CM Telefolio ++++++

Spinning profits

India’s largest textile machinery manufacturer is currently on a strong growth path

Buy Lakshmi Machine Works

BSE Code 500252

NSE Code LAXMIMACH

Bloomberg LMW@IN

Reuter LKMC.BO

52-week High/Low Rs 2920 / Rs 1725

Current Price Rs 2610 (as on 28th February 2014)

Lakshmi Machine Works is a leading Textile Machinery Manufacturer in India and one among the three in the world to produce the entire range of Spinning Machinery. It caters to the domestic market as well as Exports the products to Asian and Oceanic regions.

December 2014 quarter results

For the quarter ended December 2013, it registered a solid 46% rise in sales to Rs 629.64 crore. OPM jumped 300 basis points to 13.2% which saw OP rising 89% to Rs 83.37 crore.

Other income grew 36% to Rs 20.56 crore and interest cost grew 53% to Rs 17 lakh. As depreciation fell 14% to Rs 26.07 crore, PBT jumped 169% to Rs 77.69 crore.

EO stood at Rs 33 lakh against nil thus PBT after EO stood at Rs 77.36 crore, up 168%.

Tax grew 156% to Rs 24.96 crore after which PAT zoomed 174% to Rs 52.40 crore.

Nine month results

For the nine months ended December 2013, sales grew 14% to Rs 1607.54 crore. OPM improved 90 basis points to 12.7%. Thus OP was up 22% to Rs 204.93 crore.

Other income grew 46% to Rs 70.23 crore and interest cost grew 26% to Rs 50 lakh. As depreciation fell 14% to Rs 75.73 crore, PBT jumped 57% to Rs 198.94 crore.

EO loss was Rs 6.65 crore against nil. Thus PBT after EO grew 57% to Rs 198.94 crore.

Provision for tax grew 66% to Rs 62.30 crore, after which PAT grew 46% to Rs 129.99 crore.

A worldwide reputed company

LMW has been consistently at the forefront of technological advancements in textile machinery. Over a period of time, the company has gained a worldwide reputation for its state-of-the-art technology and high quality standards. LMW has a major role as a totally integrated spinning system manufacturer.

Spinning machines from LMW contributes to a large extent in keeping Indian production costs down and quality standards up.

Continuous upgradation of manufacturing technology and the ability to provide complete range of contemporary textile machinery at a competitive price makes LMW a natural partner of choice.

Prospects are good

During the year despite the odds, stable cotton prices and increased yarn exports to china has substantially improved the profitability of many textile mills in India facilitating higher capex from them.

Numerous government measures like removal of excise duty on readymade garments, extension of TUF scheme to the 12th Five Year Plan period, enhanced fund allocation for textile parks and inclusion of textiles in the Focus Product Scheme would improve the financial strength of the textile sector.

Also various State Governments in India have announced attractive schemes for establishment of Textile Spinning units as green field projects.

Presence of an ever-growing fashion-conscious population compels the textile mills to upgrade their production facilities continuously. This is an opportunity for companies to upgrade the manufacturing technology and the ability to provide the complete range of contemporary textile machinery at a competitive price. This makes LMW a natural partner of choice.

India is becoming the global hub of low cost manufacturing for engineering goods. The capability of LMW to manufacture new and improved variants of the CNC machines, HMC and VMC machines will enable it to grab a sizeable market share in the years to come.

Valuation

For FY’14, we expect the company to register consolidated sales and PAT of Rs 2220.19 crore and Rs 169.91 crore respectively. For FY’15, we expect the company to register net sales and PAT of Rs 2575.42 crore and Rs 213.63 crore. This gives an EPS of Rs 154.8 for FY’14 and Rs 189.6 for FY’15. At current market price of Rs 2610, the share trades at 13.8 times expected FY’15 earnings.

Winds to turn favourable

The company has taken number of initiatives to position itself well once the home appliance market picks up

Buy Whirlpool of India

BSE Code 500238

NSE Code WHIRLPOOL

Bloomberg WHIRL@IN

Reuter WHIR.BO



Whirlpool of India is a 75% subsidiary of the Whirlpool Corporation, the world's #1 manufacturer and marketer of major home appliances.

