Small & Beautiful
Emco Ltd (33.00) is the third largest manufacturer of transformers in India and a leading player in electronic energy meters and turnkey electrical projects It offers widest transformers range from 5 kVA, 11kV right up to 315 MVA, 400 kV for power generation, transmission & distribution. It is one of the leading players in manufacturing special application transformers like furnace transformers (for Steel Industry), large rectifier transformers (for Chemical Industry) and traction and locomotive transformers (for Railways). With acquisition of Urja Engineers Limited, company can now construct EHV Power Transmission Lines upto 765 kV on a total turnkey basis and boasts of having a tower manufacturing facility up to 45000 MT/Annum. To maintain its growth momentum, company has decided to set up a transformer manufacturing plant in South Africa to meet the growing demand in the African region and neighboring countries. Presently company has an impressive order book position of Rs 1300 cr. For the latest Sept qtr sales grew by 25% to Rs 231 cr and net profit improved by 10% to Rs 11.30 cr. Accordingly it is expected to clock a turnover of Rs 1150 cr and PAT of Rs 58 cr for FY09. This translates into EPS of Rs 10 on current equity. At a modest discounting by 8x times share price can double within a year.
Last week Indag Rubber (20.00) came out Dec qtr nos as per expectation. Its sales were marginally down to Rs 20 cr but NP fell by 50% to Rs 1.30 cr posting an EPS of Rs 2.50 for the quarter. Its operating margin stood at 10% against 15% last year. Accordingly for nine months ending Dec’08 it has earned a net profit of Rs 4.50 cr on sales of Rs 57.50 cr. Thus it has already clocked an EPS of Rs 9 till date. Company is one of the reputed players in tyre retreading business. Company’s margin has been affected due to unprecedented rise in prices of basic raw materials particularly poly butadiene rubber, natural rubber, carbon black and rubber chemicals. Due to high prices of tyres, retreading of tyres has become all the more necessary as tyres retreaded with quality material and retread process give about the same mileage as new as new tyres, at a much lower cost per mile and are environmentally friendly. Of late the raw material prices have come down and once the company start reporting healthy margin its share price will shoot up sharply. Meanwhile for FY09 on a conservative basis it may register sales of Rs 75 cr and profit after tax of Rs 4.50 cr only i.e. EPS of Rs 9 on equity of Rs 5.25 cr. A good bet for medium to long term.
In contrast to industry estimates, JK Lakshmi (40.00) has posted encouraging result for the Dec qtr. Sales grew marginally by 5% to Rs 297 cr and NP declined by 8% to Rs 56 cr. However it posted a healthy OPM of 26% for the quarter and the average margin for first three quarters works out to 23%. Notably it has already earned an EPS of Rs 20 for nine months ending Dec 2008. Company 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. For FY09, now it is estimated to report a turnover of Rs 1125 cr and profit of Rs 135 cr which leads to an EPS of Rs 22 on current equity. Although experts are still apprehensive about the demand supply scenario going forward, investors can buy it as a contrarian’s bet for medium term. At the same time, a huge of debt of Rs 700 cr on its books is a cause of concern.
Being the Asia’s largest manufacturer of air compressors, Elgi Equipment (31.00) is involved with the design, development and production of exhaustive range of electric and diesel powered, centrifugal, reciprocating, borewell, railway air compressors etc. As air compressors are used in a wide range of applications, company caters to almost all sectors of industry. Besides it also derives 20% revenue from providing total service station solutions through the supply of a range of equipment and tools for two, three & four wheelers. Ironically company deals in or manufactures more than 128 equipments generally required by full-fledged garage. However to concentrate on each business segment company is hiving off its automotive equipment business into a separate wholly owned subsidiary called ATS-Elgi Ltd. Of late to cash on its rich experience company also started offering end to end mechanical engineering solutions and contract manufacturing services of precision engineered part to clients who are looking for cost-effective, subcontracting solution. It is also looking to increase it global presence for which it has formed a subsidiary in China and has also entered into joint venture with M/s. J P Sauer & Sohn, Germany for manufacturing air compressors. For FY09 it is expected to report a topline of Rs 450 cr and bottomline of Rs 35 cr i.e. EPS of Rs 6 on equity of Rs 6.30 cr having face value of Rs 1/- per share. A screaming buy at current levels.
Last week Indag Rubber (20.00) came out Dec qtr nos as per expectation. Its sales were marginally down to Rs 20 cr but NP fell by 50% to Rs 1.30 cr posting an EPS of Rs 2.50 for the quarter. Its operating margin stood at 10% against 15% last year. Accordingly for nine months ending Dec’08 it has earned a net profit of Rs 4.50 cr on sales of Rs 57.50 cr. Thus it has already clocked an EPS of Rs 9 till date. Company is one of the reputed players in tyre retreading business. Company’s margin has been affected due to unprecedented rise in prices of basic raw materials particularly poly butadiene rubber, natural rubber, carbon black and rubber chemicals. Due to high prices of tyres, retreading of tyres has become all the more necessary as tyres retreaded with quality material and retread process give about the same mileage as new as new tyres, at a much lower cost per mile and are environmentally friendly. Of late the raw material prices have come down and once the company start reporting healthy margin its share price will shoot up sharply. Meanwhile for FY09 on a conservative basis it may register sales of Rs 75 cr and profit after tax of Rs 4.50 cr only i.e. EPS of Rs 9 on equity of Rs 5.25 cr. A good bet for medium to long term.
In contrast to industry estimates, JK Lakshmi (40.00) has posted encouraging result for the Dec qtr. Sales grew marginally by 5% to Rs 297 cr and NP declined by 8% to Rs 56 cr. However it posted a healthy OPM of 26% for the quarter and the average margin for first three quarters works out to 23%. Notably it has already earned an EPS of Rs 20 for nine months ending Dec 2008. Company 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. For FY09, now it is estimated to report a turnover of Rs 1125 cr and profit of Rs 135 cr which leads to an EPS of Rs 22 on current equity. Although experts are still apprehensive about the demand supply scenario going forward, investors can buy it as a contrarian’s bet for medium term. At the same time, a huge of debt of Rs 700 cr on its books is a cause of concern.
Being the Asia’s largest manufacturer of air compressors, Elgi Equipment (31.00) is involved with the design, development and production of exhaustive range of electric and diesel powered, centrifugal, reciprocating, borewell, railway air compressors etc. As air compressors are used in a wide range of applications, company caters to almost all sectors of industry. Besides it also derives 20% revenue from providing total service station solutions through the supply of a range of equipment and tools for two, three & four wheelers. Ironically company deals in or manufactures more than 128 equipments generally required by full-fledged garage. However to concentrate on each business segment company is hiving off its automotive equipment business into a separate wholly owned subsidiary called ATS-Elgi Ltd. Of late to cash on its rich experience company also started offering end to end mechanical engineering solutions and contract manufacturing services of precision engineered part to clients who are looking for cost-effective, subcontracting solution. It is also looking to increase it global presence for which it has formed a subsidiary in China and has also entered into joint venture with M/s. J P Sauer & Sohn, Germany for manufacturing air compressors. For FY09 it is expected to report a topline of Rs 450 cr and bottomline of Rs 35 cr i.e. EPS of Rs 6 on equity of Rs 6.30 cr having face value of Rs 1/- per share. A screaming buy at current levels.
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