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IMP Powers - Investment Call
Tuesday, June 12, 2007
The shares of transformer companies are in demand with most shares like Indo Tech Transformers, Bharat Bijlee and Voltamp Transformers touching 52-week highs. Within this segment, the share of IMP Powers Ltd. (IMPPL) is recommended for decent appreciation in the long-term. IMPPL is into the lucrative transformer manufacturing, the demand of which is constantly on the increase. The Government has set itself vision of 'Power for all by 2012', which will entail an investment of Rs.11,50,000 cr. in power generation, transmission and distribution leading to a huge requirement for transformers.
IMPPL was established in 1961 and has two well-established manufacturing units at Mumbai & Silvassa manufacturing entire range of electrical measuring instruments, testing equipments, distribution & power transformers. Its satisfied clientele includes all the state electricity boards, railways, and public and private sector undertakings.
IMPPL can manufacture HV & EHV power transformer up to 220 kV Class to 150 MVA. The total installed capacity is 3600 MVA. Backed by continuous in-house applied technical research and use of best quality raw materials have enabled it to comply with the latest exacting standards, both national and international. Its products are sold in Southeast and Middle East Asia, Africa, New Zealand and Australia. Exports during FY06 have pole-vaulted three times to Rs.20 cr. from Rs.6.5 cr. in the earlier year.
During the year ended 30 June 2006, its sales have advanced by 54% to Rs.67 cr. Net profit was Rs.3.7 cr. against net loss of Rs.5.7 cr. in the 15 months ended 30 June 2005. During Q3FY07, while sales advanced by 50% to Rs.27 cr., its net profit jumped by 99% to Rs.2.4 cr. For the nine months ended 31 March 2007, although sales have surged by 55% to Rs.72 cr., net profit moved up by 123% to Rs.5.9 cr.
Its equity capital is Rs.5.9 cr. and with reserves of Rs.13.4 cr., the book value of the share works out to Rs.33.
The promoters hold 45% in the equity capital. Non-promoter corporate holding is 9.5%. Stressed Assets Stabilization Fund has acquired 12.6%. The domestic institutions hold 6% leaving 26.9% with the investing public.
IMPPL continues to invest in expansion. During FY06, it invested Rs.3 cr., taking gross block to Rs.42 cr. IMPPL has been able to reduce its borrowings to Rs.66 cr. from Rs.72 cr. in FY05.
Sources close to the management say this is just the beginning of the road for IMPPL as it witnesses growing demand for its transformers and meters. With the bright prospects of the power industry, IMPPL is in the process of enhancing its production in coming years. Besides, IMPPL is sitting on huge land at Kandivli (W) in Mumbai. If it decides develop into residential/commercial complex, it will fetch crores of rupees.
IMPPL expects to garner target sales of Rs.110 cr. for the ensuing year ending 30 June 2007 with a bottom line of about Rs.8.5 cr., which will give an EPS of Rs.14.5. Riding on the boom, analysts expects sales of Rs.150 cr. in FY08 with a net profit increasing to Rs.12 cr. (EPS Rs.20). The shares of IMPPL are currently traded at just Rs.106, discounting its FY07E only 7.3 times and FY08E of Rs.20 by just 5.3 times. The industry average P/E of the electric equipment industry currently rules firm at over 30.
The shares of its peers, Indo Tech and Voltamp Transformers are quoted at a P/E of 14 and 18 on their earnings of Rs.24 and Rs.38 for FY07 respectively. Thus the shares of IMPPL are going cheap and with a reasonable P/E of 12. Investment in this share is likely to fetch decent appreciation of about 65% (Target Price: Rs.174) in 6-9 months. The 52-week high/low of the share has been Rs.126/55.
IMPPL was established in 1961 and has two well-established manufacturing units at Mumbai & Silvassa manufacturing entire range of electrical measuring instruments, testing equipments, distribution & power transformers. Its satisfied clientele includes all the state electricity boards, railways, and public and private sector undertakings.
IMPPL can manufacture HV & EHV power transformer up to 220 kV Class to 150 MVA. The total installed capacity is 3600 MVA. Backed by continuous in-house applied technical research and use of best quality raw materials have enabled it to comply with the latest exacting standards, both national and international. Its products are sold in Southeast and Middle East Asia, Africa, New Zealand and Australia. Exports during FY06 have pole-vaulted three times to Rs.20 cr. from Rs.6.5 cr. in the earlier year.
During the year ended 30 June 2006, its sales have advanced by 54% to Rs.67 cr. Net profit was Rs.3.7 cr. against net loss of Rs.5.7 cr. in the 15 months ended 30 June 2005. During Q3FY07, while sales advanced by 50% to Rs.27 cr., its net profit jumped by 99% to Rs.2.4 cr. For the nine months ended 31 March 2007, although sales have surged by 55% to Rs.72 cr., net profit moved up by 123% to Rs.5.9 cr.
Its equity capital is Rs.5.9 cr. and with reserves of Rs.13.4 cr., the book value of the share works out to Rs.33.
The promoters hold 45% in the equity capital. Non-promoter corporate holding is 9.5%. Stressed Assets Stabilization Fund has acquired 12.6%. The domestic institutions hold 6% leaving 26.9% with the investing public.
IMPPL continues to invest in expansion. During FY06, it invested Rs.3 cr., taking gross block to Rs.42 cr. IMPPL has been able to reduce its borrowings to Rs.66 cr. from Rs.72 cr. in FY05.
Sources close to the management say this is just the beginning of the road for IMPPL as it witnesses growing demand for its transformers and meters. With the bright prospects of the power industry, IMPPL is in the process of enhancing its production in coming years. Besides, IMPPL is sitting on huge land at Kandivli (W) in Mumbai. If it decides develop into residential/commercial complex, it will fetch crores of rupees.
IMPPL expects to garner target sales of Rs.110 cr. for the ensuing year ending 30 June 2007 with a bottom line of about Rs.8.5 cr., which will give an EPS of Rs.14.5. Riding on the boom, analysts expects sales of Rs.150 cr. in FY08 with a net profit increasing to Rs.12 cr. (EPS Rs.20). The shares of IMPPL are currently traded at just Rs.106, discounting its FY07E only 7.3 times and FY08E of Rs.20 by just 5.3 times. The industry average P/E of the electric equipment industry currently rules firm at over 30.
The shares of its peers, Indo Tech and Voltamp Transformers are quoted at a P/E of 14 and 18 on their earnings of Rs.24 and Rs.38 for FY07 respectively. Thus the shares of IMPPL are going cheap and with a reasonable P/E of 12. Investment in this share is likely to fetch decent appreciation of about 65% (Target Price: Rs.174) in 6-9 months. The 52-week high/low of the share has been Rs.126/55.
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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.
