About The Company
Gontermann Peipers India Ltd (GIP) was promoted in technical and financial collaboration with Gontermann-Peipers GmbH, Germany, a front-ranker in the manufacture of Rolls – casting and forging rolls. In 1981 the company was taken over by the Ispat Group. The promoters and their various companies hold 55.13% of the equity.
About The Results
The financial performance of the company had not been too encouraging for the second quarter and as predicted, it got only worse for the third quarter ended 31st Dec 2008. YoY, sales dipped 27%. When the beginning was bad, the ending had to suffer. It ended the quarter with a net loss of Rs.1.08 crore. OPM more than halved from 23% in Q3FY08 to around 7% in Q3FY09.
Apart from the slowdown, what really made matters worse was the minor fire that occurred in the Melting & Foundry Division of the factory on November 28, 2008 and it reopened on 1st Dec 2008. Operations were partially affected and though the company has adequate insurance cover, the loss on account of production was higher.
Source: http://www.sharetradingtips.in/
Showing posts with label stock market picks. Show all posts
Showing posts with label stock market picks. Show all posts
Saturday, April 4, 2009
Sunday, March 15, 2009
South Indian Bank - Multibagger
South Indian Bank has its presence in 23 states with 500 branches and 26 extension counters and 225 ATM Networks. The bank, during FY 08 had opened 25 new branches, upgraded 8-extension counter, and opened 50 ATMs. The bank holds licence to open 15 new branches and plans to open 30 branches in the year FY 09.
The bank, as at 31-03-08, had total deposits of Rs 15,156 crores while advances were at Rs 10,754 crores with total business of the bank being placed at Rs 25,910 crores. Capital Adequacy ratio of the bank as at 31-03-08 was at 13.80% while net NPAs were at 0.33%. Gross NPAs of the bank, as at 31-03-08 were at Rs 188.48 crores against Rs 321.21 crores as at 31-03-7. During FY 08, the bank had recovered NPAs of Rs 172.31 crores against the target of Rs 130 crores.
During FY 08, the total income of the bank was placed at Rs 1,434 crores with profit after tax of Rs 151.62 crores, resulting in an EPS of Rs 18.77 while book-value per share as at 31-03-08 was placed at Rs 128.43.
During FY 08, the bank had issued 2 crores equity shares at Rs 163 per share (premium of Rs 153 per share) to Qualified Institutional Investors. Due to this issue, paid-up equity of the bank increased to Rs 90.41 crores while net worth improved of Rs 1,161 crores.
For quarter ending June 08, the bank had a total income of Rs 406 crores with profit after tax of Rs 38.62 crores, resulting in an EPS of Rs 4.27 for the quarter. FY09 is likely to have an income in excess of Rs 1,800 crore with estimated PAT of Rs 175 crores, which should translate into an EPS of Rs 19.50. Expected book-value on 31-03-09 of the bank would be over Rs 140.
The bank had proposed to issue bonus in the ratio of 1 share for every 4 shares held and the record date for the same has been fixed at 17-10-08 and share would go ex-bonus from 16-10-08. The present market price of the stock at Rs 106 is cum-bonus.
The bank has total investments of Rs 4,572 crores as at 31-03-08, of which government securities are of Rs 3,590 crores while Rs 982 crores are in Debentures, shares and other investments.
The bank has strong presence in NRIs and as 31-03-08, the bank had total NRI Deposit of Rs 3,085 crores being 20.35% of the total deposit of the bank.
Even Bank is holding 4.99% stake of Dhanlakshmi Bank, which implies an intention to acquire the bank, if feasible, at an appropriate time.
Share now ruling at Rs 98.60, had its 52 week high low of Rs 285 and Rs 87 and is now ruling at a PE of less than 6 on historic and expected earnings. Even it is available at cum-bonus and price to book-value of 0.80 : 1. All this shows great scope of appreciation in the investments in the time to come. The present market capitalization of the bank is close to Rs 950 crores, translating per branch valuation of less than Rs 2 crores.
