indiabull
28-11-2007, 07:09 AM
Stone India
Incorporated in 1931 and a part of well known Duncan Goenka group, Stone India Ltd (SIL) is a multi-product engineering company serving the Indian railroad industry for over seven decades. Being a pioneer in the brake systems and train lighting alternators, SIL is the undisputed leader in locomotive brakes systems and has a huge range of mechanical and electrical products for the railroad industry. It also manufactures few critical products for defence tanks and armoured vehicles. Currently, it generates about 90% of its revenue from the railways and has a market share of about 25-30%. Broadly, the company has segmented its product profile into the following three categories:
Carriage Business Group: SIL manufactures and deals in pneumatic equipments like distributor valves, brake cylinders, angle cocks, dirt collectors, hoses, slack adjuster apart from compact air braking system of carriage & freight stock for railway rolling stock operation. Recently it has developed its own patented beam mounted brake system for all types for freight wagons.
Locomotive Business Group: Produces & markets brake systems, centrifugal lube oil filter and regenerating type 'Vaporid' air dryers for Diesel and Electric Locomotives. In addition, it specializes in conversion of vacuum to air brake system in locomotives.
Train Power Business Group: Manufactures and supplies brushless alternators, electronic rectifier regulators and pantographs. Alternators are actually power generators used in coaches and pantographs are used in the electric locomotives & electric multiple units (EMUs) to draw power from the overhead traction.
To diversify its product portfolio, it has set up a greenfield facility at Nalagarh, Himachal Pradesh, which is likely to go on stream in this fiscal itself. Besides, it intends to put up a third plant somewhere in the South. As the company manufactures sophisticated and critical components involving high precision and accuracy, it has collaborated with several global industry leaders for its high technology products. Faiveley S.A. of France, SAB of Sweden, WABTEC Corporation of USA, SAB WABCO of France etc are some to name a few. Of late, SIL has also ventured into railway electronics with the introduction of a slew of high value power electronic products like inverters, converters and power supply system for coaches, locomotives, EMUs and metros. Accordingly, it has launched a technical collaboration with SMA Technologies AG, Germany for producing 180 kilovolt-amps (KVA) auxiliary power converters for railways. The other product of this new division viz. end of train telemetry device has also been approved by the railways. Earlier, SIL had entered into an exclusive understanding with ZRJC, Guangzhou, China for manufacturing & supply of air conditioning system along with microprocessor based control systems for passenger coach rolling stock and metro coaches.
In order to de-risk its business model, SIL is looking to increase its revenue from projects & services for which it is executing a huge order for refurbishment and upgradation of 1115 wagons from the Ministry of Defence. Notably, it is the only private company selected to execute this order, which was earlier done by the Indian Railways. Moreover, the company has already entered the Asian rail market and has appointed Telewira Tegas SDN BHD, Malaysia, as an exclusive agent for turnkey project work relating to freight car, passenger coach and locomotive upgradation and maintenance for Malaysian Railways. It has also been exporting air brake systems to an internationally reputed wagon manufacturer in China. And importantly, SIL has recently partnered with the Sumitomo group of Japan to gain technical know-how for manufacturing of air springs which are technically far superior to the existing mechanical suspension system.
To conclude, the ongoing major restructuring of Indian Railways and large capacity expansion of its network augurs well for SIL which is well poised to take on all the future opportunities in line with its strength & core competencies. Hence, SIL will continue to grow at a scorching pace in future as well. For H1FY08, sales grew by 60% to Rs.41 cr. and net profit increased by 70% to Rs.6.90 cr. Despite such excellent performance, its share price has tumbled down sharply from a high of Rs.220 in December 2006 to the current level. This may be because of the delay in commencement of its new plant in HP and also due to the fact that in April 2006 warrants holders didn’t exercise their right to convert 14,32,000 warrants even at a low of price of Rs.97 after the allotment in 2005. For FY08, the company is expected to register sales of Rs.100 cr. with PAT of Rs.13.50 cr. i.e. EPS of Rs.18 on its equity of Rs.7.60 cr. Investors are strongly recommended to buy at current levels with a price target of Rs.220 (i.e. 60% appreciation) in a year’s time.
