Sesa Goa Ltd.
Day’s Close – Rs. 81.65
52 Wk high – Rs. 219
52 Wk Low – Rs. 60
No. of shares – 78,72,40, 400
Promoter Holding – 51.18%
Market Cap – 6427.82 Cr
Book Value - Rs. 35.45
EPS – Rs. 28.20 (TTM)
PE – 2.9
Company has 4 times issued bonuses in the ratio 1:1.
Total Share Capital - 39.36
Net Worth - 2791.13
Total Debt - 0.00
Net Block - 398.09
Investments - 2000.44
Net Current Assets - 376.75
Total Assets - 2791.13
All the above fig are as on 23-Feb-2009.
Business overview:
Sesa Goa, a 51 per cent subsidiary of Vedanta Resources, is engaged in the mining and export of iron ore. The company has three segments — iron ore (84 per cent of FY08 revenues), pig iron (13 per cent) and metallurgical coke (3 per cent).
Sesa Goa has the current capacity to produce 12 million tonnes per annum (MTPA) of iron ore, which it plans to increase to 25 MTPA by 2010 through an investment of $700 million. The company has sufficient internal resources to fund this expansion.
To augment its existing capacity, Sesa Goa has been aggressively exploring acquisition of new mines in Goa and Karnataka.
The relatively lower and medium grade iron ore from Sesa Goa has been in high demand over the past few years, as the Chinese steel mills imported larger quantities of low grades ores.
This and the freight cost advantages that Indian exporters have over the Brazilian counterparts, had contributed to rising Chinese off take of Indian ore.
With net sales registering a Compounded Annual Growth Rate (CAGR) of 55 per cent and net profit growing by 159 per cent, Sesa Goa’s earnings and cash flows have expanded at a rapid pace over the past five years. This period has also seen operating profit margins improve from 25.6 per cent to 63.3 per cent, superior to global peers as BHP Billiton and Vale. Strong cash flows have resulted in a zero-debt status for the company.
recording sharp year-on-year falls from October 2008.
Iron ore spot prices also corrected from $190 in May to $ 63 in October 2008. While China’s 4 trillion Yuan ($586 billion) bail-out package is expected to revive demand for steel and, thus, iron ore, the jury is still out on whether overall Chinese import volumes will be maintained at last year’s levels of about 400 million tonnes.
But the past two months have brought signs of a drawdown in Chinese stockpiles and better export offtake of iron ore, especially for Indian exporters. Export volumes of iron ore from India staged a sharp year-on-year increase of 38 per cent and 21 per cent respectively in December and January.
Expectations of higher Chinese demand have propped up spot prices for iron ore by about 30 per cent from $63 to $ 85 a tonne in recent months.
Financial Overview:
Offtake has not been a key problem for Sesa Goa in recent years, with the company managing a 25-30 per cent volume growth every year since 2004-05.
In the current fiscal, Sesa Goa witnessed a volume decline in the September quarter to the tune of 30 per cent on a complete cutback in Chinese demand, but volumes recovered, increasing by 37 per cent in the December quarter. Sales for the last quarter were up by 23 per cent on a Y-o-Y basis, despite the economic slowdown.
Volume growth from the iron ore segment was at 36 per cent year on year and 37 per cent. Sales are up by 76 per cent and net profits by 69 per cent in the nine months ended December 2008.
Steadily rising iron ore realizations have helped Sesa Goa steadily improve its operating profit margins over the years to nearly 48 per cent in the first nine months of 2008-09; though margins have moderated in the December quarter.
A low cost structure and zero financing costs, endows the company with a cost advantage amongst its competitors globally. Vedanta Resources Plc (the 51 per cent holding company) had earlier announced plans for an eight-fold increase in the iron ore production capacity at Sesa Goa.
While this expansion project will certainly add scale over the long term, whether it will be implemented in its entirety, given a softer demand scenario, needs to be seen. This plan has the potential to increase the debt on the balance-sheet. Strong operational performance in recent years has left Sesa Goa with high return ratios (return on capital employed of over a 100 per cent), a strong balance-sheet, with high free reserves and near zero debt. With commodity prices set to fall further, the company has hinted at more room for downsizing costs.
Recent export duty concessions extended by the Indian Government will also translate into better realizations in the coming quarters. The easing off of inflation may see lower policy intervention on ore exports; this has been a key source of risk to earnings last year.
Valuations:
The key risks to Sesa Goa’s earnings arise from a sharper-than-expected cut in iron ore prices (contract as well as spot), slippage in Chinese demand and a spike in freight rates.
