIL’s performance is affected by the continued slowdown in the auto and industrial sectors. For the first half ending June 2008, it registered flat bottomline of Rs 43 cr on 12% rise in topline to Rs 350 cr. On account of fall in peak custom duty, domestic bearing industry is also facing the heat due to import of cheaper bearings from China and Eastern Europe. However the fall in steel prices is the only silver lining to safeguard the margins. Considering the current market conditions, FBIL’s management is cautiously optimistic about future prospects and may end CYO8 with sales of Rs 700 cr and NP of Rs 85 cr. This translates into EPS of Rs 51 on equity of Rs 16.60 cr. Fundamentally, this MNC subsidiary is a debt free company with strong cash flow and huge reserves of more than Rs 300 cr making it a strong bonus candidate. Hence, although company is not expected to grow aggressively in near future still it’s a value buy. As the scrip is making new lows, investors are recommended to buy at current levels with a price target of Rs 475 in 15 months.

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