STOCK WATCH

As usual Cera Sanitaryware (100.00) has come out with good nos for June’09 quarter. Sales grew by 20% to Rs 40 cr whereas PAT shot up 30% to Rs 3.40 cr posting an EPS of Rs 5.40 for the quarter. At the time when most of its peers are finding it difficult to survive, company has been able to maintain its operating margin at 18~20%. This proves that company has the bargaining power and its niche products don’t face any stiff competition. Earlier it ended FY09 with 20% growth in sales to Rs 170 cr whereas PAT increased by 30% to Rs 13 cr, despite an extra ordinary expense to the tune of Rs 1.60 cr. It is the third largest company in the organized sanitaryware segment with over 20% market share in domestic market. Moreover in the last couple of years, company has evolved itself into a total bathroom solutions provider with a wide product range for the mass as well as premium segment. 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 has come 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. For FY10 it can clock a turnover of Rs 200 cr and PAT of Rs 16 cr which translates into EPS of Rs 26 on tiny equity of Rs 3.11 having face value of Rs 5/- per share.

PBA Infrastructure (60.00) is engaged in execution of civil engineering projects and specializes in construction of highways, dams, runways and heavy RCC structures, bridges and other infrastructure projects of various govt bodies. It is executing projects from Kashmir to Kanyakumari and has taken up new works like toll collection and quarrying to augment its income. It reported almost flat nos for the latest March’09 quarter resitering a topline and bottomline of Rs 105 cr and 2.20 cr respectively. But on the full year basis it recorded a decline of 20% in net profit to Rs 11.75 cr on flat sales of Rs 366 cr. Thus it posted an EPS of Rs 8.70 for FY09 on equity of Rs 13.50 cr. However looking at the special thrust on infrastructure sector in the recent budget the future outlook of the sector looks promising. Recently company bagged an order from MMRDA (Mumbai) to the tune of Rs 71 cr for building 16 skywalks in the city. It is among the few companies which regularly makes public disclosure of the order bagged by it. Being a Mumbai based company its work is mostly concentrated in city of Mumbai, Pune and other part of Maharashtra. Traditionally, company has been having a high debt equity ratio, which in future may come down as company is contemplating to raise funds thru equity route. To conclude company can grow at CAGR of 15~20% for the next 3~4 years. Buy at declines.

Jaihind Projects (95.00) 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, company also undertakes projects for ONGC, Cairn Energy, BPCL, IOC, GSPC, GSPL, Mahanagar Gas, Reliance Infra, L&T, Delhi Jal Board etc. To cash on the opportunity of the India growth story, company has taken an aggressive stance and is expected to grow at CAGR of 40~50% for next 3~4 years. It has increased its bidding process across new geographies and is open to form JV’s to bag bigger contracts. Last month, in consortium with other companies it bagged a huge contract to the tune of Rs 231 cr from GSPL for E.P.C. Project for Darod - Jafrabad Gas Pipeline Project - Section A. For FY09, company’s revenue shot up 125% to Rs 323 cr whereas net profit more than doubled to Rs 13 cr on a consolidated basis. This translates into an impressive EPS of Rs 19 on current equity of Rs 7.10 cr. Recently, company made a preferential allotment of 25 lac warrants to be convertible into equity @ Rs 60 per share. This will lead to 35% equity dilution in near future. Despite this investors are advised to keep accumulating it at every sharp decline. Incidentally scrip hit a low of Rs 32 early this year and has since then tripled to Rs 100 currently.

In order to consolidate and integrate its operation, Kirloskar Electric (45.00) has recently merged Kaytee Switchgear Ltd (KSL) & Kirsloskar Power Equipments Ltd (KPEL) with itself. Accordingly for FY09 it has reported sales of Rs 866 cr and PAT of Rs 30 cr leading to an EPS of Rs 5.60 on expanded equity of Rs 50.50 cr. Apart from manufacturing wide range of power as well as distribution transformer company also produces several types of special transformers like furnace, flame proof as well as conventional dry type, earthing, special converter, high voltage testing, short circuit testing, nitrogen gas cushioned, cast resin etc. It is also one of the leading manufacturers of AC/DC motors, AC generators, DG sets, tractions etc. At the same time, its Switchgear division manufactures high voltage switchgear in the range of 3.3 to 36kV for indoor as well as outdoor applications. Recently, it has setup up a new plant at Maharashtra & Haryana for transformer & rotating machine respectively. Due to drastic fall in metal prices and synergies of merger, KECL has the potential to improve its margin going forward and can report an EPS of more than Rs 8 in FY10. A good bet for medium to long term.