Volumes and defending its market share being the foremost priority, Sesa Goa may have to work with thinner margins than in the immediate past, for the near term.
A key trigger to the stock price would be the conclusion of iron ore negotiations with China, at the expected prices.
SESA GOA LIMITED Five Year Record as on 31 March 2008
(Rs. in Crores)
Year ending 31 March 2004 2005 2006 2007 2008
Total Revenue 573 1424 1735 2049 3672
Earnings 99 462 539 606 1492
EPS (in Rs.) 50.19 117.47 137.04 154.06 379.06
Dividend % 100% 225%* 400% 400% 450%
Net Worth (Net of Intangible Assets) 313 724 1084 1506 2791
Fixed Assets 195 288 329 399 414
* On expanded capital base
Feb 24, 2009
Feb 17, 2009
DARK HORSE - Bartronics India Limited
Bartronics India Limited (Bartronics)
Total Equity - 28,977,1700
No. of outstanding shares - 28,977,170
Total Promoter/Group Holding – 33.19%
Institutions – 15.03%
Market Cap - 241.24 P/E - 3.74 EPS (TTM) - 22.26
B/V - 84.48 FV - 10.00 (values as on 17-Feb-09)
52 Wk High: 252.85
52 Wk Low: 55.05
Incorporated in 1990, Bartronics is a Hyderabad based company that started with providing solutions in Bar Coding, one of the oldest AIDC technologies, RFID, POS, Smart Cards working as AIDC division, RFID division, Smart Card Division and Retail-IT division in separate. Presently the company offers diverse range of AIDC technologies – Barcode, Biometrics, Radio Frequency Identification (RFID), Radio Frequency Data Communications (RFDC) and Electronic Article Surveillance (EAS).
INDUSTRY SCENARIO FOR AIDC/RFID/RETAIL/SMART CARD:
AIDC industry is rapidly moving towards the use of RFID in a number of high value and high volume market segment. The RFID market is expected to jump from $1.4 billion annually to $6.1 billion in 2010.
The Indian market is estimated to be around or more than Rs.300 crore in FY08 comprising of smart cards and bar codes solutions. This segment is expected to grow at 20-30% annually.
RFID and biometrics solutions are growing at a CAGR of 50% and are expected to have an exponential growth with retail and manufacturing growth in India . Bartronics having the highest market share and first mover advantage is expected to be the biggest beneficiary.
These include (but are not limited to):
Dramatic benefits being achieved by leading consumer packaged goods, retail,
manufacturing, logistics, transportation and healthcare companies.
Improvements in RFID technology:
Bartronics has made significant entry into Retail Sector through POS hardware
solutions. The retail trade in India is more than $7 billion and is growing at a rapid pace.
(The US Government’s use of RFID to track military shipments (to and from the
Persian Gulf, for example) & Wal-Mart’s mandate that has asked 138 of its retail
suppliers to be RFID-enabled at the case and pallet level by January 2005.)
Bartronics has set up a presence in four countries in the region – Bangladesh, Sri
Lanka, Dubai and Mauritius. This has been driven by a combination of queries
received directly by the company as well as queries directed to the company by its
principals (primarily Intermec, Synel and PSC).
The AIDC industry is moving rapidly towards the use of RFID in a number of highvalue and high-volume market segments. The RFID market is expected to jump from $1.4 billion annually to $3.8 billion in 2008 to $6.1 billion in 2010. It is still in a nascent stage but there are several factors, in addition to dropping chip prices, which are driving the growth of RFID as an enabling technology.
Some of the prestigious projects won by the company:
**Bartronics India Ltd has bagged the prestigious project "AapKe Dwar" from the Municipal Corporation of Delhi. The project envisages setting up and running 2000 G2C kiosks in Delhi. The project is on a Build-Operate-Transfer Model for a period of nine years. The Company expects minimum revenue of Rs 5000 crores over the project period.
**The company`s Singapore unit Bartronics Asia had on 12 February 2009 bagged a trial purchase order from Housing and Development Board, Government of Singapore for supply of radio frequency identification (RFID) tags. The initial order for 48000 tags is expected to be enhanced continuously and will be used in precast concrete slabs used in public housing. The financial details were not disclosed.
(In a recent budget announcement, the Government of Singapore had allocated about $212 million to the Housing Development Board in the form of operating grants.)
**Bartronics Asia Pte Ltd in December 2008 had secured EPPU (Expenditure and Procurement Policies Unit) registration with a S10 (highest) grade from the Singapore Government. EPPU is a unit under finance ministry of Singapore Government and the highest grading by it will enable the company to qualify for bidding for projects worth over S $30 million.