Incorporated in 1931 and a part of well known Duncan Goenka group, Stone India Ltd (SIL) is a multi-product engineering company serving the Indian railroad industry for over seven decades. Being a pioneer in the brake systems and train lighting alternators, SIL is the undisputed leader in locomotive brakes systems and has a huge range of mechanical and electrical products for the railroad industry. It also manufactures few critical products for defence tanks and armoured vehicles. Currently, it generates about 90% of its revenue from the railways and has a market share of about 25-30%. Broadly, the company has segmented its product profile into the following three categories:
Carriage Business Group: SIL manufactures and deals in pneumatic equipments like distributor valves, brake cylinders, angle cocks, dirt collectors, hoses, slack adjuster apart from compact air braking system of carriage & freight stock for railway rolling stock operation. Recently it has developed its own patented beam mounted brake system for all types for freight wagons.
Locomotive Business Group: Produces & markets brake systems, centrifugal lube oil filter and regenerating type 'Vaporid' air dryers for Diesel and Electric Locomotives. In addition, it specializes in conversion of vacuum to air brake system in locomotives.
Train Power Business Group: Manufactures and supplies brushless alternators, electronic rectifier regulators and pantographs. Alternators are actually power generators used in coaches and pantographs are used in the electric locomotives & electric multiple units (EMUs) to draw power from the overhead traction.
To diversify its product portfolio, it has set up a greenfield facility at Nalagarh, Himachal Pradesh, which is likely to go on stream in this fiscal itself. Besides, it intends to put up a third plant somewhere in the South. As the company manufactures sophisticated and critical components involving high precision and accuracy, it has collaborated with several global industry leaders for its high technology products. Faiveley S.A. of France, SAB of Sweden, WABTEC Corporation of USA, SAB WABCO of France etc are some to name a few. Of late, SIL has also ventured into railway electronics with the introduction of a slew of high value power electronic products like inverters, converters and power supply system for coaches, locomotives, EMUs and metros. Accordingly, it has launched a technical collaboration with SMA Technologies AG, Germany for producing 180 kilovolt-amps (KVA) auxiliary power converters for railways. The other product of this new division viz. end of train telemetry device has also been approved by the railways. Earlier, SIL had entered into an exclusive understanding with ZRJC, Guangzhou, China for manufacturing & supply of air conditioning system along with microprocessor based control systems for passenger coach rolling stock and metro coaches.
In order to de-risk its business model, SIL is looking to increase its revenue from projects & services for which it is executing a huge order for refurbishment and upgradation of 1115 wagons from the Ministry of Defence. Notably, it is the only private company selected to execute this order, which was earlier done by the Indian Railways. Moreover, the company has already entered the Asian rail market and has appointed Telewira Tegas SDN BHD, Malaysia, as an exclusive agent for turnkey project work relating to freight car, passenger coach and locomotive upgradation and maintenance for Malaysian Railways. It has also been exporting air brake systems to an internationally reputed wagon manufacturer in China. And importantly, SIL has recently partnered with the Sumitomo group of Japan to gain technical know-how for manufacturing of air springs which are technically far superior to the existing mechanical suspension system.
To conclude, the ongoing major restructuring of Indian Railways and large capacity expansion of its network augurs well for SIL which is well poised to take on all the future opportunities in line with its strength & core competencies. Hence, SIL will continue to grow at a scorching pace in future as well. For H1FY08, sales grew by 60% to Rs.41 cr. and net profit increased by 70% to Rs.6.90 cr. Despite such excellent performance, its share price has tumbled down sharply from a high of Rs.220 in December 2006 to the current level. This may be because of the delay in commencement of its new plant in HP and also due to the fact that in April 2006 warrants holders didn’t exercise their right to convert 14,32,000 warrants even at a low of price of Rs.97 after the allotment in 2005. For FY08, the company is expected to register sales of Rs.100 cr. with PAT of Rs.13.50 cr. i.e. EPS of Rs.18 on its equity of Rs.7.60 cr. Investors are strongly recommended to buy at current levels with a price target of Rs.220 (i.e. 60% appreciation) in a year’s time.