Ravalgaon Sugar Farm Ltd (BSE : 507300) FV INR 50 – CMP 4500

Ravalgaon Sugar Farm Ltd (BSE : 507300) FV INR 50 – CMP 4500

The Ravangaon Sugar Farm Ltd was founded in 1933 as part of the Walchand Group but operates independently today. The Company's registered office and manufacturing facilities are situated in Ravalgaon, in the Nasik district of Maharashtra.

The company has 3 Divisoin, viz.. Sugar, Confectionery & Machinery.

Sugar : The Sugar Division has a capacity of 2,000 TCD and is situated in the Nasik belt of Maharashtra. The factory produces S-30, M-30 and L-30 varieties of white sugar. The factory is automated and monitored by computerized operations control. Ravalgaon's operations are run in an environmentally responsible manner. The plant is energy independent and supplies the excess energy it generates to the township. Water for production is drawn from the cane itself and treated water is discharged back into the earth. The Ravalgaon factory complex has planted thousands of trees in an around the plant as part of its green initiative.

Confectionery : The confectionery division has been operational since 1942 and has a strong pan India presence. It produce hard-boiled sweets and toffees under the Ravalgaon brand. Company own innovative and timeless products, including Pan Pasand, Mango Mood, Coffee Break, Choco cream besides the all time favorites cherries & che( strawberry, orange, lime flavours ), Supreme (cardamom, rose & butterscotch). , which are marketed throughout India by in-house sales force, and are available in traditional and modern trade retail outlets. The state-of-the-art factory has multiple high-speed cooking, forming and packaging lines for hard-boiled sweets and toffees.

Machinery : Ravalgaon's Industrial Machinery Division (IMD) started producing best-in-class machinery for the sugar, confectionery and other allied industries since the 1950s. Ravalgaon branded hoppers, graders, silos and double-twist candy wrapping machines manufactured in the early years of IMD's operations are functional even today across the country.

Valuations : The company has a tiny equity of Rs. 34 Lakhs only, divided into 68,000 Shares of Rs 50 paid up, of which the management holding is 53.3%. The numbers are bad like all Sugar companies  looking at downward trend in sugar industry since last few years.

Rationale : This 8 decade old closely held company having good assets in the books is engaged in turning around sugar sector, confectionery and sugar machinery is traded at a market cap of only Rs 30 crore. While other sugar stocks have multiplied 4 to 5 times, Ravalgaon, the hidden gem has not even doubled in last 12 months, thus leaving good scope for future appreciation. Few years back there were acquisition of confectionery business at a very high valuation (Nutrine was acquired by Hersheys at  270 Cr & Lotte bought 60% stake in Parrys valuing the company over 100 cr, share price of Sampre Nutrition which produce confectionery for big brands multiplied 15 times in last 1 year, so till when Ravalgaon will remain undiscovered?) Looking at these Confectionery division of Ravalgaon, which has well accepted strong brand can easily fetch close to 150 Cr, which comes to Rs 22000 per share, plus sugar biz should be valued at atleast 75 cr, which is another Rs 11000 odd per share, while Current market price is just Rs 4500, making it grossly undervalued. Only concern is liquidity which can be taken care of if by splitting the Face Value and by issuing bonus shares. A very small exposure of few odd shares is warranted as buy and forget type of investment for multifold returns in long term.

  

KLRF LTD (BSE 507598 FV RS.10) RS. 55 – Hidden GEM

KLRF LTD (BSE 507598 FV RS.10) RS. 55 – Hidden GEM

One can buy KLRF at CMP which is close to recomended price for short to medium term.

Company : Kovilpatti Lakshmi Roller Flour Mills, as KLRF with its brand as "Kuthuvilakku" came into existence way back in 1964 with the establishment of 46,800 MT of wheat flour at Gangaikondan in Tamil Nadu, near the southern tip of the Indian subcontinent. The various business of the company is as below :

Flour Mill Division : This is the flagship Division with licensed and Installed capacity of : 74,000 MT per annum working at 70% capacity (thus leaving scope for further scalability). KLRF has commissioned a traditional stone mill and transformed itself into well known manufacture of branded whole meal Atta which has more fibre, minerals, vitamins and rich in aroma. The company now has product portfolio of entire range of flour, which meets the demand across users such as Bakeries, Parotta Makers, Hoteliers, Sweet & Confectioneries Manufacturers and domestic end users. The company is pioneer in tapping high margin retail segment by launching half kg, 1 kg pack of various attas it manufactures, which is well accepted by the consumers due to its consistent quality, well recognized brand at affordable price. Company has Brands as : Kuthuvilakku, Kera Brand, Alamaram Brand for various basket of products.