**Bartronics India Ltd had been awarded a prestigious contract worth over Rs 400 crores, for providing Smart Cards by the Employees State Insurance Corporation. The contract is for district-wise operation of Smart Cards under the RSBY Scheme covering 609 districts across the country.
It is possible that no segment in indian trade / people movement will be functional without Bar coding , RFID , Telecom cards , Smart cards etc.
Also Bartronics is one of the few global manufacturers to be certified by Arsenal Research for DESFire, making it eligible for bidding for large-scale Mass Transit applications world-wide.
Thus, Bartronics is well placed to capture the new opportunities provided by the requirements of the industry and specific applications within an industry with respect to the AIDC/RFID/Retail/Smart Cards related initiatives.
Strong international presence:
In order to have strong global presence the company has five international distribution centres. These centres cater to the growing AIDC demand in the countries such as Malaysia , Sri Lanka , Bangladesh and Dubai . The company has tied-up with Watchdata Technologies, Singapore , one of the leading global players in smart cards, for sourcing and marketing of smart cards based products in India and neighbouring countries and is likely to broaden its product portfolio. For expanding in the Sri Lankan market the company has tied up with Hayleys Group. More than 40% of the revenues in FY07 were from exports and the same is expected in FY08.
Strong Client Base:
Bartronics has established a brand value amongst its clients (over 1600) over a period of 16 years. The work includes system integration for Barcode solutions, which has applications in areas such as inventory management, attendance recording, dispatch management etc. The companies clientele includes TISCO, TELCO, HLL, ITC, Ashok Leyland, TVS, CMC, Ranbaxy, Compaq, VST, Whirlpool, ITW, Dr. Reddy’s to name a few. The company also services to the Devotees of Lord Balaji (Tirupati) by managing the inflow logistics of the pilgrims. While some of the multinational clients include Compaq, Panasonic, IBM, GM, Mercedes etc.
Results:
The Company has come out with an excellent results for 3rd Quarter of 08-09.
The net Sales are Rs. 92.30 crore (54.67 cr) & Net profit of Rs. 18.48 Crore (6.73 cr).
For Nine months ending Dec 08, net sales is Rs. 261.05 Cr & NP is Rs. 45.37 Cr.
Against the entire FY-07-08, the figures are Rs. 183 Cr & 33 Cr.
This clearly reflects the sound management along with the ethical business practice to create shareholders’ value.
CONCERNS:
Entry of global players in this industry may affect the company’s profitability as they have the brand and the money to implement the new technology very fast. The unorganized sector in India is also catching fast and may take some market share from Bartronics.
All these factors indicate that Bartronics might prove to be a dark horse in 4-5 years period. Accumulate on every decline.
Disclaimer: These are only the views of the analyst and we do not take any responsibility for the losses arising from it.
Total Equity - 28,977,1700
No. of outstanding shares - 28,977,170
Total Promoter/Group Holding – 33.19%
Institutions – 15.03%
Market Cap - 241.24 P/E - 3.74 EPS (TTM) - 22.26
B/V - 84.48 FV - 10.00 (values as on 17-Feb-09)
52 Wk High: 252.85
52 Wk Low: 55.05
Incorporated in 1990, Bartronics is a Hyderabad based company that started with providing solutions in Bar Coding, one of the oldest AIDC technologies, RFID, POS, Smart Cards working as AIDC division, RFID division, Smart Card Division and Retail-IT division in separate. Presently the company offers diverse range of AIDC technologies – Barcode, Biometrics, Radio Frequency Identification (RFID), Radio Frequency Data Communications (RFDC) and Electronic Article Surveillance (EAS).
INDUSTRY SCENARIO FOR AIDC/RFID/RETAIL/SMART CARD:
AIDC industry is rapidly moving towards the use of RFID in a number of high value and high volume market segment. The RFID market is expected to jump from $1.4 billion annually to $6.1 billion in 2010.
The Indian market is estimated to be around or more than Rs.300 crore in FY08 comprising of smart cards and bar codes solutions. This segment is expected to grow at 20-30% annually.
RFID and biometrics solutions are growing at a CAGR of 50% and are expected to have an exponential growth with retail and manufacturing growth in India . Bartronics having the highest market share and first mover advantage is expected to be the biggest beneficiary.
These include (but are not limited to):
Dramatic benefits being achieved by leading consumer packaged goods, retail,
manufacturing, logistics, transportation and healthcare companies.
