EIL provides a complete range of project services right from conceptualization, designing and engineering to LSTK projects in diverse fields like petroleum refineries, pipelines, petrochemicals, oil & gas processing, offshore structures & platforms, fertilizers, metallurgy and power. Company has diversified into infrastructure consultancy area like Urban Development, Airport development, Water Management, Railway Freight Corridor and Intelligent Buildings. EIL has identified the following growth drivers: – Internationalise aggressively in existing sectors targeting mid-large sized EPC projects in Brazil, Middle-East, etc – Nuclear power and Water management – Solar power and CTL (Coal-to-Liquid) projects – All existing core areas including hydrocarbon, etc. Company will be leveraging knowledge / designing / engineering base and project management skills in India and overseas through: – 50:50 JV with Tata Projects specialized in execution of large projects on LSTK basis, in the areas of power, hydrocarbon, fertilizers, infrastructure etc. in India and overseas. – 30:70 JV with global leader Tecnimont-Italy (Euro 2 billion) for executing EPC projects in UAE. While EIL will undertake engineering & project management work, Tecnimont would be responsible for construction. With oil prices stabilizing, this JV is expected to get an impetus for orders. These JVs will further add great value to its core business by diversifying from major reliance on hydrocarbon industry and expanding geography beyond India. • Current order book is Rs. 8,000 crore divided almost equally (50:50) between Consultancy & LSTK. Export order book – about Rs. 350 crore.Project cycle is 30-36 months. Company expects to maintain at same level of order book by year end (FY2010). • On LSTK side, margins will be protected, as company is now going more for open-book orders, where input cost increases are passed through. • EIL has surplus cash of about Rs 2,061 crore, i.e. Rs 367 per share. It has received necessary approvals to develop about 33 acres of land in Gurgaon on outskirts of New Delhi and is currently evaluating different options to maximize shareholders’ value. Market Cap 5,774.53 EPS (TTM) 69.07 P/E 14.89 P/C 14.49 * Book Value 244.91 * Price/Book 4.20 Div(%) 185.00 Div Yield(%) 1.80 Market Lot 1.00 Face Value 10.00 Industry P/E 20.02 For Q1 FY2010, Revenues grew by 55.1% to Rs 391.4 crore and OPM% zoomed to 25.8% from 17.1%. PAT is higher by 86% to Rs. 94.2 crore. Expected EPS for FY10 is Rs. 80. In view of very encouraging future prospects, EIL is an excellent investment from a long-term perspective.
Here is another hidden gem from famous equity analyst Ashish Chugh. He discussed this recently on a TV channel. Ashish Chugh is known to identify the companies with hidden intrinsic value of the stock and recommends to buy stocks at early stage. The stock recommendations from him could prove multi-bagger stocks in long run.
If we see the price pattern of this stock, this stock has been primarily range-bound between Rs 30–40 for a long period of time. Promoters picked-up about 5% of the stake in the company they increased the stake by about 5% in the month of November at about Rs 28 and the stock has been primarily range-bound mainly because of the negatives which surround the sector and also the company. Last year there were rumors of a Delhi based infrastructure company wanting to take a stake in their air strip project and the valuations being talked about are very high, and at that time the stock touched a high of about Rs 250–270.
The company has a 250-acre land where they have made an airstrip which is largely unutilized and I see that as an opportunity, the reason that we are getting the stock at a market cap of just about Rs 100 crore is primarily because of the reasons which are mentioned. When things look rosy and everything starts looking good. When they are fresh with orders for aircraft and the value unlocking which people are expecting that airstrip will have that happens and you won’t get the stock for Rs 35-40.
The reason you are getting the stocks at current valuations is only because of the negatives which are surrounding and the good thing is that the promoters themselves have increased their stake at about Rs 28 in themonth of November . At that time there was pessimism all around and the stock has also been range bound for a very long period of time and that’s a reason you are getting this stock for Rs 35, when there were rumours of someone big buying that airstrip business and fancy valuations being talked about at that time the stock was not available for Rs 35 and it was available for Rs 250–270. So this is the one for the patient investors who can just sit on the stock and wait for company to unlock the value for the shareholders.
Here is a hidden gem from famous equity analyst Ashish Chugh. He discussed this recently on a TV channel. Ashish Chugh is known to identify the companies with hidden intrinsic value of the stock and recommends to buy stocks at early stage. The stock recommendations from him could prove multi-bagger stocks in long run.