Textile Division : In 1982, the company expanded into textiles business by the name of KLRF Textiles, a 30000 spindle unit and 1344 rotors, after further expansion it became one of the leading yarn manufacturer and exporter in the country. The division scored operating loss of 3 crore, this is mainly due to fall in yarn prices due to global slowdown and less off take from China.

Sheet Metal Division : KLRF SHEET METAL INDUSTRIES was established in October 1978. Initially this unit has been installed to cater the needs of M/S. LAKSHMI MACHINE WORKS. KLRF SHEET METAL INDUSTRIES is engaged in a diversified business like, ferrous castings, flour milling, textile spinning, sheet metal fabrication, plantation and flour milling machinery manufacturing, rice color sorting machine manufacturing and trading of electrical and Industrial goods.. KLRF SHEET METAL INDUSTRIES is also acting as a trading agent of Probat Werke of Germany ( for their entire range of Coffee Roasting machines ) and M/s. Mahlkonig , Germany ( for their entire range of Coffee Grinding machines ). KLRF SHEET METAL INDUSTRIES has got all the facilities required for sheet metal fabrication under one roof.

Windmill Division : Wind Mill Division at Aralvoimozhi Village in Kanyakumari District, Pazhavoor Village and Dhanukkarkulam Vilalge in Tirunelveli District, Tamil Nadu with a capacity of 6.25 MW. The entire power generated by the windmills is captively consumed. All the windmills are well maintained and the performance is satisfactory.

Engineering (Foundry / Casting) Division : The company has Foundry division with licensed and installed capacity of 10,800 MT per Year, which is running at 90% capacity and contributing 30% of turnover.

Investment Rationale : During 1^st Half of FY16, the company achieved turnover of Rs 106 Cr, on which it earned net profit of Rs 5 crore, resulting EPS of Rs 10 per share in first six months only. In 2^nd half FY16, company can double the turnover and net profit, which will result in EPS of Rs 20 per share for entire FY16. (In FY15 The turnover of the company in FY15 as 222 Cr, on which EBIDTA of 12.67 Cr was earned. Food Division earned EBIDTA of 9.3 Cr (56292 MT) accounting 59% of turnover, Textile division has incurred EBIDTA of -2.31 CR and Engineering Division has earned EBIDTA of 5.68 Cr.)

The management is optimistic on Food Division of the company due to consistent demand and favorable availability of quality wheat. Due to continuous losses and considering uncertainty in the sector, the management has decided to close down 2 units of textile division & 1 unit of sheet metal division, for which the approval has been obtained from shareholders. This will help company to wipe out loss and proceeds from sale will help the company reduce the debts. While in engineering division increased production as achieved due to availability of dedicated power supply. Increased production and improved performance is expected in FY16.

Valuation : The share of this more than 50 year old company with Fv of Rs 10 paid up and tiny equity of Rs 5 Cr only, having book value of Rs 46 and having TTM sales of 195 Cr & management holding of 51%, with recession proof business of Branded Food and high potential Foundry/Casting Heavy Engineering business, which is already making good profit alongwith ROE and ROCE of 14 & 11 percent and OPM margin of 13% is available at market cap of only 30 crore which is very cheap looking at the potential earning power of the company, as company has closed down its loss making division and proceeds of which is utilized to reduce debt, which again will improve the profit, which is already 6CR in last 3 quarters (Rs 12 EPS per Share). The current PE of 5 and market cap of 30 crore is very attractive as peers are trading at a PE of 20 and Mcap to Sales of 4, thus this turned around company can achieve EPS of close to Rs 30 TO 35 per share in net couple of years, if it can trade at PE of even 10 can give immense scope of appreciation in the long term.