Improvements in RFID technology:
Bartronics has made significant entry into Retail Sector through POS hardware
solutions. The retail trade in India is more than $7 billion and is growing at a rapid pace.
(The US Government’s use of RFID to track military shipments (to and from the
Persian Gulf, for example) & Wal-Mart’s mandate that has asked 138 of its retail
suppliers to be RFID-enabled at the case and pallet level by January 2005.)
Bartronics has set up a presence in four countries in the region – Bangladesh, Sri
Lanka, Dubai and Mauritius. This has been driven by a combination of queries
received directly by the company as well as queries directed to the company by its
principals (primarily Intermec, Synel and PSC).
The AIDC industry is moving rapidly towards the use of RFID in a number of highvalue and high-volume market segments. The RFID market is expected to jump from $1.4 billion annually to $3.8 billion in 2008 to $6.1 billion in 2010. It is still in a nascent stage but there are several factors, in addition to dropping chip prices, which are driving the growth of RFID as an enabling technology.
Some of the prestigious projects won by the company:
**Bartronics India Ltd has bagged the prestigious project "AapKe Dwar" from the Municipal Corporation of Delhi. The project envisages setting up and running 2000 G2C kiosks in Delhi. The project is on a Build-Operate-Transfer Model for a period of nine years. The Company expects minimum revenue of Rs 5000 crores over the project period.
**The company`s Singapore unit Bartronics Asia had on 12 February 2009 bagged a trial purchase order from Housing and Development Board, Government of Singapore for supply of radio frequency identification (RFID) tags. The initial order for 48000 tags is expected to be enhanced continuously and will be used in precast concrete slabs used in public housing. The financial details were not disclosed.
(In a recent budget announcement, the Government of Singapore had allocated about $212 million to the Housing Development Board in the form of operating grants.)
**Bartronics Asia Pte Ltd in December 2008 had secured EPPU (Expenditure and Procurement Policies Unit) registration with a S10 (highest) grade from the Singapore Government. EPPU is a unit under finance ministry of Singapore Government and the highest grading by it will enable the company to qualify for bidding for projects worth over S $30 million.
**Bartronics India Ltd had been awarded a prestigious contract worth over Rs 400 crores, for providing Smart Cards by the Employees State Insurance Corporation. The contract is for district-wise operation of Smart Cards under the RSBY Scheme covering 609 districts across the country.
It is possible that no segment in indian trade / people movement will be functional without Bar coding , RFID , Telecom cards , Smart cards etc.
Also Bartronics is one of the few global manufacturers to be certified by Arsenal Research for DESFire, making it eligible for bidding for large-scale Mass Transit applications world-wide.
Thus, Bartronics is well placed to capture the new opportunities provided by the requirements of the industry and specific applications within an industry with respect to the AIDC/RFID/Retail/Smart Cards related initiatives.
Strong international presence:
In order to have strong global presence the company has five international distribution centres. These centres cater to the growing AIDC demand in the countries such as Malaysia , Sri Lanka , Bangladesh and Dubai . The company has tied-up with Watchdata Technologies, Singapore , one of the leading global players in smart cards, for sourcing and marketing of smart cards based products in India and neighbouring countries and is likely to broaden its product portfolio. For expanding in the Sri Lankan market the company has tied up with Hayleys Group. More than 40% of the revenues in FY07 were from exports and the same is expected in FY08.
Strong Client Base:
Bartronics has established a brand value amongst its clients (over 1600) over a period of 16 years. The work includes system integration for Barcode solutions, which has applications in areas such as inventory management, attendance recording, dispatch management etc. The companies clientele includes TISCO, TELCO, HLL, ITC, Ashok Leyland, TVS, CMC, Ranbaxy, Compaq, VST, Whirlpool, ITW, Dr. Reddy’s to name a few. The company also services to the Devotees of Lord Balaji (Tirupati) by managing the inflow logistics of the pilgrims. While some of the multinational clients include Compaq, Panasonic, IBM, GM, Mercedes etc.
Results:
The Company has come out with an excellent results for 3rd Quarter of 08-09.
The net Sales are Rs. 92.30 crore (54.67 cr) & Net profit of Rs. 18.48 Crore (6.73 cr).
For Nine months ending Dec 08, net sales is Rs. 261.05 Cr & NP is Rs. 45.37 Cr.
Against the entire FY-07-08, the figures are Rs. 183 Cr & 33 Cr.
This clearly reflects the sound management along with the ethical business practice to create shareholders’ value.
