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GEI Industrial Systems Ltd.
Wednesday, June 13, 2007
Overview:
GEI Industrial Systems (GIS) was formed 33 years ago. It was earlier named as GEI Hamon Industries Ltd. Over this period the company has remained focused largely on the business of the installment of Air Cooled Heat exchangers and Air-cooled stem condensers, which largely get applied in the petroleum refineries and power generation plants. The company over the years has developed itself, one of the leaders in this particular business. Currently Paharpur Cooling Towers and GEA Energy Systems are the major competitors of the company in this particular business segment. In FY06 the company diversified in to power EPC projects and gained Rs.100m order from Uttar Pradesh for the Electrification of 395 villages under Rajiv Gandhi Grameen Vidyutikaran Yojana of Government of India
Better Traction from Oil and Gas Sector :
Higher investment in the Oil and Gas sector in the country, coupled with revamping the water cooled systems to Air Cooled system would be a good growth driver for the company. Further with the establishment of its office at Oman we expect the company would see pouring in order from the Middle East when the major part of the refineries there would go for revamping.
Healthy Order book :
Currently the company is having a total order book of Rs.1,600m, which is 1.75 times of our expected sales for FY07. Overseas orders constitute around 25% of the total order book.
Outlook :
Looking at the better order outlook for FY08, coupled with company’s growing focus on, moving up in the value chain of project execution in its focused business, we have an overall positive business outlook for the company for FY08. However prices of key raw materials like Copper and Aluminum would remain a concern from the margin perspective. Raw material and spare constitute 57.4% of net sales of the company during FY06.
Valuation :
We expect 20% rise in gross sales during FY07 to Rs. 982m. The EBITDA margin would remain at 16% as against 17% during FY06. Based on this the net profit for FY07, before the write offs, would remain at Rs.52.6m, where as the reported net profit would remain at Rs.45.6m. Therefore on the before write off net profit and expanded equity (Conversion of Warrants) capital of Rs.127m the FY07 EPS would remain at Rs 4.1. The stock is trading at PE multiple of 18.4 to our adjusted FY07E EPS.
GEI Industrial Systems (GIS) was formed 33 years ago. It was earlier named as GEI Hamon Industries Ltd. Over this period the company has remained focused largely on the business of the installment of Air Cooled Heat exchangers and Air-cooled stem condensers, which largely get applied in the petroleum refineries and power generation plants. The company over the years has developed itself, one of the leaders in this particular business. Currently Paharpur Cooling Towers and GEA Energy Systems are the major competitors of the company in this particular business segment. In FY06 the company diversified in to power EPC projects and gained Rs.100m order from Uttar Pradesh for the Electrification of 395 villages under Rajiv Gandhi Grameen Vidyutikaran Yojana of Government of India
Better Traction from Oil and Gas Sector :
Higher investment in the Oil and Gas sector in the country, coupled with revamping the water cooled systems to Air Cooled system would be a good growth driver for the company. Further with the establishment of its office at Oman we expect the company would see pouring in order from the Middle East when the major part of the refineries there would go for revamping.
Healthy Order book :
Currently the company is having a total order book of Rs.1,600m, which is 1.75 times of our expected sales for FY07. Overseas orders constitute around 25% of the total order book.
Outlook :
Looking at the better order outlook for FY08, coupled with company’s growing focus on, moving up in the value chain of project execution in its focused business, we have an overall positive business outlook for the company for FY08. However prices of key raw materials like Copper and Aluminum would remain a concern from the margin perspective. Raw material and spare constitute 57.4% of net sales of the company during FY06.
Valuation :
We expect 20% rise in gross sales during FY07 to Rs. 982m. The EBITDA margin would remain at 16% as against 17% during FY06. Based on this the net profit for FY07, before the write offs, would remain at Rs.52.6m, where as the reported net profit would remain at Rs.45.6m. Therefore on the before write off net profit and expanded equity (Conversion of Warrants) capital of Rs.127m the FY07 EPS would remain at Rs 4.1. The stock is trading at PE multiple of 18.4 to our adjusted FY07E EPS.
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Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.
