STOCK WATCH

SEAMEC (60.00) has beaten the estimate of all analysts, including the most optimistic one, by declaring stunning result for Dec’08 quarter. Due to the continuous deployment of its entire four vessels, it registered total revenue of Rs 104 cr and huge profit of Rs 55 cr equivalent to an EPS of Rs 16 for the single quarter. Remarkably it reported an OPM of 59% which indicates that vessels are deployed at healthy charter rates. Thanks to this quarter, it was able to record 60% growth in topline to Rs 269 cr and 30% increase in bottomline to Rs 47 cr for the year ending Dec ’08. This works out to an EPS of Rs 14 for the full year. More importantly, management is optimistic about continuous engagement of all four vessels for the full CY09. With no dry dock expected in the current year and long term contract for vessel deployments already in place, this could turn out to be a bumper year for the company. Although there is the risk/probability of order cancellation due to slowdown of oil exploration and production activities or re-negotiation in charter rate of vessels, still its worth a punt at current levels. Its not only a debt free MNC but also a cash rich company having potential to generate Rs 60 ~ 70 cr cash thru core business operation. For CY09 it can report revenue of Rs 325 cr and net profit of Rs 80 cr i.e. EPS of Rs 24. With just one more encouraging set of nos for March quarter, share price can easily double even from current levels.

Action Construction Equipment (11.00) is the undisputed leader in hydraulic mobile crane manufacturing with more than 50% market share. It also manufactures other construction equipments like mobile & fixed tower cranes, back hoe and wheeled loaders, lorry loaders, fork lift trucks etc. Lately company also ventured into and introduced new products including concrete pumps, piling rigs, crawler cranes and truck mounted cranes apart from tractors. Company supplies equipment to very big groups such as Reliance, L & T Simplex, Essar, NCC, IVRCL, Punj Lloyd, BHEL, Gammon etc. Financially company has done excellent for FY08 and reported excellent set of nos for H1FY08. However for the Dec qtr, suddenly its topline as well as bottomline fell drastically, maybe due to ongoing slowdown in construction activities. Despite this for the first three quarters it has recorded 25% increase in sales to Rs 352 cr and 20% fall in profit to 22 cr. Thus it has already clocked an EPS of Rs 2.40 till date on current equity of Rs 18 cr having face value as Rs 2/- per share. Recently, it has also signed an MOU to acquire a Chinese company. Considering the company’s leadership position and future prospect of construction equipment industry, this share can be bought at current levels for long term.

Jaihind Projects (40.00) core area of specialization & operation includes laying oil & gas pipe lines across the country. It has capability to lay pipelines from 4” to 56” in diameter thru different terrains ranging from rocky to desert and snowy to marshy land. Apart from GAIL - its biggest client, JPL also undertakes projects for ONGC, Cairn Energy, BPCL, IOC, GSPC, GSPL, Mahanagar Gas, Reliance Infra, L&T, Delhi Jal Board etc. To scale up its operation, JPL is now looking to enter the construction and laying of pipeline business in the international markets particularly in Gulf regions. On the back of excellent Dec’08 quarter nos, it has registered 75% rise in revenue to Rs 153 cr, where profit before tax shot up 230% to Rs 15 cr for the nine months ending Dec 2008. As per unconfirmed reports, JPL has bid for more than Rs 2000 cr contract apart from having healthy order book position. After taking tax provisions into consideration, company is estimated to end FY09 with topline of Rs 225 cr and bottomline of Rs 13 cr i.e. EPS of Rs 18 on current equity of Rs 7.10 cr. For FY10, it can earn a PAT between Rs 16 ~ 18 on total revenue of more than Rs 300 cr. Despite the risk of substantial equity dilution in future, investors can but this scrip at current levels.

Gujarat Apollo (55.00) is the undisputed leader and India's No.1 manufacturer of road construction & maintenance equipment. With nearly four decade of experience, it has expertise in manufacturing asphalt plants, sensor paver finisher, bitumen sprayer, rollers, kerb paver, road marking and road maintenance equipments. In order to de-risk its revenue model, last year it entered into a technical collaboration agreement with a German company to manufacture jaw crushers, impact crushers, wheeled/crawler mounted & skid mounted crushing plants, grizzly feeders, screens, conveyors, etc. It is building a brand new factory near Ahmedabad specifically for manufacturing of compaction equipment and is expected to begin production in few months. Although there are apprehensions regarding slowdown in construction activities but company is expected to be least affected due to its association with road construction activities only. On a standalone basis it may end the current year with sales of Rs 200 cr and net profit of Rs 23 cr. Although no official consolidated figures are available, still it is roughly estimated to clock a turnover of Rs 300 cr and PAT of Rs 30~32 cr on a consolidated basis for FY09. These figures translate into standalone EPS of Rs 15 whereas consolidated EPS works out to Rs 19 on equity of Rs 15.75 cr. Scrip can appreciate 50% within a year.