CONCERNS:
Entry of global players in this industry may affect the company’s profitability as they have the brand and the money to implement the new technology very fast. The unorganized sector in India is also catching fast and may take some market share from Bartronics.
All these factors indicate that Bartronics might prove to be a dark horse in 4-5 years period. Accumulate on every decline.
Disclaimer: These are only the views of the analyst and we do not take any responsibility for the losses arising from it.
Feb 11, 2009
High Risk - High Return
CUBEX TUBINGS LTD.
Face Value: Rs. 10
Total Equity: 7.46 Cr
Promoter Holding: 35%
Institutional Holding: 0.70%
Private Corporate bodies: 18.22%
Public holding: 45%
Current Market Capital: 8.779
Current PE: 1.6376
Book Value: Rs. 56 (As on Mar-08)
Debt/equity: 0.15
3 Year High: Rs. 121 3 Year Low: Rs. 2.50
1 Year High: Rs. 98 1 Year Low: Rs. 8.70 (As on 16/01/09)
Cubex Tubings Limited engages in the manufacture and sale of solid drawn tubes, roads, busbars, and wires of copper and copper based alloys, including cupronickel, admirality brass, aluminum brass, and copper in India. It offers its products to various industries, which comprise power plants, power plant manufacturers, switchgears, refineries, furnace manufacturers, sugar plants, automobile, and electric equipment. The company is based in Secundrabad, India.
CTL manufactures copper and copper alloy products used by the core sector and other critical industries like power generation, shipbuilding, Railways, Telecommunications, Defence and automobiles. The present capacity of the plant is 2800MTPA.
The user industries are Power plants, Power plants manufacturers, Switchgears, Refineries, Furnace manufacturers, Sugar plants, Automobile and Electrical Equipment industries.
CTL’S R&D division has developed in-house copper-nickel tubes of large cross-sections, to meet Defence and shipyard requirements. The company plans to introduce large cross section tubes and bus bars and specialty copper and copper alloy products in India.
INDUSTRY OUTLOOK
Since there is lot of emphasis on power generation the consumption of Copper Alloy Tubes, Rods and Semis would increase.
The Manufacturing capacity of Condenser/Refrigeration Tubes is in short supply compare to its requirements in India.
There is huge Export Potential for Copper and Copper Alloy tubes, Rods and Strips to Europe and Middle East.
Client industry:
• Chemicals and Fertilizers.
• Petrochemicals and Oil Refineries.
• Electronics and Telecommunication.
• Ship Building and Automotive Transport.
• Power Generation and Energy Distribution
• Atomic Energy, Space Research and Defence.
• Machine Building and General Engineering.
• Electrical Industries.
Face Value: Rs. 10
Total Equity: 7.46 Cr
Promoter Holding: 35%
Institutional Holding: 0.70%
Private Corporate bodies: 18.22%
Public holding: 45%
Current Market Capital: 8.779
Current PE: 1.6376
Book Value: Rs. 56 (As on Mar-08)
Debt/equity: 0.15
3 Year High: Rs. 121 3 Year Low: Rs. 2.50
1 Year High: Rs. 98 1 Year Low: Rs. 8.70 (As on 16/01/09)
Cubex Tubings Limited engages in the manufacture and sale of solid drawn tubes, roads, busbars, and wires of copper and copper based alloys, including cupronickel, admirality brass, aluminum brass, and copper in India. It offers its products to various industries, which comprise power plants, power plant manufacturers, switchgears, refineries, furnace manufacturers, sugar plants, automobile, and electric equipment. The company is based in Secundrabad, India.
CTL manufactures copper and copper alloy products used by the core sector and other critical industries like power generation, shipbuilding, Railways, Telecommunications, Defence and automobiles. The present capacity of the plant is 2800MTPA.
The user industries are Power plants, Power plants manufacturers, Switchgears, Refineries, Furnace manufacturers, Sugar plants, Automobile and Electrical Equipment industries.
CTL’S R&D division has developed in-house copper-nickel tubes of large cross-sections, to meet Defence and shipyard requirements. The company plans to introduce large cross section tubes and bus bars and specialty copper and copper alloy products in India.
INDUSTRY OUTLOOK
Since there is lot of emphasis on power generation the consumption of Copper Alloy Tubes, Rods and Semis would increase.
The Manufacturing capacity of Condenser/Refrigeration Tubes is in short supply compare to its requirements in India.
There is huge Export Potential for Copper and Copper Alloy tubes, Rods and Strips to Europe and Middle East.
Client industry:
• Chemicals and Fertilizers.
• Petrochemicals and Oil Refineries.
• Electronics and Telecommunication.