KLRF Ltd - Result Update

Result Update YoY Sales up 20% 46.3 Cr to 54.3 Cr Operating Profit up 90% from 1.33 Cr to 2.46 Cr Net Profit 66.93 Lakhs against loss of 43.4 Lakhs last year QoQ Sales remained stable at 54.38 Cr against 53.75 Cr in last quarter Net Profit 66.93 Lakhs against 1.57 Cr (including +90 lakh exceptional item last quarter) last quarter Company is stabilizing its operation, result for which shall be seen in coming quarters. 9 Months EPS is Rs 11.23 per share. http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/7A18BB47_13EE_410B_89E6_4ED5260DD81B_153014.pdf

Result Update - Rajoo Engineers

Good result considering recession period. Company is able to sail through difficult times, which can be seen from decent numbers posted. Company able to remain in profit. http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/E1DB66FE_FE50_4325_BAC8_14C9400285C5_165324.pdf Sales down 20% QoQ and YoY Profit down 30% QoQ and YoY Company able to maintain 9 months profit YoY, Which is up by a quarter of a %. Hold for long term gain

KLRF LTD (BSE 507598 FV RS.10) RS. 55 – Hidden GEM

KLRF LTD (BSE 507598 FV RS.10) RS. 55 – Hidden GEM

Company : Kovilpatti Lakshmi Roller Flour Mills, as KLRF with its brand as "Kuthuvilakku" came into existence way back in 1964 with the establishment of 46,800 MT of wheat flour at Gangaikondan in Tamil Nadu, near the southern tip of the Indian subcontinent. The various business of the company is as below :

Flour Mill Division : This is the flagship Division with licensed and Installed capacity of : 74,000 MT per annum working at 70% capacity (thus leaving scope for further scalability). KLRF has commissioned a traditional stone mill and transformed itself into well known manufacture of branded whole meal Atta which has more fibre, minerals, vitamins and rich in aroma. The company now has product portfolio of entire range of flour, which meets the demand across users such as Bakeries, Parotta Makers, Hoteliers, Sweet & Confectioneries Manufacturers and domestic end users. The company is pioneer in tapping high margin retail segment by launching half kg, 1 kg pack of various attas it manufactures, which is well accepted by the consumers due to its consistent quality, well recognized brand at affordable price. Company has Brands as : Kuthuvilakku, Kera Brand, Alamaram Brand for various basket of products.

Textile Division : In 1982, the company expanded into textiles business by the name of KLRF Textiles, a 30000 spindle unit and 1344 rotors, after further expansion it became one of the leading yarn manufacturer and exporter in the country. The division scored operating loss of 3 crore, this is mainly due to fall in yarn prices due to global slowdown and less off take from China.

Sheet Metal Division : KLRF SHEET METAL INDUSTRIES was established in October 1978. Initially this unit has been installed to cater the needs of M/S. LAKSHMI MACHINE WORKS. KLRF SHEET METAL INDUSTRIES is engaged in a diversified business like, ferrous castings, flour milling, textile spinning, sheet metal fabrication, plantation and flour milling machinery manufacturing, rice color sorting machine manufacturing and trading of electrical and Industrial goods.. KLRF SHEET METAL INDUSTRIES is also acting as a trading agent of Probat Werke of Germany ( for their entire range of Coffee Roasting machines ) and M/s. Mahlkonig , Germany ( for their entire range of Coffee Grinding machines ). KLRF SHEET METAL INDUSTRIES has got all the facilities required for sheet metal fabrication under one roof.

Windmill Division : Wind Mill Division at Aralvoimozhi Village in Kanyakumari District, Pazhavoor Village and Dhanukkarkulam Vilalge in Tirunelveli District, Tamil Nadu with a capacity of 6.25 MW. The entire power generated by the windmills is captively consumed. All the windmills are well maintained and the performance is satisfactory.

Engineering (Foundry / Casting) Division : The company has Foundry division with licensed and installed capacity of 10,800 MT per Year, which is running at 90% capacity and contributing 30% of turnover.

