Tuesday, May 27, 2008

Petronet LNG Ltd

Potential Growth........

Company Insight:

PLL was incorporated in the year 1998, and 50% of initial contribution to total paid up capital was made by BPCL, GAIL, IOC, ONGC and the balance paid up capital was subscribed by individuals.

The sphere of PLL’s encompasses import and regasification of
Liquefied Natural Gas (LNG), by developing LNG terminals in the different parts of the country.

PLL started imports of LNG in January 2004, when it received its first cargo at
Dahej LNG terminal. During FY07, Dahej terminal operated at 118% capacity utilization,
where 12 additional spot cargoes were regasified over and above the contracted LNG
supplies from RasGas.

Investment Rationale:

With a support from Navaratna PSUs like ONGC, GAIL, IOC and BPCL and robust domestic demand growth of LNG, PLL has outperformed during the last 3years in terms of revenue growth.

Due to guaranteed support from the PSU promoters, the company has entered into a long term Gas Sales Purchase Agreement (GSPA) with GAIL, IOC and BPCL for supply of re-gasified LNG for a period of 25yrs.

Business Overview:

The company is one of the established players in the global LNG market and controls a quarter of the India Market. Accordingly looking at growing demand of gas from the sectors like steel, chemicals, petrochemicals, glass, ceramics, refineries and city gas, the company has decided to expand its current capacity of Dahej and Kochi to twofold by the end of 2010.

Further, the company is going to be benefited by the Govt’s move of giving stress on using spot LNG instead of costly naphtha as fuel and feed stock to the major gas users like power and fertilizers. Company’s main business encompasses Sales and Purchase of LNG, hence the business model is basically based on a back-to-back long term purchase and sales agreement for a period of 25yrs
.

Financial Analysis:

The growth in Net sales was mainly due to increased volumes and better realizations. The Volume sales for FY08 increased to 321.85 trillion British thermal unit (tBtu) as compared with 290.28 tBtu during FY07.

In addition to this, PLL is also expecting to earn marketing margins on some of it spot cargo deals, depending on the price it negotiates with the LNG supplier and the price off-takers are willing to pay. The global regassification capacity is expected to be three times the liquefaction capacity in the next decade, which would lead to a sharp rise in LNG prices and thus take away the cost benefits for end users.

With the strategic expansion plan at Dahej and Kochi LNG terminals and continuous growth in demand we estimate PLL to cross Rs1,07,975.5 mn revenue with the CAGR of 29.5% by the end of FY’10.

Valuations:

We believe that the company’s future performance is mainly dependent on the spot volumes, for which company has started expansion of Dahej LNG terminal. The company has planned to finish its expansion plan at Kochi by the end of 2010 and commence the operation by FY11.

As a part of forward integration, company’s step to diversify its business into gas-based power generation by setting up 1,000 MW gas based power project at its Kochi terminal, will add value to it’s existing business.

Further, the back-to-back sales agreement with the Navaratna PSU’s is making PLL to operate in high inventory turnover in future, which requires less working capital requirement. Looking at future prospect of the PLL’s expansion plan and new venture in gas based power business makes the stock attractive Investment.

Monday, May 26, 2008

Voltas Ltd

Comforting prospects

Company Insight:

Voltas offers engineering solutions for a wide spectrum of industries in areas such as heating, ventilation and air conditioning, refrigeration, electro-mechanical projects, textile machinery, machine tools, mining and construction equipment, materials handling, water management, building management systems, indoor air quality and chemicals.

Stock Outlook:

Strong demand for its products and services, improving margins and growing order book augur well for Voltas.The last few years have seen Voltas Limited report strong growth in revenues and improvement in profitability, led by strong demand from user industries as well as the company's efforts.

Notably, Voltas is expected to report robust growth in all its three business segments and also sustain profitability, if not improve further, going forward.

Voltas' good prospects are well supported by increasing investments by user industries in the West Asian markets as well as in India. This should enable the company achieve its targeted annual growth of 35-40 per cent over the next few years.

EMPS: On solid footing:

The biggest revenue contributor is electro-mechanical projects and services (EMPS). This division undertakes MEP (mechanical, electrical and public works) and HVAC (heating, ventilation and air-conditioning) contracts; the latter is a part of MEP.

Among HVAC and MEP projects executed (jointly or solely) include the $227 million MEP contract for Burj Tower, Dubai (world's tallest building), $101 million MEP project for Emirates Palace Hotel in Abu Dhabi, $40 million MEP project for New Hong Kong Airport and HVAC projects for ITC Hotel (Lower Parel, Mumbai) and new Hyderabad International Airport, among many others.

For year ended March 2008, the company saw its order book (largely pertains to the HVAC and MEP business; 95 per cent of total orders) rise 101 per cent to Rs 4,872 crore, of which, international orders accounted for Rs 3,787 crore.

In India, too, there are huge opportunities in HVAC and MEP, which some analysts estimate at Rs 40,000-45,000 crore over the next five years. These would come up on the back of investments planned in sectors like IT and IT-ES, retail, airports, SEZs, hospitality and telecom, among others.

Others: Healthy prospects:

In engineering products and services (18 per cent of segment revenues), which is a combination of in-house manufacturing (70 per cent) and agency commission (30 per cent), Voltas sells equipment to users in the mining and construction, material handling and textiles sectors.

The unitary cooling (air-conditioners, water coolers, commercial refrigeration) products business, which accounted for 27 per cent of revenues, grew by a robust 37.3 per cent in FY08. Notably, it has reported a turnaround as profits grew from Rs 9.9 crore in FY07 to Rs 54 crore in FY08, helped by price rationalisation (including shifting of production to tax-free zone) and improved efficiencies.

Investment rationale

The order book size, which is nearly three times FY08 revenues of electro-mechanical projects business, reflects strong revenue visibility. Given the prospects of the other two businesses, Voltas should achieve its targeted annual growth of over 35 per cent for the next three years. And, profits should grow at similar pace, if not more.

The other trigger could come in the form of an announcement pertaining to its 32-acre land in Hyderabad, which should happen over the next six months. At Rs 158.30, the stock trades at a PE of 14.7 based on FY10 earnings and, can deliver 25 per cent returns over the next one year.

Thursday, May 1, 2008

Bartronics India Ltd

Bartronics India Ltd

Background:

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.

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.

Company Insight:

Bartronics India Limited (Bartronics) enables businesses to gain real-time visibility, control and information through the effective evaluation, implementation, integration and support of Automatic Identification & Data Capture (AIDC) technologies, RFID, Smart Cards and Point of Sale (POS) solutions.

Technology:

Smart Cards
Bar Codes
Biometrics
RFID
RFDC
EAS
Point of Sale

Products:

AIDC
RFID
Handheld Terminals
Printers
Scanners

Latest Quarterly Results:

The company reported a 260.82 per cent increase in net profit to Rs 16.42 crore and 309.9 per cent surge in net sales in Q4 March 2008 over Q4 March 2007.

Shareholding pattern:

Foreign Holdings - 23.17
Govt. / Financial Institutions - 7.65
Corporate Bodies(not covered above) - 7.51
Directors and their Relatives - 38.94
Other including Indian Public - 22.6