• Ship Building and Automotive Transport.
• Power Generation and Energy Distribution
• Atomic Energy, Space Research and Defence.
• Machine Building and General Engineering.
• Electrical Industries.
Hidden Gem - NUCLEAS Software
This is a Delhi-based company catering to the BFSI space. When you talk of a software company catering to a banking sector, the first thought which comes to your mind is the collapsing financial sector in the US, but this company derives less than 1% of its revenues from the US. This stock is again trading at Rs 50 from a high of about Rs 500, which it touched about a year-and-a-half back. It is down by about 90%. There has been deterioration in the financials of the company and it is witnessing margin pressure. The revenues for first half of this financial year are up by about 15% but profit after tax is down by about 55-60%. So, there has been margin pressure being witnessed by the company.
This company derives most of its revenues from Far East and south-east Asian markets which are impacted by the global slowdown, but not as much impacted as the impact witnessed in the US. In spite of global slowdown, Nucleus Software is still receiving very good order flow which is evident from various announcements which they have made to the National Stock Exchange and Bombay Stock Exchange in the past two months.
Order book for quarter ended September 2008 was close to Rs 356 crore. Given the current order flow it would have gone up for this quarter also. At the current market price, the market cap of this company is Rs 165-170 crore and it is totally debt free. The company has got cash and cash equivalents of close to Rs 90-95 crore. As far as the valuation of the business of the company is concerned, it is going at a valuation of Rs 70-75 crore.
It is a product company and not a service-oriented company. I think Rs 70 crore for this kind of company looks to be very low. Given the quality of the management of the company and strong balance sheet, I think they will be able to weather the storm which is currently being witnessed in the global markets. Hopefully, in the next couple of years they should emerge stronger.
At the price of Rs 50, there may not be any immediate triggers in the stock, but this maybe a stock to accumulate at the current levels and on declines. It maybe a stock for the long-term investor because the management is trustworthy. It is a long-term pick to be accumulated over the next 5-6 months at current levels and may be in case the market drops and the price goes down at lower levels also.
This company derives most of its revenues from Far East and south-east Asian markets which are impacted by the global slowdown, but not as much impacted as the impact witnessed in the US. In spite of global slowdown, Nucleus Software is still receiving very good order flow which is evident from various announcements which they have made to the National Stock Exchange and Bombay Stock Exchange in the past two months.
Order book for quarter ended September 2008 was close to Rs 356 crore. Given the current order flow it would have gone up for this quarter also. At the current market price, the market cap of this company is Rs 165-170 crore and it is totally debt free. The company has got cash and cash equivalents of close to Rs 90-95 crore. As far as the valuation of the business of the company is concerned, it is going at a valuation of Rs 70-75 crore.
It is a product company and not a service-oriented company. I think Rs 70 crore for this kind of company looks to be very low. Given the quality of the management of the company and strong balance sheet, I think they will be able to weather the storm which is currently being witnessed in the global markets. Hopefully, in the next couple of years they should emerge stronger.
At the price of Rs 50, there may not be any immediate triggers in the stock, but this maybe a stock to accumulate at the current levels and on declines. It maybe a stock for the long-term investor because the management is trustworthy. It is a long-term pick to be accumulated over the next 5-6 months at current levels and may be in case the market drops and the price goes down at lower levels also.
MULTIBAGGERS
Ahluwalia Contracts
Ahluwalia Contracts is a Delhi-based construction company. This company has got an order book position of close to Rs 4,200 crore. If you look at the financials of the company for FY08, the company achieved revenues of about Rs 880 crore, made a profit after tax of about Rs 52 crore, and paid a tax of close to Rs 29 crore. In the first half of the current financial year, revenue is up by about 50%, profit after tax is up by close to 30%, and the good part is that the tax payment is up by close to 40%.
There are few concerns as far as the company and the sector is concerned. First, the general negative sentiment which we are witnessing towards the construction stocks is taking its toll on the stock of Ahluwalia Contracts also. Second, is regarding one of the projects which is related to the Commonwealth Games village. This is about Rs 650-700 crore project which has been allotted to the company by Emaar MGF and the project is witnessing slow progress mainly on account of the liquidity crunch which Emaar MGF is facing. The Commonwealth Games village project has to be completed before end of 2010.
Emaar MGF has approached DDA (Delhi Development Authority) for a loan for doing this project and there is some uncertainty on that account. But I think the issue may get resolved in the next one month or so because they would need time for construction of the Commonwealth Games village also. I think that is one concern because of which the market is slightly sceptical about Ahluwalia, but once this concern is taken care of the stock can look up.