Investment Rationale : During 1^st Half of FY16, the company achieved turnover of Rs 106 Cr, on which it earned net profit of Rs 5 crore, resulting EPS of Rs 10 per share in first six months only. In 2^nd half FY16, company can double the turnover and net profit, which will result in EPS of Rs 20 per share for entire FY16. (In FY15 The turnover of the company in FY15 as 222 Cr, on which EBIDTA of 12.67 Cr was earned. Food Division earned EBIDTA of 9.3 Cr (56292 MT) accounting 59% of turnover, Textile division has incurred EBIDTA of -2.31 CR and Engineering Division has earned EBIDTA of 5.68 Cr.)

The management is optimistic on Food Division of the company due to consistent demand and favorable availability of quality wheat. Due to continuous losses and considering uncertainty in the sector, the management has decided to close down 2 units of textile division & 1 unit of sheet metal division, for which the approval has been obtained from shareholders. This will help company to wipe out loss and proceeds from sale will help the company reduce the debts. While in engineering division increased production as achieved due to availability of dedicated power supply. Increased production and improved performance is expected in FY16.

Valuation : The share of this more than 50 year old company with Fv of Rs 10 paid up and tiny equity of Rs 5 Cr only, having book value of Rs 46 and having TTM sales of 195 Cr & management holding of 51%, with recession proof business of Branded Food and high potential Foundry/Casting Heavy Engineering business, which is already making good profit alongwith ROE and ROCE of 14 & 11 percent and OPM margin of 13% is available at market cap of only 30 crore which is very cheap looking at the potential earning power of the company, as company has closed down its loss making division and proceeds of which is utilized to reduce debt, which again will improve the profit, which is already 6CR in last 3 quarters (Rs 12 EPS per Share). The current PE of 5 and market cap of 30 crore is very attractive as peers are trading at a PE of 20 and Mcap to Sales of 4, thus this turned around company can achieve EPS of close to Rs 30 TO 35 per share in net couple of years, if it can trade at PE of even 10 can give immense scope of appreciation in the long term.

Sandesh Ltd - Result Update

Excellent number posted and this was expected

Quarter (YOY)

Sales up 8%
Net Profit up 90%

Half Yearly (YOY)

Sales up 15%
Net Profit up 50%

Hold for long term growth prospects

Rajoo Engineers Ltd - Result Update

Very good performance by Rajoo Engineers Ltd, even in bad times.

Quarter Numbers

Sales up 35% QoQ
Net Profit up 105% QoQ

Hold stock for long term, this is just the beginning for Capital Goods sector

RAJOO ENGINEERS LTD (BSE 522257 FV RS.1) RS. 17 – A Global player in Plastic Extrusion Machinery

RAJOO ENGINEERS LTD (BSE 522257 FV RS.1) RS. 17 – A Global player in Plastic Extrusion Machinery

Company : Rajoo Engineers Ltd (REL), founded in 1986 as a private limited entity engaged in a business of manufacturing Plastic Extrusion Machines. In the last 29 years, the company has  blossomed to become one of the most respected name in the Extrusion Machine Manufacuring industry. The company boasts of having commissioned over 2000 installations till date in india and across over 56 plus countries including Germany, Spain & UK which speaks for the acceptance of company’s products by the most stringent and developed markets of the world. Over 50% of company’s products are exported and Over 60% of the business of the company comes from repeat orders, which indicates the satisfaction levels of the existing customers.

Products : The company today is a Market Leader in Blow Film Lines, Sheet Lines and Thermoformers (in the Indian sub-continent as well as amongst its peers in Asian sub continent.)  Other products includes  PP Non woven fabric making machine, Foam Extrusion Systems (Chemical & Physical), Pipe Plants & Drip Irrigation.

Application : The machinery manufactured by the company, has applications across various Industries, such as : Flexible Packaging, Agriculture, Infrastructure, Automobiles, Food & Beverages, Pharmaceutical, White Goods, Stationery & Printing.

Technical Collaboration : For expanding its product line, company has technical collaboration with :

COMMODORE INC, U.S.A. for manufacture of XPS Sheet line and Thermoformer.

WONDERPACK, a leader in Thermoforming Industry, was merged with Rajoo Engineers Ltd

HOSOKAWA ALPINE AG, GERMANY one of the most reputed company in Blown Film Technology

A JV with BAUSANO & FIGLI S.P.A. of ITALY a global leader in Pipe manufacturing technology & Drip Irrigation Solutions.