The share qualifies a good buy at Rs 45.00, which has potential to rise to Rs 140 in the next 12 months with minimum downside.
The bank, as at 31-03-08, had total deposits of Rs 15,156 crores while advances were at Rs 10,754 crores with total business of the bank being placed at Rs 25,910 crores. Capital Adequacy ratio of the bank as at 31-03-08 was at 13.80% while net NPAs were at 0.33%. Gross NPAs of the bank, as at 31-03-08 were at Rs 188.48 crores against Rs 321.21 crores as at 31-03-7. During FY 08, the bank had recovered NPAs of Rs 172.31 crores against the target of Rs 130 crores.
Kirloskar Electric Company - Multibagger
During FY 08, the total income of the bank was placed at Rs 1,434 crores with profit after tax of Rs 151.62 crores, resulting in an EPS of Rs 18.77 while book-value per share as at 31-03-08 was placed at Rs 128.43.
During FY 08, the bank had issued 2 crores equity shares at Rs 163 per share (premium of Rs 153 per share) to Qualified Institutional Investors. Due to this issue, paid-up equity of the bank increased to Rs 90.41 crores while net worth improved of Rs 1,161 crores.
For quarter ending June 08, the bank had a total income of Rs 406 crores with profit after tax of Rs 38.62 crores, resulting in an EPS of Rs 4.27 for the quarter. FY09 is likely to have an income in excess of Rs 1,800 crore with estimated PAT of Rs 175 crores, which should translate into an EPS of Rs 19.50. Expected book-value on 31-03-09 of the bank would be over Rs 140.
KSB Pumps- Multibagger
The bank had proposed to issue bonus in the ratio of 1 share for every 4 shares held and the record date for the same has been fixed at 17-10-08 and share would go ex-bonus from 16-10-08. The present market price of the stock at Rs 106 is cum-bonus.
The bank has total investments of Rs 4,572 crores as at 31-03-08, of which government securities are of Rs 3,590 crores while Rs 982 crores are in Debentures, shares and other investments.
The bank has strong presence in NRIs and as 31-03-08, the bank had total NRI Deposit of Rs 3,085 crores being 20.35% of the total deposit of the bank.
Buy McNally Bharat Engineering Company
The present equity of the bank is at Rs 90.41 crores with face-value of Rs 10 each. FIIs are holding 43% while 12% are held by banks, insurance companies, FIs, and MFS and 45% is held by the general public. Prominent shareholders of the bank are Federal Bank (4.94%) IFC, Washington (4.80%) Goldman Sachs (3.93%) LIC (1.77%) Union Bank (1.06%) and SBI 1.02%.Even Bank is holding 4.99% stake of Dhanlakshmi Bank, which implies an intention to acquire the bank, if feasible, at an appropriate time.
Share now ruling at Rs 98.60, had its 52 week high low of Rs 285 and Rs 87 and is now ruling at a PE of less than 6 on historic and expected earnings. Even it is available at cum-bonus and price to book-value of 0.80 : 1. All this shows great scope of appreciation in the investments in the time to come. The present market capitalization of the bank is close to Rs 950 crores, translating per branch valuation of less than Rs 2 crores.
The share qualifies a good buy at Rs 45.00, which has potential to rise to Rs 140 in the next 12 months with minimum downside.
Stocks To Watch of The Week - 16 March 09
Mahindra and Mahindra- Short Term Investments
M&M derives about 65 per cent of its automotive revenues from utility vehicles (UVs), where it has steadily improved market share from 45 per cent in 2004 to 53 per cent now. Interest from institutional buyers such as small and medium businesses and cab operators has helped the company manage the slowdown better than most other vehicle-makers. Backed by sales of Scorpio and Bolero, M&M’s UV sales volumes were flat in 2008, after averaging a 14 per cent growth in the preceding three years.