Jagatjit Industries is a 60 year old liquor company famous for Aristocrat brand Whisky. They also had brands like Maltova, etc. which they sold to SmithKline a couple of years back. This company was dragged in problems between the promoters of the group and a wide order in the month of March by CLB, that problem has not been resolved. CLB ordered the company to buy back the shares of other promoter group and they have already brought back the shares which led to reduction in equity from about Rs 52 to about Rs 44 crore. If you look at the valuations of the company, at the current price the market cap of the company is just about Rs 200 crore, the gross of the company is Rs 540 crore and this being a 60 year old company and the market cap just being 50% of gross, the real value of the assets must be much more.
This company has done sales of about Rs 800 crore in the last year, so even if you compare this company with the drop on the basis of sales and brand equity this looks grossly undervalued compared to the peer group.
BL Research Bureau The Sensex may be 27 per cent below its high of 20,873 in January 2008, but did you know that select blue-chips have already surpassed their earlier highs? Thirty-six of the BSE 500 stocks and four Sensex stocks have raced ahead of their respective prices on January 8, 2008. “Defensives” from the pharma and FMCG space make up most of the list.
GlaxoSmithkline Consumer Healthcare, Hero Honda Motors, LIC Housing Finance and Rural Electrification Corporation, in fact, made new life-time highs in June 2009, even as the broader market traded well below its January 2008 levels. At least 12 stocks from the BSE 500 universe recorded their new life-time highs in the last two months, even as 36 raced ahead of their respective prices on January 8, 2008.
Companies such as Godrej Consumer Products, EID Parry India and Shree Renuka Sugars in the FMCG space and Lupin and Cipla in the pharmaceutical segment are all currently trading a good 20 per cent above their respective prices on January 8, 2008. While the stocks that recently hit their all-time high are from a mixed bag of sectors, the ones trading above their January 2008 levels mostly come from pharma and consumer goods.
In the Sensex basket, Maruti Suzuki, Hindustan Unilever and Infosys Technologies have managed to sustain their prices at levels higher than the January 2008 peak. Sun Pharma was, however, the only stock to make a new life high in the recent rally.
Aided by performance
Stocks that soared were actually cases of valuations being ‘re-rated’. Stocks in the BSE 500 universe that were carried to their new highs managed to deliver healthy profit growth in a year that witnessed a good number of firms recording decline/marked slowdown in their profit growth.
Companies such as Hero Honda Motors, Coromandel Fertilisers and Rural Electrification Corporation demonstrated profit growth in the range of 30-90 per cent in FY-09, thus demanding a re-rating. Others such as Sesa Goa, boosted by a series of positive moves including a recent acquisition, are probably just a short spike away from hitting a new high.
1) Gujarat State Fertilizers & Chemicals Ltd cmp:167 Traded in:Nse-bse
Story: GSFC operates in two key segments – industrial chemicals and fertilisers. Over the years, it has diversified continuously and it now has a product mix consisting of more than 24 brands of fertilisers, petrochemicals, chemicals, industrial gases, plastics, fibres and other products.How has the company performed in the December quarter? Its sales and operating profit have doubled over the corresponding period and it earns an average operating margin of 13%. Is this a one-off spurt in financials? Its performance over the past five quarters has also been good; sales growth averaged a healthy 51% while its operating profit grew by 37% over the same period. Interestingly, the company maintains a very low debt profile which keeps its interest cost at a minimal level – averaging 1% of its net sales and 6% of its operating profit over the past five quarters. GSFC is among the 12 companies with whom Reliance has recently signed a contract to supply gas from its KG D6 fields. GSFC is also part of a consortium of companies promoted by the Gujarat government which is floating a new chemicals project at Dahej. This is a Rs10,000-crore project for setting up units to manufacture phenol, bisphenol and polycarbonate for use in synthetic rubber, PVC and ethylene dichloride industries. All this provides some clarity on the future of this company. A bet worth taking at its current price and valuation.
Story: Lakshmi Precision Screws Ltd specialises in fastening products which include 6,000 varieties of standard cold-forged high-tensile fasteners, special high-tensile bolts/screws, studs, nuts and cold-forged components. LPSL also manufactures and supplies a system which offers a simple and cost-effective solution to installing and removing fasteners. Though the December-quarter performance has not been very impressive, sales have been growing by an average 14% over the past five quarters while its operating profit was up 6% over the same period. One positive aspect of its December-quarter performance, however, has been an improvement in operating margin to 16% from an average of 13% that it earned over the past five quarters. Its interest cost as a percentage of sales averaged 6% but as a percentage of its operating profit, it was 48%.A great buy at dips.