A JV with MEAF Machines B.V, Netherlands for manufacturing world class Sheet Extrusion Equipments and Thermoforming Machinery to address growing demand for Semi-flexible packaging system.

The company carries many record for developing / bringing latest technology first time in the country and in the world, for which the company & its founders have received many Awards for business leadership, innovation in technology and contribution to plastic & polymer industry. Recently company launched a product which consumes 40% less Power.

Business Strategy : To mark its overseas presence and showcase the products, the company has participated in 10 exhibitions last year, out of which 6 were overseas, the company has got excellent exposure and good response, hence next target for the company is to participate in 15 such exhibitions related to plastic industry both local and overseas.

Outlook : With Increasing demand for plastic products due to Consumerism, Mall Culture and Improving Hygiene habits, plastic industry is having good times with increase in profitability due to fall in with weak Crude Oil Price, which is allowing it to invest more into capital goods for expansion & addition of new product lines, which in turn benefits Rajoo Engineers Ltd, as it is one of the leading suppliers of machinery to plastic industry. Plus company to get huge benefit due to its venture into Plastic Pipes and Drip Irrigation Solutions the demand for which is huge from within the country and overseas as water crisis is becoming a Global Phenomenon, Here in India Drip Irrigation is supported by central government’s “More Crop, Per Drop” policy. 

Valuation : An Award winning company for its Innovation & Advance Technology, which is truly a global player into niche segment of Plastic Extrusion Machinery, with technical collaboration with global leaders, and a Debt Free company is available at a P/E of just 17 times (Industry P/E 30) TTM Eps of Rs 0.96 per share. Recent released IIP data states huge increase in manufacturing of plastic extrusion machinery, which suggest better days for the company, and stock is yet to catch up with the current rally, hence investors should study this stock for long term investment purpose. Delivery data on BSE from Jul 2015 till date is above 85% which suggest good accumulation by Smart investors. 

SANDESH LTD (BSE : 526725) RS 650 (FV RS 10)

SANDESH LTD (BSE : 526725) RS 650 (FV RS 10)

Sandesh Group is over 90 years old, the journey of Sandesh as a newspaper started in 1923, and today Sandesh is Gujarat’s largest and most influential media house, having a strong foothold across media landscape, such as :

Newspaper : Sandesh, which is published from Gujarat & Maharashtra is the largest media Gujarati company with 7 editions across Gujarat & Mumbai.

Television : Sandesh News (Award winning channel) is the region’s fastest growing 24x7 Gujarati News Channel, which reaches out to the most affluent and powerful gujarati audience.

Digital : Harnessing the potential as a future of communication, Sandesh is among first to launch a Gujarati news Smart Phones App in India to provide information and news in real times as it happens, and continues to have an expanding digital presence of over 5 million followers across all platforms.

Magazine & Weekly Publications : Through “Agro Sandesh”  which provides relevant and enriching content to the farming, Dairy and co-operative sector, thus contributing the sector positively. “Stree” is popular women focused magazine which reaches out to women across all classes and addresses the issues related to them directly.

OOH (Out of Home) Media Solutions : “Spotlight” Brand Management focuses on every aspect of Brand Launching, upto Brand Building and enhancing the brand message by going beyond just grabbing eyeballs, but creating a lasting buzz around the brand. Company has its sites at all the major commercial areas in Ahmedabad. The company has procured various prestigious tenders like BRTS, Bus Shelters, AUDA & Ahmedabad Municipal Corporation.

Besides all of the above, the company also successfully operates its Real Estate (by the name of Applewoods Estates Pvt Ltd, by monetizing its land bank in Ahmedabad) and Finance business.

To cover the entire geography of Gujarat state, the company has its printing facilities at Baroda, Surat, Rajkot, Bhavnagar, Bhuj to cater Semi urban & rural areas. The regional offices are located at Mumbai, Delhi, Kolkata, Bangaluru, Chennai & Pune. Company enjoys a strong regional franchise, where it enjoys strong readership loyalty.

