STOCK WATCH

Despite the adverse market condition, Elgi Equipments (30.00) reported 20% growth in topline as well as bottomline to Rs 121 cr and Rs 10 cr respectively for the latest Dec’08 quarter. However its automotive equipment division which contributes roughly 20% revenue is witnessing sharp slowdown. In order to manage this effectively, company is hiving off its automotive equipment business into a separate wholly owned subsidiary called ATS-Elgi Ltd. On the other hand its air compressor business is doing well as it is used in a wide range of applications and company caters to almost all sector of industry. Being the Asia’s largest manufacturer of air compressors, company is involved with the design, development and production of exhaustive range of electric and diesel powered, centrifugal, reciprocating, borewell, railway air compressors etc. 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 its 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. It may end FY09 with sales of Rs 450 cr and NP 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 solid bet for medium to long term

For the Dec’08 quarter, Gayatri Project (80.00) reported 25% rise in revenue to Rs 256 cr but profit declined by 20% to Rs 10.70 cr. However for the nine months ending Dec 08, its topline has increased by 40% to Rs 670 cr and PAT has also risen by 15% to Rs 30.50 cr thereby posting an EPS of Rs 30 till date. Company is engaged in execution of major civil works including concrete/masonry dams, earth filling dams, national highways, bridges, canals, aqueducts, ports, etc. Although the company has executed various projects in different sectors of infrastructure, its expertise lies mainly in the road and irrigation sectors. Of late company has moved up the value chain and is executing five lucrative BOT road projects which are estimated of having very healthy IRR of around 14%. It has also entered into joint ventures with DLF for construction of road on BOT basis and with ION Exchange for water transport projects. Moreover company boasts of having a massive order book position of more than Rs 3000 cr which is 4x times its FY08 turnover thereby providing strong revenue visibility. Notably, irrigation projects constitute 30%, transportation projects 60% and industrial building constitutes the balance 10% of order book. Despite having huge debt of Rs 450 on its books company can be bought at current market cap of Rs 80 cr.

Most of the retail investors are selling Shanthi Gears (32.00) as it posted more than 40% decline in net profit for the Dec quarter. But during the quarter, company has incurred one time extraordinary expenditure of Rs 7 cr as interest and forex loss towards redemption of FCCB. So excluding this, company has reported almost flat nos with PBT of Rs 17.50 & PAT of Rs 11.50 cr. It is not an auto ancillary company although name suggest, but infact it 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. Of late, company has even started manufacturing gearboxes of 250 KV for windmills. 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. For FY09 it may clock a turnover of Rs 235 cr and PAT of Rs 38 cr i.e. EPS of Rs 5 on equity of Rs 8.17 cr having face value as Rs 1/- per share. Moreover if rumors are to be believed then at one time, 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 the company. If it happens anytime in future, this may lead to re-rating of the company and share price may see a vertical rise.

Recently Supreme Infrastructure’s (25.00) declared good set of nos. Total revenue for the quarter almost doubled to Rs 92 cr and operating profit jumped up 75% to Rs 16 cr. However due to higher interest and depreciation cost its PAT declined by 10% to Rs 5.50 cr. At the same time, its nine month revenue is up by 125% to Rs 237 cr and net profit stands at 21 cr up by 55%. Thus it has already clocked an EPS of Rs 15 till date. Company’s core competency lies in construction/widening of roads & highways, but it also undertakes other infrastructure projects like integrated nallah development, drainage work, laying of railway tracks, construction of minor bridges, development of IT Park, residential tower, RCC building, strengthening of sea wall and laying of tetra pods etc. Its area of operation is mainly concentrated in Mumbai region and few parts of Maharashtra & Bangalore. Couple of days bag company has bagged new orders to the tune of Rs 225 cr which include construction of flyover in Jaipur, widening of road and construction of bridge across the creek in Thane district, which is first of its kind for the company. Importantly, company has its own captive ready mix concrete plant, asphalt mix plant, quarrying and crushing unit & paver block manufacturing unit. With massive order in hand of more than Rs 600 cr and capex plan to double its RMC capacity to 300 cum. per hour, the future looks promising. Against having a net worth of Rs 95 cr (i.e. Book value of Rs 68) & IPO price of Rs 108, scrip is available grossly cheap at CMP of Rs 25.