Story: Demand and supply forecasts for the sugar industry have been changing frequently. From a short supply scenario, it has suddenly shifted to an optimal supply position, thanks to the revised estimates of sugar production for the current season. On perceived shortage of sugar, sugar stocks have been doing well; this outperformance may continue for a while. One sugar company that fares well on the valuation parameters is Upper Ganges Sugar & Industries Ltd. At the current price, its market-cap is only 0.09 times its December-quarter annualised sales and 0.50 times its operating profit. Its December-quarter performance has been extremely good with sales rising 53% over the corresponding year-ago period while its operating profit shot up to Rs22.28 crore from a mere Rs24 lakh during the corresponding period last year. Operating margin was 15%. One worry is that its interest cost is 12% of sales. But the huge profits of the past quarters should help it pare the debt.Overall A good sugar stock to sweeten your portfolio.
Story: Aplab specialises in test and measurement equipment, power conversion equipment, UPS systems, self-service terminals for the banking sector and fuel dispensers for the petroleum sector. Of its wide range of products the last two are likely to enjoy a huge demand given the growth in retail banking and petroleum retailing. India has several thousands petrol pumps and the number is expected to go up substantially given that the government has issued licences to set up another thousands of fuel stations. The rush of banks to set up ATMs is likely to be beneficial too. Apart from a good domestic demand, the company exports its output to Western Europe, Canada and the US. All these factors suggest that Aplab will very soon move out of the micro-cap space transforming itself into a larger league stock.
2)scripscan:Faze Three Ltd code:530079 cmp:10
Story: Faze Three manufactures bath mats, shower curtains, blankets and throws, curtains, accent and area rugs, kitchen textiles and doormats. Its business is positioned across three distinct segments of home furnishings, retailing and automotive textiles; products are exported mainly to the US. Its client list is very impressive -- the likes of Wal-Mart, Sears, Target, Marks & Spencer, J C Penny and others. The sector offers excellent growth opportunities and if Faze Three can handle its expansion well, mainly through acquisitions, investors will see the stock do well.
3)scripscan:Lakshmi Electrical Control Systems Ltd code:504258 cmp:168
Story: Lakshmi Electrical Control Systems deals in electrical control systems and contractors, thermal overload relays and other products. It has a technical collaboration with Sprecher & Schuh AG Aarau, Switzerland, to make and assemble electrical contractors, which gives it a distinct edge in precision manufacturing.Valuation wise its quoting at singe digit pe.Prospects looks good added up advantage would be its investments in lakshmi group stocks.Equity is low with fat reserves in book.A liberal bonus can be on the anvil too.Good stock to buy at dips.
Story: Novopan Industries is another micro-cap company which has recorded powerful growth and has a promising future. Novopan makes particle boards and other decorative panels. Demand for particle boards is gradually rising given its cost effectiveness vis-à-vis wood. A booming property market spells a bright future for companies like Novopan.
Story: The hotel industry has been raking in the moolah for quite some time now. Most well-known hotels in major cities are fully booked throughout the year thanks to booming domestic and foreign travellers. Among the smaller, more established hotels, is Chennai-based, Savera Hotels, a four-star property with 260 rooms. Its operational performance in the recent past has been very impressive. Demand for hotel rooms is likely to continue in the near future given the rising business and tourist traffic in the country. Though Savera is a micro-cap company, its 260-room property offers it a huge opportunity to capitalise on the growth that is likely to come the way of hotels especially in fast-growing business centres like Chennai.A good buy at dips.