Against an order book of Rs 4,200 crore, the market cap of the company just about Rs 200 crore. Last year, they did a operating profit of Rs 110 crore. So at Rs 200 crore market-cap, this company available at less than two years of its operating profits.
If you look at the debt position of the company, it has got working capital loans of close to Rs 55 crore. If you do a peer group comparison for similar size companies and similar order book positions, the debt of Ahluwalia is much less compared to many other peer group companies. Promoters hold 74% stake in the company which gives a lot of confidence. Ahluwalia Contracts may have kept a low profile but the promoters are veterans in their industry, having been in the business for about more than 30 years.
Ahluwalia Contracts is probably down mainly because of concerns in the mind of investors regarding slow spending by the government for infrastructure projects. Out of Rs 4,200 crore of projects, about Rs 1,200-1,500 crore projects are the ones which are related to the Commonwealth Games which are scheduled to be held in Delhi at the end of 2010. These are projects which are time scheduled and they have to be completed before the commencement of the Commonwealth Games. Now with the new government in Delhi headed by Sheela Dixit, we may see faster execution of these projects. These projects till now has been going at their own pace but as the time for the Commonwealth Games approach closer, I think faster execution can happen in these projects.
As far as the concerns about the slowdown and its impact on Ahluwalia Contracts is concerned, these concerns maybe largely unfounded. The heartening fact is that inspite of the slowdown the company has seen an about 50% increase in revenues in the first half and 30% increase in profit after tax. In the worst case scenario, this year’s profit will be up by at least 10-15% compared to FY08 profits.
At the current valuation, this stock looks extremely cheap. The stock has fallen from a high of about Rs 393 to the current price of about Rs 31-32. As far as the downside is concerned, it looks to be stock with little downside from the current levels and has got a potential to give extremely good returns over maybe one-two years period.
Completed Projects:
The company’s experience of comprises execution of projects across a wide spectrum which includes Corporate Buildings, Residential Complexes, Hospitals, Hotels, Malls & Government Buildings and Government projects. Some of the projects executed by the company are given as under:-
Current Projects:
The company has an order book of Rs 3750 crores as on 31st October 2008.
Some of the current projects are :-
The company has bagged one of the largest housing construction contracts in the country - the Residential Complex for Commonwealth Games 2010. The value of the township project is Rs 688 crores. The project was awarded by Emaar MGF Construction. This is the largest project ACIL has received so far.
The company has bagged and order worth Rs 229 crores for upgradation and renovation of Dr. S P M Swimming pool complex in New Delhi for the Commonwealth Games.
Awarded Hotel Leela Venture, Chankyapuri, New Delhi project worth of Rs 83 crores.
Vedanta Aluminum, Orissa Project worth of Rs 118.55 crores.
NBCC, Kundli, residential Project worth of Rs 99.26 crores.
Elphinston Mills, Mumbai project worth of Rs 73.00 crores.
Henkel Switchgear, Mumbai project worth of Rs 130.78 crores.
Housing project at Gurgaon from Emaar MGF worth Rs197 crores.
Office Building for IDBI at BKC, Mumbai worth Rs 97 crores.
Office Building for PNB at BKC, Mumbai worth Rs 54 crores.
BOT Projects:
ACIL has ventured into the urban infra space with a maiden Rs 72 crores order on BOT basis from Rajasthan State Road Transport Corporation (RSRTC) for the construction of a model bus terminal with a commercial complex at Kota (Rajasthan). The total plot area is 26,343 sq meters, out of which 3,300 sq meters built up area for bus terminal is to be handed over to RSRTC and the remaining 23,000 sq meters commercial space will be licensed to the company for 40 years. The company will develop a total of 2, 50,000 sq ft at the existing site, where it proposes to develop a commercial complex, budget hotels, multiplex, etc. ACIL plans to bid for similar projects in Rajasthan, UP, Punjab, Uttaranchal, etc.
Ahluwalia Contracts is a Delhi-based construction company. This company has got an order book position of close to Rs 4,200 crore. If you look at the financials of the company for FY08, the company achieved revenues of about Rs 880 crore, made a profit after tax of about Rs 52 crore, and paid a tax of close to Rs 29 crore. In the first half of the current financial year, revenue is up by about 50%, profit after tax is up by close to 30%, and the good part is that the tax payment is up by close to 40%.