Though the segment did witness deceleration in the December quarter, growth has picked up to 20 per cent in the first two months of 2009, driven by launches. LCVs and three-wheelers constitute 20 per cent of M&M’s automotive revenues (though it is not a prominent player in this segment) and this segment relies largely on rural demand.
Introduced in January 2009, Xylo, targeted at retail buyers, infused the much-needed buoyancy to M&M’s sales (4,000 units sold until February). Since it is strategically priced below other sedans and MUVs such as Toyota Innova and Chevrolet Tavera, Xylo appears well-positioned against competition.
Apart from this, the company launched an upgraded model of Scorpio this month. M&M has recently passed on to consumers the excise duty cuts, which , may be visible from the next quarter. The demand for SUVs usually accelerates ahead of elections and that may deliver a short-term boost to sales as well.
Farm equipment
M&M holds 40 per cent market share in the farm equipment segment. After sustaining growth in the first half of this fiscal, the segment witnessed a 7 per cent decline in volumes during October-December 2008. Going by favourable factors such as adequate monsoon and increased credit availability in the hands of farmers, the segment appears well-placed to sustain sales growth this year. Punjab Tractor’s amalgamation with M&M, which is to take effect from this quarter, may add market share and strengthen M&M’s presence in the Northern market, though it is unlikely to have a material near term impact on the per share earnings.
Financial Aspects
After a sustained net profit growth of 25-30 per cent (excluding exceptional gains) in the five years to 2006-07, M&M saw a sharp deterioration in the profit picture in the first nine months of 2008-09, concentrated mainly in the December quarter. While revenues on a consolidated basis grew 13.2 per cent to Rs 21,652 crore, net profit after minority interest declined by 26 per cent to Rs 809.5 crore from Rs.1095 crore.
On a standalone basis, the December quarter saw the company report a loss of Rs 26 crore (before other income, interest and exceptional items), compared to a profit of Rs 280 crore in the same period last year. However, profits were depressed to a significant extent by forex losses of Rs 182 crore (gain of Rs 13.9 crore last year) taken this quarter. This pertains to cancellation of forward contracts and revaluation of foreign currency borrowings. Of this, Rs 136 crore may be of a one-time nature and is unlikely to impact profitability in the coming quarters.
While forex losses did play a role in depressing the profit picture, lower production and revenues — the company sold mainly from inventories — higher raw material costs and possible inventory losses on excise duty cuts also contributed to the decline in profit margins. However, with the company substantially drawing down its inventories in the December quarter and raw material costs (steel, aluminium and paint) easing significantly, profit margins may stage a sharp improvement, from here on. A recovery in sales volumes and the recent excise duty cut will also help improve revenues, helping better recovery of fixed costs. Going forward, though forex losses on existing loans (due from 2011) will remain a drag, lower interest rates on working-capital borrowings may help lower financing costs.
Expansion plans
Fairly ambitious capex plans have also weighed on the M&M stock’s valuations. The company had previously lined up a capex of around Rs 7,500 crore. Due to the overall slowdown in the sector, the company has revised its plans downward to Rs 5,000 crore, phased out over the three years to 2012.
M&M appears to have funded the major portion of this by means of FCCBs and ECBs and is setting up a new UV plant in Chakan with a capacity of 3,50,000 vehicles. This plant would be operational from FY 2010. Debt-equity ratio, which stood at 0.6 at end-March 2008, continues to be at the same level.- HBL
Though the segment did witness deceleration in the December quarter, growth has picked up to 20 per cent in the first two months of 2009, driven by launches. LCVs and three-wheelers constitute 20 per cent of M&M’s automotive revenues (though it is not a prominent player in this segment) and this segment relies largely on rural demand.
Buy McNally Bharat Engineering Company
Introduced in January 2009, Xylo, targeted at retail buyers, infused the much-needed buoyancy to M&M’s sales (4,000 units sold until February). Since it is strategically priced below other sedans and MUVs such as Toyota Innova and Chevrolet Tavera, Xylo appears well-positioned against competition.