Scripscan:Vishal Information Technologies Ltd cmp:55 Traded in:Nse-bse
Story: The Rs 41-crore VITL is a subsidiary of Tutis Technologies. VITL provides IT-enabled services (ITeS) in the areas of data digitisation, e-publishing and digital library. These services fall under the non-voice category of the ITeS segment. VITL has a subsidiary called Basiz Fund Accounting Services, in which it holds 86.9% stake. Basiz provides sub-fund accounting and administration services to hedge funds, private equity firms, mutual funds and insurance companies in various countries including the US, UK, Hong Kong and Singapore.VITL derives more than 98% of its revenue from overseas clients. The UK is the company''s biggest market, contributing three-fourths to its total revenue. Among its three verticals, data archiving accounts for 60% of its topline, while e-publishing contributes 30%. The rest comes from Basiz. Though Basiz contributes to just over 10% of VTIL''s business, it provides a much better operating margin of 45%, compared to 25-30% for other verticals. Revenues from services, including archiving and e-publishing, are project-based and hence, lumpy in nature. To reduce its exposure to this lumpiness, VTIL is focusing its attention on print-on-demand (POD) and digital library services. These services are recurring in nature and hence, provide higher revenue visibility.VTIL''s topline and bottomline have shown a compound annual growth rate (CAGR) of 31% over a period of four years ended March ''08. Along with a sustained growth rate in sales and profit, the company has also maintained healthy margins. Its operating margin improved from 32% in FY04 to 36% in FY08. Its net margin has more or less remained flat at 30% during this period. However, compared to FY07, its net margin shrank by 220 basis points due to the imposition of minimum alternative tax (MAT) on IT companies.The company is working on a pilot project with Royal National Institute for the Blind (RNIB), UK, to provide digital library services. Further, it has tied up with leading book publishers in the UK and US for POD services. These two new lines of businesses, along with existing ones, are expected to maintain the company''s growth momentum. Investors with a two-year horizon can consider this scrip at dips.
Story: Ratnamani''s business can be categorised mainly into two segments - stainless steel tubes for industrial applications and carbon steel pipes. Stainless steel tubes are used by a number of industries like refineries, fertiliser, pharmaceutical and power plants (both thermal and nuclear), among others. These are very critical applications and hence, require high quality levels. Ratnamani is a market leader in this segment, with a market share of close to 40%. The second line of business constitutes electric resistance welded (ERW) and submerged arc welded (SAW) pipes, which are used for oil & gas transportation. Most of the company''s carbon steel capacities are currently fully utilised. The company''s strategy is to maintain a balance between the two lines of businesses, with each contributing around 50% towards its topline.The company plans to expand its capacity in modular phases. It plans to increase its horizontal SAW (HSAW) capacity by one lakh tonnes to two lakh tonnes by the end of the current financial year. Out of this, 150,000 tonnes of capacity will be commissioned by September this year, while the rest will come up by the end of FY09.CRUDE OIL prices has been a cause of concern in the past five years, and this has increased exploration and production (E&P) activities around the world. These activities have generated huge requirements for carbon steel pipes and stainless steel tubes. Many domestic pipe makers are set to benefit from this trend. Ratnamani Metals & Tubes is one such player which manufactures pipes and an array of stainless steel tubes, used in industrial applications. The company''s strong financials, growth plans and diversification strategy make it a good investment bet at the current price level.
Story: The company''s revenue growth of 65% in FY08, against revenue CAGR of 33% over FY03-07, means the efforts put in by the company to boost its manpower strength, asset base, systems & processes, and funding capabilities are bearing fruit. Simplex is on a high-growth path and investments made during the past few years will benefit the company in future. Having one of the most diversified order books in the construction sector (in terms of segmental and geographical mix), Simplex is hedged against any slowdown in order awards due to impending elections in India. It expects margins to improve, driven by a shift in its order book towards higher margin segments and more profitable overseas operations. At CMP, for revised fully diluted EPS estimate of Rs 38, Simplex trades at a P/E of 10.1x FY10E,. Though the outlook for the construction sector is challenging in the short term, Simplex is better placed with limited funding concerns - it has a well-diversified business model, strong growth prospects, and limited real estate & asset ownership exposure.
Story: HZL is expected to post EPS of Rs 30 on revenues of Rs 2200 crore, and has reduced its zinc price forecast for FY10, in line with the sharp correction in LME zinc prices recently. This has largely been driven by zinc surplus of 78 kt in January-April ''08. However, even at the reduced prices, HZL is likely to post strong EBITDA margins of 61% in FY09 and 60% in FY10. Given the pure-play nature of HZL''s business, zinc price has been embedded in the market value of the stock: at 5x EV/EBITDA, the market seems to be factoring in a sub-$1,500 zinc price on the LME. Even if zinc price remains stagnant at $1,800, HZL''s fair value should be Rs 656 per share.
