dkishore
26-11-2007, 05:49 AM
* Revathi Equipments (Rs.1101) - Investors can look at following points for investment in this company:
1) The company is operating in high growth areas like mining & construction equipments, where in the future outlook is very encouraging.
2) The growth initiatives undertaken in the last two years and its continued focus thereon during this year should start yielding results from the current 2nd half onwards.
3) In construction equipment, the company makes the wider range of concrete equipments comprising batching plants that prepare the concrete mix, transit mixers that transport the concrete mix and Concrete pumps similar to Schwing Stetter – a leader in the field. Greaves Cotton is another manufacturer in India but the Revathi range is much wider to suit the Indian requirements where by the company expects strong growth in sales and profits over the next few years. In the current year, sales from this division likely to be Rs.30 cr., which may go up sharply to Rs.125 cr. by next year as its new plant goes on stream in March’08. Its projected sales for FY09 is likely to be Rs.250 cr. and the initial feedback from the customers is highly encouraging.
4) Its association with Bucyrus International, USA in developing sizes of drills which will increase its range of offerings. These drills have undergone thorough testing and have been demonstrated to different customers. Bucyrus is confident of sourcing them from the company. It has export orders on hand worth Rs.22 cr. which is being executed in this year only. The global demand for these drills is strong and expected to grow in coming years. The management expects to increase their sales substantially leading to growth in profitability. This will reduce its dependence on Coal India.
5) It has invested surplus funds into other companies and mutual funds, wherein it is said to have realized gains of Rs.12 cr.
6) Morgan Stanley Research Europe has recently come out with a research report on Atlas Copco, wherein it mentions that its parent company expects the contribution from India to go up by 50% in group’s total sales, which is a very encouraging statement. Blast hole drills are essential for the production of coal, iron ore, lignite etc. The major requirements come from coal mines. Hence Revathi will also benefit from this expected growth, as the offtake from Bucyrus, too, will go sharply in line with the statement of Atlas Copco. The global demand is very strong and Atlas Copco is unable to meet this demand, which will benefit Revathi Equipments immensely.
7) Associate Companies: The company made two strategic investments last year and expects both these companies to post a robust growth.
(a)Monarch Chemicals Pvt. Ltd., Mumbai, is a company engaged in speciality chemicals and Revathi acquired a 26% stake in it. Monarch has carried out substantial expansion, the benefit of which will come in this year.
(b) Potential Service Consultants Pvt. Ltd. is a Bangalore based Engineering Design Services company providing total engineering solutions to the building & construction sector. Revathi has acquired a 40% stake in the company and has agreed to acquire another 11% stake on pre-determined basis by July 2009. This company is largely Bangalore centric with some operations in Hyderabad and Chennai. Its order position is more than Rs.150 cr. This itself can become a big story in future.
There can be good unlocking of values in both these companies if they go in for an IPO or for private equity in future.
Revathi reports a standalone EPS of around Rs.55 in the current year, which can touch around Rs.100 with other income if realized and income from associate companies. Its standalone EPS is expected to go up sharply to about Rs.90/100 by next year. At Rs.1100, its stock valuation looks very attractive compared to Atlas Copco, wherein the full year EPS may not exceed Rs.40 in the current year and around Rs.55/60 next year.
About two years back, when the Sensex was around 9000, Revathi was quoting around Rs.1200. Hence investors are getting the stock at Sensex value of 9000, when it should have doubled in keeping with the market sentiment. Long-term investors can keep accumulating this stock for good long-term growth over the next few years as it can touch Rs.1400 by April 2008 and Rs.2000 level by April 2009.
1) The company is operating in high growth areas like mining & construction equipments, where in the future outlook is very encouraging.
2) The growth initiatives undertaken in the last two years and its continued focus thereon during this year should start yielding results from the current 2nd half onwards.
3) In construction equipment, the company makes the wider range of concrete equipments comprising batching plants that prepare the concrete mix, transit mixers that transport the concrete mix and Concrete pumps similar to Schwing Stetter – a leader in the field. Greaves Cotton is another manufacturer in India but the Revathi range is much wider to suit the Indian requirements where by the company expects strong growth in sales and profits over the next few years. In the current year, sales from this division likely to be Rs.30 cr., which may go up sharply to Rs.125 cr. by next year as its new plant goes on stream in March’08. Its projected sales for FY09 is likely to be Rs.250 cr. and the initial feedback from the customers is highly encouraging.
4) Its association with Bucyrus International, USA in developing sizes of drills which will increase its range of offerings. These drills have undergone thorough testing and have been demonstrated to different customers. Bucyrus is confident of sourcing them from the company. It has export orders on hand worth Rs.22 cr. which is being executed in this year only. The global demand for these drills is strong and expected to grow in coming years. The management expects to increase their sales substantially leading to growth in profitability. This will reduce its dependence on Coal India.
5) It has invested surplus funds into other companies and mutual funds, wherein it is said to have realized gains of Rs.12 cr.
6) Morgan Stanley Research Europe has recently come out with a research report on Atlas Copco, wherein it mentions that its parent company expects the contribution from India to go up by 50% in group’s total sales, which is a very encouraging statement. Blast hole drills are essential for the production of coal, iron ore, lignite etc. The major requirements come from coal mines. Hence Revathi will also benefit from this expected growth, as the offtake from Bucyrus, too, will go sharply in line with the statement of Atlas Copco. The global demand is very strong and Atlas Copco is unable to meet this demand, which will benefit Revathi Equipments immensely.
7) Associate Companies: The company made two strategic investments last year and expects both these companies to post a robust growth.
(a)Monarch Chemicals Pvt. Ltd., Mumbai, is a company engaged in speciality chemicals and Revathi acquired a 26% stake in it. Monarch has carried out substantial expansion, the benefit of which will come in this year.
(b) Potential Service Consultants Pvt. Ltd. is a Bangalore based Engineering Design Services company providing total engineering solutions to the building & construction sector. Revathi has acquired a 40% stake in the company and has agreed to acquire another 11% stake on pre-determined basis by July 2009. This company is largely Bangalore centric with some operations in Hyderabad and Chennai. Its order position is more than Rs.150 cr. This itself can become a big story in future.
There can be good unlocking of values in both these companies if they go in for an IPO or for private equity in future.
Revathi reports a standalone EPS of around Rs.55 in the current year, which can touch around Rs.100 with other income if realized and income from associate companies. Its standalone EPS is expected to go up sharply to about Rs.90/100 by next year. At Rs.1100, its stock valuation looks very attractive compared to Atlas Copco, wherein the full year EPS may not exceed Rs.40 in the current year and around Rs.55/60 next year.
About two years back, when the Sensex was around 9000, Revathi was quoting around Rs.1200. Hence investors are getting the stock at Sensex value of 9000, when it should have doubled in keeping with the market sentiment. Long-term investors can keep accumulating this stock for good long-term growth over the next few years as it can touch Rs.1400 by April 2008 and Rs.2000 level by April 2009.