Apart from this, the company launched an upgraded model of Scorpio this month. M&M has recently passed on to consumers the excise duty cuts, which , may be visible from the next quarter. The demand for SUVs usually accelerates ahead of elections and that may deliver a short-term boost to sales as well.
Farm equipment
Buy Jaiprakash Associates Ltd - Short Term
M&M holds 40 per cent market share in the farm equipment segment. After sustaining growth in the first half of this fiscal, the segment witnessed a 7 per cent decline in volumes during October-December 2008. Going by favourable factors such as adequate monsoon and increased credit availability in the hands of farmers, the segment appears well-placed to sustain sales growth this year. Punjab Tractor’s amalgamation with M&M, which is to take effect from this quarter, may add market share and strengthen M&M’s presence in the Northern market, though it is unlikely to have a material near term impact on the per share earnings.
Financial Aspects
After a sustained net profit growth of 25-30 per cent (excluding exceptional gains) in the five years to 2006-07, M&M saw a sharp deterioration in the profit picture in the first nine months of 2008-09, concentrated mainly in the December quarter. While revenues on a consolidated basis grew 13.2 per cent to Rs 21,652 crore, net profit after minority interest declined by 26 per cent to Rs 809.5 crore from Rs.1095 crore.
Buy GVK Power & Infrastructure Ltd - Short Term
On a standalone basis, the December quarter saw the company report a loss of Rs 26 crore (before other income, interest and exceptional items), compared to a profit of Rs 280 crore in the same period last year. However, profits were depressed to a significant extent by forex losses of Rs 182 crore (gain of Rs 13.9 crore last year) taken this quarter. This pertains to cancellation of forward contracts and revaluation of foreign currency borrowings. Of this, Rs 136 crore may be of a one-time nature and is unlikely to impact profitability in the coming quarters.
While forex losses did play a role in depressing the profit picture, lower production and revenues — the company sold mainly from inventories — higher raw material costs and possible inventory losses on excise duty cuts also contributed to the decline in profit margins. However, with the company substantially drawing down its inventories in the December quarter and raw material costs (steel, aluminium and paint) easing significantly, profit margins may stage a sharp improvement, from here on. A recovery in sales volumes and the recent excise duty cut will also help improve revenues, helping better recovery of fixed costs. Going forward, though forex losses on existing loans (due from 2011) will remain a drag, lower interest rates on working-capital borrowings may help lower financing costs.
Expansion plans
What is GDP ?
Fairly ambitious capex plans have also weighed on the M&M stock’s valuations. The company had previously lined up a capex of around Rs 7,500 crore. Due to the overall slowdown in the sector, the company has revised its plans downward to Rs 5,000 crore, phased out over the three years to 2012.
M&M appears to have funded the major portion of this by means of FCCBs and ECBs and is setting up a new UV plant in Chakan with a capacity of 3,50,000 vehicles. This plant would be operational from FY 2010. Debt-equity ratio, which stood at 0.6 at end-March 2008, continues to be at the same level.- HBL
Buy SAIL : Stock Investments
Investors can consider buying the Steel Authority of India (SAIL) stock (Rs 82), given its low valuation. The stock trades at a price-to-earnings multiple of 4.5 times the trailing 12 month earnings. Though the jury is still out on whether the recovery in steel demand seen so far in 2009 is sustainable, SAIL remains one of the better-placed companies in the steel sector to weather the challenging times. A sharp drop in contract prices for coking coal and iron ore, expected to be negotiated for the coming year, suggests scope for margin expansion, even if steel prices continue to soften.
Read Also : Buy McNally Bharat Engineering Company
Low dependence on international orders, a focus on orders from government agencies which may benefit from higher public spending and low leverage and strong cash flows, make the company a preferred exposure in the steel sector. Investors in the stock, however, should be prepared for high volatility, as the stock’s performance may continue to carry strong linkages to global commodity price trends.