Future Outlook : According to FICCI-KPMG Report 2014, the print sector continued to buck the global slowdown trend and the sector grew at CAGR of 8.5% last year to touch Rs 243 Billion. The print industry is expected to grow at a CAGR of over 9% for 2013-18, as against estimated 8.7% expected in 2013. Vernacular market saw 10.8% growth in advertisement revenues, with English print reporting a sluggish growth of 5.2%. The increase in population, literacy rate and reach has led to increased circulation and readership of the newspapers in India. The company is steadily increasing its geographical presence, which helps improve its circulation and readership of its publications.

Sectors which spent heavily on print were FMCG (12.3%), Automobiles (11.7%), Education (9.7%), and Real Estate (8.7%). FMCG, Telecom and Automobile will continue to increase their ad-spent to push the sales due to slowdown, and majority will likely to come to Print media, due to its affordability, vast reach and direct impact.

According to FICCI-KPMG Report 2014,  among various media, Print and Television continued to be the primary media platforms, claiming nearly 82% of total revenue and could continue to be the most dominant media for the next 5 years.

Valuation : This closely held DEBT FREE, Cash Rich company, with a tiny equity of Rs 7.61 Cr & Reserve of 392 Cr (Book Value Rs 604 per Share), where promoters hold 74.81% (Zero Pledge), HNIs hold 12.12% and rest (~13%) is held by Public, is trading at a PE of only 7.5 times TTM EPS of Rs 85 per Share (Average Industry PE stands at 18 times). At CMP of 680, the share is available at a Price to Book value of close to 1.1 (Industry Price to Book value 4.5 times). Market Cap to Sales Ratio is 1.4 (Industry Average is 4.5 times).

June 15 Quarter company posted YOY sales growth of 10%, while Net Profit Jumped over 50% from 13.3 cr to 20.35 Cr, posting an EPS of 26.88 for June Quarter alone. The great news is that the company has posted a Super margins, OPM of 36.15% and NPM of 22%, which is the highest in the industry. ROE & ROCE stands at 12.01% and 35.95%.  

With blockbuster results of June quarter, one thing is clear that the company is now on a high growth path and that will continue going forward, the company can easily post an EPS of Rs 110 for FY 16, which makes this stock one of the cheapest among media company at only 6 times PE at CMP of 650. Investors can invest in this another “Force Motors” in the making stock for long term wealth creation.

IMP Powers Ltd (BSE 517571 / NSE INDLMETER) FV Rs 10 – CMP 84.00

IMP Powers Ltd (BSE 517571 / NSE INDLMETER) FV Rs 10 – CMP 84.00

IMP Powers Ltd (IMPPL) was incorporated in 1961, Growing from manufacturing Indistrial Meters, to India’s leading manufacturers of various types of Transformers, ranging from 1 MVA to 315 MVA, upto 400 kv Class with target of taking this production capacity upto 500 MVA., Today the company is amongst the Top 5 power transformer companies in India, in the 132 – 220 kv class.

IMPPL has well equipped Manufacturing Unit at Silvassa spread across 4 Acres, factory floor area for 1 Lakh Sq Ft Built up (Thus enjoying location advantage of close to National Highway and 3 Ports), for manufacturing the entire range of Transformers with an installed capacity of 12,000 MVA per annum, which is backed by in-house Design Center, R&D and own Impulse Testing facility upto 400 kva, which is accredited by NABL, (Department of Science & Technology, Government of India.)

The company is an approved Class ‘A’ supplier to all SEBs and other Government Agencies such as PGCIL, NTPC, NHPC & DVC. Non SEB customers include EPC companies, leading Consultants and other industrial players with whom IMPPL enjoys Preferred Vendors status.

IMPPL with a 5 decades of experience, has about 30,000 installations / Customer base which is spread across India and in about 26 countries across the world, catering the requirements of Utilities, SEB, PSUs and Private Industries. Some of the Clients are listed as below :

India : All SEBs (State Electrical Boards), State owned Transmission Companies, SAIL, PGCIL, ZESCO, Nepal Electricity Authority.

