Category Archives: Stock Specifics

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Reliance Infrastructure: valued at a pittance

The biggest cause for worry is that Ebit margins of infrastructure projects fell to 15.4% in FY11, from 51.6% last year, raising question marks on the profitability and IRRs

Mint 1/6/2011

The Reliance Infrastructure Ltd (R-Infra) stock has underperformed the broader market by around 65% in the past two years. During this period, a number of large brokerages put out “buy” reports on the firm, on the premise that the large number of infrastructure projects being commissioned will lead to a re-rating. While the infrastructure business has grown manifold in size, both in terms of revenue and order book, the re-rating still hasn’t happened.

Lately, the shares have been hit because of the consent order by the Securities and Exchange Board of India (Sebi). In January, Sebi settled a case with the Anil Ambani-led Reliance Group, which allegedly involved routing money raised through overseas bonds to the stock market in 2007, for Rs. 50 crore and barred some officials of the group as well as R-Infra from investing in listed firms for a year. R-Infra’s shares have underperformed the market by about 28% since the order was passed.

In the past three years, the firm has increased its presence in the infrastructure space and expanded considerably. In the past year, the order backlog in the EPC (engineering, procurement and construction) business has grown 54% to Rs. 29,600 crore. R-Infra told analysts it expects sales of Rs. 6,800 crore from this business in the current fiscal ending March 2012 (FY12), which is ahead of Street estimates. The firm is involved in five transmission projects, three Metro projects, a large number of road projects, a sea-link project and airports in non-metro areas, where the total outlay is estimated to be Rs. 35,000 crore.

Analysts at Citigroup estimate the EPC business will grow at a compounded average rate of 20% in the next three years on the back of the strong order book.

In FY11, consolidated earnings before interest, tax, depreciation and amortization (Ebitda) grew by 26%, thanks to the growth in profitability of the core electrical energy business. Pre-tax profit, however, was more or less flat as other income fell by a third.

A results review report by Citigroup states that “the biggest cause for worry is that Ebit margins of infrastructure projects fell to 15.4% in FY11, from 51.6% last year, raising question marks on the profitability and IRRs (internal rate of return) of the projects that have been commissioned so far”.

Even so, the fact that a number of its infrastructure projects are beginning to generate revenue means that consolidated results would soon begin to look better. The current market capitalization of Rs. 15,200 crore, however, barely accounts for R-Infra’s stake in Reliance Power Ltd and the cash on its books. The core business is being valued at a pittance, which reflects the regulatory overhang on the group.

*This article is only for the knowledge of the readers. VRIDHI may or may not recommend this stock. Consult your Financial Advisor.

Fedders Lloyd – Value At Play

Source: Fwd Email

Fedders Lloyd has been pioneers and is a well established name in Indian Air Conditioning Industry for more than 50 years, manufacturing Window Air Conditioners, Split / Ducatable Air Conditioners, Package Air Conditioners, Chillers, Transport Air Conditioners, Heat Exchangers, etc.

The company has two state of art manufacturing plants at Noida, UP & Kalaamb, HP catering to the requirements of customers like Indian Railways, Defence, MTNL, BSNL, etc. Presently, the company has focus on four diverse business areas.

Air Systems Division

Railways, Defence and Telecom AC Division

Transport AC Division

Scaffolding and Form Work Division

Structural Steel Division

Pre-Engineered Building Division

Domestic Power Projects Division

International Projects Division

Air Systems Division

Air Systems Division caters to Air Conditioning Industry & provide the most extensive range of products like Air Handling Units, Fan Coil Units, Heat Transfer Coils, Air Distribution Products, Smoke & Fire Dampers, etc.

Scaffolding & Form Work Division

Scaffolding & Form Work Division caters to construction and Infrastructure in domestic and overseas markets.

Structural Steel Division

Fedders Lloyd is a manufacturer of world class Structural Steel Buildings such as Power Plants, Refineries, High rise Buildings and Pre Engineered buildings like Industrial sheds, warehouses, metro stations; a renowned name in Air Conditioning industry with a turn over exceeding Rs. 1000 Crores and growing exponentially.

The facility now being set-up at Noida and Jabalpur is the fully automated, ultra modern, State-of-the-art manufacturing plant , one of the first of its kind in the sub-continent .

Because of increased investment in Industry and Infrastructure in India, there is chronic shortage of labor at civil sites which has developed liking for steel buildings. Also the steel buildings are giving faster completion of project so, it has got higher adoptability worldwide.

The estimated demand for PEB’s in India is around 3 million MT Per annum whereas the current installed capacity is pegged at 0.80 million MT. This demand supply gap has motivated Lloyd Group (B.R. Punj group) to set-up  manufacturing units in pan India location.

Structural steel buildings are the custom designed buildings that are factory-finished using high-end fabrication technologies and are shipped to job sites in CKD units. They are assembled and erected at site with hi-tensile fasteners using significantly low man-power.

The widespread applications of such buildings in India are – Power Plants, Refineries, High Rise Buildings, Industrial Buildings, Warehouses, Commercial Complexes, Indoor and Outdoor Stadiums, Metro Stations, Primary Health Centers, Schools, Residential Buildings, etc.