Domestic focus helps
The prospect of slowing and even recessionary trends in much of the developed world has weakened the demand for steel from user industries such as forgings, castings, automotive and construction. Both the US and Europe have seen a decline in construction and industrial activity in the last two quarters of 2008. Falling demand prompted production and price cuts by the global steel majors, with players such as Corus, Tokyo Steel and many others cutting back output by up to 30 per cent in October-November ’08.
In India, however, demand has held up better than in the other regions, with the industry’s production still up by about a per cent in the April-December 2008 period. Higher infrastructure spending by the government as a part of its two stimulus packages and a pick up in construction activities following low interest rates could help stimulate growth.
CMIE expects domestic steel production to grow by 1.5 per cent in 2008-09 and achieve a growth of 6.5 per cent in 2009-10. Responding to softening demand, steel prices have been under pressure since last year; hot-rolled coil prices fell 20 per cent from a high of Rs 48,500 per tonne in June 2008 to Rs 39,200 in December 2008.
SAIL’s sales fell in the quarter ended December 31, 2008, given a 11 per cent cut in HRC prices in November. While the effect of price cuts may continue to show up on revenues, a revival in steel volumes (up 9 per cent y-o-y in February ’09), driven by automobile and construction demand, offers some hope. On the cost front, iron ore contracts for the coming year are expected to see a price correction of 30 per cent-plus and coking coal prices are also expected to be 40 per cent lower for the year. Lower input costs would bring substantial margin relief for SAIL, given its high reliance on imported coking coal.
In the December quarter of 2008, SAIL’s profits took a hard blow (down 56 per cent) following a substantial increase in raw material costs as international coking coal prices shot up from $98 per tonne in 2007 to $300 per tonne in 2008.
Resilient to current slowdown
SAIL also looks better placed than its peers to tackle an uncertain global demand environment. SAIL derives just 3 per cent of its revenues from overseas, even as peers such as Tata Steel and JSW Steel have a much larger global exposure.
Within the domestic market too, 40 per cent of the orders are from the government agencies. With the stimulus packages promising higher infrastructure spending by the government, the company may sustain healthy order inflows in the coming quarters.
A diversified customer base is also an advantage, with the company serving a wide range of industries from construction, engineering, power, railway, to automotive and defence. The company has also been realigning its product mix, with value-added products now accounting for 40 per cent of production.
Even as other steel companies are shelving their capex plans, SAIL appears well-placed to bankroll its own expansion. The company had Rs 13,760 crore in cash balances by end-FY08, following strong operating cash flows of over Rs 8,300 crore during the year.
The company’s debt-to-equity ratio of 0.18:1 (in FY08) is low, allowing room to increase borrowings for the planned capex. SAIL has outlined a capex of Rs 53,000 crore for expanding its capacity from 14 million tonnes to 26 million tonnes by 2010-11. Of this, the company has already spent Rs 3,230 crore and has placed orders for equipment worth Rs 36,000 crore. As there are certain equipment sourcing-related delays, the projected additions to capacity may be delayed.
Given its relatively strong balance-sheet, we expect SAIL to reap benefits from recent interest rate cuts, though it may still contract higher borrowings for capex. - HBL
Read Also : Buy McNally Bharat Engineering Company
Low dependence on international orders, a focus on orders from government agencies which may benefit from higher public spending and low leverage and strong cash flows, make the company a preferred exposure in the steel sector. Investors in the stock, however, should be prepared for high volatility, as the stock’s performance may continue to carry strong linkages to global commodity price trends.
Domestic focus helps
The prospect of slowing and even recessionary trends in much of the developed world has weakened the demand for steel from user industries such as forgings, castings, automotive and construction. Both the US and Europe have seen a decline in construction and industrial activity in the last two quarters of 2008. Falling demand prompted production and price cuts by the global steel majors, with players such as Corus, Tokyo Steel and many others cutting back output by up to 30 per cent in October-November ’08.