International : UK, African Continent, Asia and to the farthest corners and difficult terrains of Austrailia and New Zealand

EPCs : Godrej & Boyce Ltd, Jyoti Structures, KEC International, Larsen & Toubro, Kalpataru Power, UB Engg, IVRCL, Shreem

Corporates : Birla, Tata, Essar, Videocon, HPL Electric, Bajaj Electricals, Alstom, Crompton Greaves, ISOLUX, INABENSA, Siemens, Aditya Birla Group, Areva, Etc

Future Growth :

In India, the demand for equipment used in power sector is multiplying at a rapid rate because of social, economic and industrial development. The new government plans to fund up to 75% of the investment required to supply electricity through separate feeders for agricultural and rural domestic consumption, which will benefit the Power Sector Companies and ultimately boost the regional demand for power transformers. The government's commitment to provide 24x7 uninterrupted power supply to all homes and Deendayal Upadhyaya Gram Jyoti Yojana to augment power supply to rural areas, strengthen the sub-transmission and distribution systems will ultimately boost the demand for Power Transformers.



IMPPL now also focuses on growing export market sales especially in Africa, Asia & Middle East, tying up with several International EPC players, which will improve its profitability owing to higher gross margin ranging from 25% to 30%.



Order Book : as on June 2015 stands as : 291 Crores, for 4821 MVA. 44% orders are from SEBs, while 21% from EPC Contractors, 31% is Deemed Exports and 3% Exports Orders Received.

While the installed capacity increased from 7000 MVA to 12000 MVA in last 5 years, Production increased from 4000 MVA to 7883 MVA, capacity utilization increased from 25% to 40% during this period, keeping immense scope for order intake and production capacity, with no spending on Capex.

Industry Outlook :

The Transformer market revenues in India are expected to grow at the CAGR of 14 % till 2018. Under the 12th five year plan (2012-2017), the government plans to spend 200 billion on developing and strengthening power infrastructure in India. The Indian government expects to add another 85,000 MW of power capacity during the 12th Five-Year Plan (2012-2017) period. The demand for power Transformers is also expected to go up as a direct consequence. Government's attempt of attaining 100% electrification across the country by 2017 would contribute to the demand for power transformers. With the continuous support from the government to promote the power transformer industry through investments, tax benefits, subsidies, etc. will help the industry to grow over the coming years. With the upswing demand for reliable power in the country, the transformer market is witnessing a growth trend.



Triggers :

Company has idle plot of 20,000 Sq.Ft. at Kandivali west, the value of which should be not less than 60 Crores, if sold on outright basis, if develop & sold by the company, it can fetch a sale consideration anywhere between 80 to 100 Crore, depending on the project.

IMPPL is the only transformer company in India which is entitled for Sales Tax Exemption till 2017, such benefit will provide a significant price advantage to the company.

IMP Energy Ltd (IEL), a subsidiary company of IMPPL, incorporated in the year 2012, is acting as a Project Management Consultancy (PMC) to explore emerging opportunities in mini and small hydro power projects upto 25 MW. IEL received 13 small Hydro projects orders totaling 12.7 MW & amounting to Rs 137 Cr in Leh & Kargil, the progress of which is extremely encouraging. There may be value unlocking going forward, by listing this PMC subsidiary at rich valuations.

Falling in Input Prices of raw material such as Copper, Aluminium, Steel Stampings, Crude Oil (Transformer Oil), etc, will directly add to the bottom line of the company. Fall in interest rates will reduce the interest burden of the company.

The company has done CAPEX during tough times, the benefit of which will be seen going forward.

Valuations :

This Rs 10 paid up stock is trading at 0.8 times of book value of Rs 116.75 (Industry Price to Book Value 2.51), With FY 15 sales at 330 Cr and current Market Cap of only 70 Cr, its trading at Market Cap to Sales Ratio of ridiculously low of just 0.25 times. The company has turned around in last 3 quarters by making profit of Rs 6.43 Cr, giving EPS of Rs. 7.7 per share, making this stock so far the cheapest profit making company within the industry with a P/E of just 8.5 times (Industry PE of 68.63), if we add June 15 quarter EPS of 3, making this stock a great value pick among the high growth power sector with a modest target of 140 in the next 12 months.

Promoters recently allotted 500000 (5 Lakhs) shares to themselves at Rs 80 per share on Preferential basis, thus increase the stake in the company by a whopping 6% indirectly.