There are few concerns as far as the company and the sector is concerned. First, the general negative sentiment which we are witnessing towards the construction stocks is taking its toll on the stock of Ahluwalia Contracts also. Second, is regarding one of the projects which is related to the Commonwealth Games village. This is about Rs 650-700 crore project which has been allotted to the company by Emaar MGF and the project is witnessing slow progress mainly on account of the liquidity crunch which Emaar MGF is facing. The Commonwealth Games village project has to be completed before end of 2010.
Emaar MGF has approached DDA (Delhi Development Authority) for a loan for doing this project and there is some uncertainty on that account. But I think the issue may get resolved in the next one month or so because they would need time for construction of the Commonwealth Games village also. I think that is one concern because of which the market is slightly sceptical about Ahluwalia, but once this concern is taken care of the stock can look up.
Against an order book of Rs 4,200 crore, the market cap of the company just about Rs 200 crore. Last year, they did a operating profit of Rs 110 crore. So at Rs 200 crore market-cap, this company available at less than two years of its operating profits.
If you look at the debt position of the company, it has got working capital loans of close to Rs 55 crore. If you do a peer group comparison for similar size companies and similar order book positions, the debt of Ahluwalia is much less compared to many other peer group companies. Promoters hold 74% stake in the company which gives a lot of confidence. Ahluwalia Contracts may have kept a low profile but the promoters are veterans in their industry, having been in the business for about more than 30 years.
Ahluwalia Contracts is probably down mainly because of concerns in the mind of investors regarding slow spending by the government for infrastructure projects. Out of Rs 4,200 crore of projects, about Rs 1,200-1,500 crore projects are the ones which are related to the Commonwealth Games which are scheduled to be held in Delhi at the end of 2010. These are projects which are time scheduled and they have to be completed before the commencement of the Commonwealth Games. Now with the new government in Delhi headed by Sheela Dixit, we may see faster execution of these projects. These projects till now has been going at their own pace but as the time for the Commonwealth Games approach closer, I think faster execution can happen in these projects.
As far as the concerns about the slowdown and its impact on Ahluwalia Contracts is concerned, these concerns maybe largely unfounded. The heartening fact is that inspite of the slowdown the company has seen an about 50% increase in revenues in the first half and 30% increase in profit after tax. In the worst case scenario, this year’s profit will be up by at least 10-15% compared to FY08 profits.
At the current valuation, this stock looks extremely cheap. The stock has fallen from a high of about Rs 393 to the current price of about Rs 31-32. As far as the downside is concerned, it looks to be stock with little downside from the current levels and has got a potential to give extremely good returns over maybe one-two years period.
Completed Projects:
The company’s experience of comprises execution of projects across a wide spectrum which includes Corporate Buildings, Residential Complexes, Hospitals, Hotels, Malls & Government Buildings and Government projects. Some of the projects executed by the company are given as under:-
Current Projects:
The company has an order book of Rs 3750 crores as on 31st October 2008.
Some of the current projects are :-
The company has bagged one of the largest housing construction contracts in the country - the Residential Complex for Commonwealth Games 2010. The value of the township project is Rs 688 crores. The project was awarded by Emaar MGF Construction. This is the largest project ACIL has received so far.
The company has bagged and order worth Rs 229 crores for upgradation and renovation of Dr. S P M Swimming pool complex in New Delhi for the Commonwealth Games.
Awarded Hotel Leela Venture, Chankyapuri, New Delhi project worth of Rs 83 crores.
Vedanta Aluminum, Orissa Project worth of Rs 118.55 crores.
NBCC, Kundli, residential Project worth of Rs 99.26 crores.
Elphinston Mills, Mumbai project worth of Rs 73.00 crores.
Henkel Switchgear, Mumbai project worth of Rs 130.78 crores.
Housing project at Gurgaon from Emaar MGF worth Rs197 crores.
Office Building for IDBI at BKC, Mumbai worth Rs 97 crores.
Office Building for PNB at BKC, Mumbai worth Rs 54 crores.
BOT Projects:
ACIL has ventured into the urban infra space with a maiden Rs 72 crores order on BOT basis from Rajasthan State Road Transport Corporation (RSRTC) for the construction of a model bus terminal with a commercial complex at Kota (Rajasthan). The total plot area is 26,343 sq meters, out of which 3,300 sq meters built up area for bus terminal is to be handed over to RSRTC and the remaining 23,000 sq meters commercial space will be licensed to the company for 40 years. The company will develop a total of 2, 50,000 sq ft at the existing site, where it proposes to develop a commercial complex, budget hotels, multiplex, etc. ACIL plans to bid for similar projects in Rajasthan, UP, Punjab, Uttaranchal, etc.
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