Buy Jaiprakash Associates Ltd - Short Term
In India, however, demand has held up better than in the other regions, with the industry’s production still up by about a per cent in the April-December 2008 period. Higher infrastructure spending by the government as a part of its two stimulus packages and a pick up in construction activities following low interest rates could help stimulate growth.
CMIE expects domestic steel production to grow by 1.5 per cent in 2008-09 and achieve a growth of 6.5 per cent in 2009-10. Responding to softening demand, steel prices have been under pressure since last year; hot-rolled coil prices fell 20 per cent from a high of Rs 48,500 per tonne in June 2008 to Rs 39,200 in December 2008.
SAIL’s sales fell in the quarter ended December 31, 2008, given a 11 per cent cut in HRC prices in November. While the effect of price cuts may continue to show up on revenues, a revival in steel volumes (up 9 per cent y-o-y in February ’09), driven by automobile and construction demand, offers some hope. On the cost front, iron ore contracts for the coming year are expected to see a price correction of 30 per cent-plus and coking coal prices are also expected to be 40 per cent lower for the year. Lower input costs would bring substantial margin relief for SAIL, given its high reliance on imported coking coal.
Buy GVK Power & Infrastructure Ltd - Short Term
In the December quarter of 2008, SAIL’s profits took a hard blow (down 56 per cent) following a substantial increase in raw material costs as international coking coal prices shot up from $98 per tonne in 2007 to $300 per tonne in 2008.
Resilient to current slowdown
SAIL also looks better placed than its peers to tackle an uncertain global demand environment. SAIL derives just 3 per cent of its revenues from overseas, even as peers such as Tata Steel and JSW Steel have a much larger global exposure.
Within the domestic market too, 40 per cent of the orders are from the government agencies. With the stimulus packages promising higher infrastructure spending by the government, the company may sustain healthy order inflows in the coming quarters.
A diversified customer base is also an advantage, with the company serving a wide range of industries from construction, engineering, power, railway, to automotive and defence. The company has also been realigning its product mix, with value-added products now accounting for 40 per cent of production.
Even as other steel companies are shelving their capex plans, SAIL appears well-placed to bankroll its own expansion. The company had Rs 13,760 crore in cash balances by end-FY08, following strong operating cash flows of over Rs 8,300 crore during the year.
The company’s debt-to-equity ratio of 0.18:1 (in FY08) is low, allowing room to increase borrowings for the planned capex. SAIL has outlined a capex of Rs 53,000 crore for expanding its capacity from 14 million tonnes to 26 million tonnes by 2010-11. Of this, the company has already spent Rs 3,230 crore and has placed orders for equipment worth Rs 36,000 crore. As there are certain equipment sourcing-related delays, the projected additions to capacity may be delayed.
Given its relatively strong balance-sheet, we expect SAIL to reap benefits from recent interest rate cuts, though it may still contract higher borrowings for capex. - HBL
Friday, March 13, 2009
Sejal Architectural Glass Ltd (BUY) - Multibagger
Sejal Architectural Glass Ltd (BUY)
Sejal Architectural Glass Ltd (SAGL) is in the business of processing glass and has processing facilities for insulating, toughened, laminated and decorative glasses. SAGL has an integrated processing unit, having processing lines for all specialty glasses (Insulating, Toughened and Laminated) under one roof.
ALSO READ : Major Investment Mistakes made by Warren Buffet
SAGL has three distinct SBU’s i.e. Processing, Retail and Float glass manufacturing. Till FY07 the revenues were purely generated from the processing division. The retail division commenced its operations from April, 2007. Further the float glass plant which is the main inflexion point is under construction and would be operational in Q1FY10.
With this SAGL becomes a complete value chain providing company from manufacturing of glass to selling of high end lifestyle products for home décor(art & artifacts, lights & luminaries, sanitary - ware & bath fittings and glass products).
ALSO READ : HBL Power Systems - Multibagger
Investment Rationale:
Net Profit to grow 11x by FY12
The 550tpd capacity float plant is likely to transform this Rs55 Crore company into a Rs450 crore company by FY12; i.e. a whopping 8x growth. As a result of backward & forward integration, bottom line is expected to grow over 11x by FY12 to Rs49 crore.
