STOCK WATCH

Once again Transformer & Rectifiers (290.00) has reported flat nos for the June’09 quarter. Sales as well as PAT remained very flat at Rs 86 cr and Rs 9 cr respectively, posting an EPS of Rs 7 for the quarter. For FY09 its sales were up 40% to Rs 425 cr whereas PAT had increased by 35% to Rs 44 cr translating into EPS of Rs 34 on equity of Rs 12.90 cr. Company is one of the few manufacturers in the country manufacturing the entire range of transformers namely power generation, transmission and distribution transformers, industrial transformers such as furnace transformers, and special transformers such as mobile substation, rectifiers, testing transformers etc. Infact, it is among the largest manufacturer of furnace transformers in India. Moreover in May’09 its Greenfield plant in Moraiya (Ahmedabad) with an installed capacity of 16000 MVA went on stream which tripled the company’s production capacity to 23200 from 7200 MVA currently. However in the current fiscal company is expected to make total production of 10,000 MVA which still leads to 50% rise in volume terms. Thus it estimated to clock a turnover of Rs 600~650 cr with a net profit of Rs 65 cr which works out to an EPS of Rs 50 on current equity. A solid bet even at current levels.

Because of forex gains, Hitachi Home & Life Solutions (70.00), was able to report decent set of nos for the June’09 quarter. Its sales improved by 15% to Rs 211 cr whereas net profit increased by 20% to Rs 18.70 cr posting an EPS of more than Rs 8 for the quarter. Traditionally, it is the important quarter for the company as it operates in a seasonal business. For FY09 ending March’09 it recorded 50% fall in PAT to Rs 21 cr (including forex loss of Rs 12 cr) despite 6% rise in topline to Rs 474 cr. Thus for entire FY09, it posted an EPS of Rs 9 on equity of Rs 23 cr. Being, a 68% subsidiary of Hitachi-Japan and proud owner of “HITACHI” brand company manufactures high technological home and commercial air conditioners like window AC, split AC, concealed splits, ductables, chillers and specific telecom cooling solutions. To reduce its dependence on air conditioners company has of late ventured into refrigerators/washing machines and is even planned Rs 45 cr capex to expand its line of business. For FY10 it may clock a turnover of Rs 525 cr and PAT of Rs 35 cr leading to an EPS of Rs 15 on current equity. Being almost a debt free company coupled with strong foreign promoter backing, scrip deserves a better valuation. Buy only at sharp declines as scrip has seen a smart rally in the recent past.

Retail investors are quite disappointed on seeing the June quarter performance of Numeric power (390.00) as company has reported 40% decline in PAT to Rs 8 cr. But the corresponding quarter of the last year includes exceptional profit income of Rs 6.50 cr on sale of stake in JV company. If we exclude that, then company has actually improved its bottomline. For FY09 company had recorded 5% growth in topline to Rs 409 cr and 15% fall in PAT to Rs 33.50 cr posting an EPS of Rs 66 on small equity of Rs 5.05 cr. Incidentally, on a consolidated basis its turnover stood at Rs 443 cr and profit at Rs 38 cr i.e. EPS of Rs 76. Thus company is currently trading at a P/E multiple of 5x times against its current consolidated earnings. Company has eight world class manufacturing facilities spread across Pondichery-TN, Chennai-TN, Parvanoo-HP and Colombo-Srilanka, thereby emerging as the biggest integrated manufacture of UPS in India. 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 an enviable and high profile clientele including Infosys, Siemens, Intel, Philips, Microsoft, Veritas, HDFC, Citibank, ICICI, RBI, NIC, Reliance, ABB, BMW, NCR, Nokia, major stock exchanges etc. Recently, company ventured into solar power generation using Photo Voltaic Modules and initially intends to develop solar hybrid UPS systems. To become more efficient, it is backward integrating into batteries and is scouting for a technology partner to set up a battery manufacturing unit. Buy at declines.

Against the expectation of recording decent growth, Tera Software (35.00) has posted flat nos for the June quarter as sales and net profit stood at Rs 17 cr and Rs 2.50 cr respectively. For FY09 its net profit was down by 15% to Rs 10.50 cr, although its total revenue had increased by 40% to Rs 83 cr. Thus its EPS stood at Rs 8.50 on equity of Rs 12.50 cr. Company is expected to declare 20% dividend for FY09 which leads to a yield of 6% at CMP. Company 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 successfully executed Maharashtra Vikri Kar Seva Project in Maharashtra State (VAT Implementation of Maharastra sales tax department) on BOOR (Build own operate and refresh) model as the scope of work was computerization of sales Tax department in the entire state of Maharashtra. Notably company has been able to procure additionally six new projects of the State Government of Andhra Pradesh, Karnataka, Rajasthan, West Bengal and Himachal Pradesh. It also ventured into imparting computer education in more than 225 schools in Goa and AP by establishing the computer labs with Computers and providing the teaching staff and maintenance of systems. For FY10, it is estimated to report total revenue of Rs 90 cr and profit of Rs 12 i.e. EPS of Rs 10 on current equity of Rs 12.50 cr.