Cost effective manufacturing, automation vis-à-vis man dependency, high end designing with cutting edge software combined with experienced professionals keep Fedders at the top of its competitors in India.

The capacity being installed is 30,000 MT PEB’s per annum at Noida and around 50000 MT steel buildings per annum at Jabalpur.

The company is also in advance stage of land acquisition in southern part of India as well near Dubai for their third and forth steel building manufacturing plants.

Domestic Power Projects Division

Of the US$ 500 Million Group- the flagship company Fedders Lloyd Corporation Limited (FLCL), a pioneer and is a well-established name in Indian Air Conditioning Industry for more than 50 years. FLCL strength lies in alliance partners having strong credentials and proven track records of executing projects.

FLCL has further diversified into Power Projects Divisions. The Power Project Division has started functioning Domestic and Internationally for carrying out the Power Transmission and Sub Station Business as a EPC Contractor.

FLCL has also signed exclusive MoU with Cobra Span for their Domestic and International Need requirement. Presently the domestic division is actively taking the part of bidding process for transmission and substation and distribution of electrical Power Projects.

The domestic division is going to open the order from MPPKVVCL, Jabalpur worth Rs.60 Crores and HVPN, Punchkula for 220 KV tansmission lines worth Rs.45 Crores.

The clients are Power Grid, NTPC, NHPC, State Utlities, Central Utliities, CTU, STU and Private players who are involved in power generations and need to allocate the power through EPC contractor .

International Projects Division

Fedders Lloyd Corporation Limited (FLCL), is also engaged in International Projects / Tenders under Multi-lateral Funding Agencies such as ADB, AFDB, IBRD, IDA, WB, JBIC, KF, EBRD and GOI/Exim Bank Credit Line for Electrical, Water & Sanitation, Industrial Plants, Education Industry, Maintenance Workshops and other direct requirement.

FLCL strength lies in alliance partners having strong credentials and proven track records of executing projects. FLCL has strong presence in African Continent. Recently, FLCL have been awarded a project from Ethiopian Electric Power Corporation (EEPCO), a wholly owned company of Government of Ethiopia, for ‘Procurement of Overhead Line Accessories’ worth US $ 7 million and other US $ 125 million projects are in pipeline to be finalized.

*The above views are not ours. This article is not a buy/sell recommendation. Seeking advice from your Financial Financial Advisor is suggested. VRIDHI

Tinplate’s integration with Corus nearing completion

Business Line 25/9/10

With its doubling of capacity nearing completion, Tinplate Company of India Ltd’s integration with Corus, UK, is set to come closer.

Corus is a major producer of tinplate (1.25 million tonnes annually) in Europe.

Tata Steel holds more than 45 per cent stake in Tinplate.

The process

“The integration will be at various levels, such as application engineering, product development and sharing of best operational and management practices,” Mr Koushik Chatterjee, Chairman of Tinplate, told newspersons at the end of the company’s annual general meeting here on Friday.

“A beginning has already been made and a joint team is working on it.”

Tinplate is used mainly for packaging and Corus, as it was pointed out, was much ahead in product development.

“Our focus will be value-added products with accent on light weight and durability,” Mr Chatterjee said, pointing out that Tinplate would soon initiate discussions with Hindustan Lever and major tea companies in view of the projected growth in the demand for packaged foods.

“The solutions centre in Jamshedpur, set up a little more than a year ago, is also working in this regard.”

Tata Steel’s holding

In reply to a question, he indicated that the Tata Steel’s holding in Tinplate would rise to 60 per cent from April next year following the conversion of fully convertible debentures. “Tinplate will then become a subsidiary of Tata Steel,” he said.

The full benefit of the company’s expansion plan due for completion in the middle of next year would be seen from the 2011-12 fiscal, the Chairman said.

“On completion, the company will become one of the largest self sufficient tinplate producing facilities across South East Asia and West Asia,” he said.

The bulk of the Rs 627-crore expansion programme currently in progress was being financed by equity and internal generation.

“We’ve so far spent nearly Rs 400 crore,” he said pointing out that every attempt was being made keep debt component low. Earlier debt was three times the equity, and now the ratio has been brought down to less than 0.5.

“We’ve tied up Rs 250 crore of loan, but will draw upon it depending on the situation,” he added.

Stock Call

Mr.Vivek Karwa has recommended Sterlite Industries. at around Rs.171/- on NDTV Profit TV channel on 22/9/10. The medium term target as per him is Rs.200+ since the company is likely to perform well in future. Sterlite is now trading at around Rs.176+ with gains of few Rupees.

*Team MarketFastFood

Stock Call

Mr.Vivek Karwa has recommended MAX India Ltd. at around Rs.165/- today on NDTV Profit TV channel. The medium term target as per him is Rs.200+ since the company is likely to perform well in future.

MAX India Ltd closed at Rs.171+ with gains of more than Rs.6/- The stock was recommended to MarketFastFood subscribers at Rs.160/- itself!

*Team MarketFastFood