Trading at close to Book value
The book value per share of SAGL is currently Rs50. This translates into a P/BV ratio of 0.48, which is significantly lower than P/BV ratio of 3.6 for its peer. Moreover, if we consider the replacement cost, implied value per share turns out to be approx. Rs135.
ALSO READ : Patels Airtemp - Multibagger
First fully integrated Indian player in architectural glass
SAGL is currently having a processing unit and is now setting up a new float glass manufacturing facility. This initiative of backward integration would help the company in procuring raw material for its processing unit. This will reduce raw material cost, dependence on imports and other domestic players for glass, thereby improving operating margins from 16% in FY08 to 34% by FY12.
Demand for glass to remain robust
The per capita consumption of glass in India is about 0.55 kg, which is much lower than 11 kg in USA and 2-5 kg in South-East Asian countries. It clearly shows the growth opportunity in the under-penetrated market. The demand for processed glass has also grown by more than 35% annually, in last 2 years.
Financials and Valuation:
We initiate our coverage on SAGL with a BUY rating and twelve months price target of Rs124 based on our DCF model. The stock is currently trading at P/E of 5.63x its FY09 earnings of Rs4.26. Company’s EV/EBITDA and EV/Sales of FY08 is 16.7x and 2.7x respectively.
ALSO READ : Using common sense to invest for the long term
Sejal Architectural Glass Ltd (SAGL) is in the business of processing glass and has processing facilities for insulating, toughened, laminated and decorative glasses. SAGL has an integrated processing unit, having processing lines for all specialty glasses (Insulating, Toughened and Laminated) under one roof.
ALSO READ : Major Investment Mistakes made by Warren Buffet
SAGL has three distinct SBU’s i.e. Processing, Retail and Float glass manufacturing. Till FY07 the revenues were purely generated from the processing division. The retail division commenced its operations from April, 2007. Further the float glass plant which is the main inflexion point is under construction and would be operational in Q1FY10.
With this SAGL becomes a complete value chain providing company from manufacturing of glass to selling of high end lifestyle products for home décor(art & artifacts, lights & luminaries, sanitary - ware & bath fittings and glass products).
ALSO READ : HBL Power Systems - Multibagger
Investment Rationale:
Net Profit to grow 11x by FY12
The 550tpd capacity float plant is likely to transform this Rs55 Crore company into a Rs450 crore company by FY12; i.e. a whopping 8x growth. As a result of backward & forward integration, bottom line is expected to grow over 11x by FY12 to Rs49 crore.
Trading at close to Book value
The book value per share of SAGL is currently Rs50. This translates into a P/BV ratio of 0.48, which is significantly lower than P/BV ratio of 3.6 for its peer. Moreover, if we consider the replacement cost, implied value per share turns out to be approx. Rs135.
ALSO READ : Patels Airtemp - Multibagger
First fully integrated Indian player in architectural glass
SAGL is currently having a processing unit and is now setting up a new float glass manufacturing facility. This initiative of backward integration would help the company in procuring raw material for its processing unit. This will reduce raw material cost, dependence on imports and other domestic players for glass, thereby improving operating margins from 16% in FY08 to 34% by FY12.
Demand for glass to remain robust
The per capita consumption of glass in India is about 0.55 kg, which is much lower than 11 kg in USA and 2-5 kg in South-East Asian countries. It clearly shows the growth opportunity in the under-penetrated market. The demand for processed glass has also grown by more than 35% annually, in last 2 years.
Financials and Valuation:
We initiate our coverage on SAGL with a BUY rating and twelve months price target of Rs124 based on our DCF model. The stock is currently trading at P/E of 5.63x its FY09 earnings of Rs4.26. Company’s EV/EBITDA and EV/Sales of FY08 is 16.7x and 2.7x respectively.
ALSO READ : Using common sense to invest for the long term
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