Whirlpool Corporation is the world's leading global manufacturer and marketer of major home appliances, with annual revenues of approximately $19 billion in 2013, 69,000 employees, and 59 manufacturing and technology research centers around the world. The company markets Whirlpool, Maytag, KitchenAid, Jenn-Air, Amana, Brastemp, Consul, Bauknecht and other major brand names to consumers in nearly every country around the world.

Whirlpool of India’s ability to leverage on its parent's product and marketing expertise to launch new products / undertake innovations on existing products in the Indian market puts it in an advantageous position.

Back on growth track

For quarter ended Dec 2013, the company reported a standalone sales turnover of Rs 672.77 crore, up 9% against odds of the overall weak trend in the home appliances industry. OPM increased 172 bps to 5.5% which took OP up 58% to Rs 37.06 crore.

Other income was Rs.7.93 crore, up 67% and interest cost fell 71% to Rs 27 lakh. As Depreciation increased 5% to Rs 15.71 crore, PBT grew 135% to Rs 29.01 crore. Tax expense increased 245% to Rs.7.76 crore, after which net profit zoomed 111% to Rs.21.25 crore.

For the nine-month period ended December 30, 2013, WPL reported sales of Rs 2168.31 crore, up 1%. Net Profit too declined 15% to Rs.87.37 crore.

Number of initiatives in place to grow in the face of competition

The company is revamping its product range, with launches of improved versions of Direct Cool Refrigerators, higher end Frost Free Refrigerators, 360 Degree Bloom, and ACE Semi-automatic and Front-loading Washing Machines.

It is also communicating a new marketing message, conveying a premium/international image instead of focusing on just product features and Indian celebrities.

The company is also improving its distributor incentive structure to ensure improved trade margins.

It is also driving operating efficiencies in manufacturing, sourcing, supply chain and working capital to sustain its low cost advantage over its competitors.

Further, the company is reducing the product revamp life cycle (earlier a model used to revamped every 3 years, which has now been compressed to 18 months) thereby driving growth. The management has indicated that it has begun rolling out new products from July 2013 and by the end of FY14, most of its new products would be available in the market.

Focus on cost effectiveness is paying off

The company has, since the past two years, focused on cost control and as a result it enjoys the highest margins in the industry and also within Whirlpool operations globally, despite high inflation and intense competition.

In view of demand being low, the company continues to focus on Cost and Cash. It is taking several actions to improve volume and category mix. All new product launches are made to improve market share and volume. Relentless pressure is being applied on controlling discretionary expenditure and working capital management. Cash generation from operations remains strong even in this volatile environment, enabling the company to finance planned investments internally without recourse to external debts. Indeed, the company has invested over Rs 80 crore in platform upgrades in FY 2013 to produce more energy efficient and superior performing appliances.

Whirlpool is also focused on improvement in margin by improving product-mix and maximizing fixed cost absorption and productivity gains through economies of scale.

New launches to gain market share

Despite tough economic conditions, the company has been able to outperform the industry on the back of successful product launches. The company had launched a slew of new products across 6 categories - Refrigerators, Washing Machines, Air Conditioners, Microwave, Water Purifiers and Built-in kitchen appliances. A key feature of the product launches is the emphasis on premium and super premium segments, an area that the company sees as an opportunity and on which it will allocate resources in the quarters to follow.

The new product line-up is a consequence of incisive consumer insights drawn from extensive market research and testing. Combined with Whirlpool's intuitive and intelligent '6th Sense' technology, the new range of products contains a high degree of consumer-relevant innovation and comes with Whirlpool's assurance of high performance, design and quality. The new portfolio supported by investment in advertising and promotion, enabled the company to expand distribution and grow market share.

Alternate channels of distribution were explored for Water Purifier. While retaining presence in the appliance trade, the company leveraged the service channel to introduce a Direct-to-Home business model.

Brand presence is being augmented in the digital space, where the reach and involvement of premium end consumers is high. This medium will be leveraged innovatively to receive a higher share of advertising rupee. The first step in this direction has been to revamp the brand's website and enable e-commerce for a limited set of products, primarily accessories and consumables.

Price increase during the current year to benefit going forward

In current year price increases have been taken across most products in order to pass-on the escalation in input costs, due to rupee depreciation.

The management expects volumes to revive FY15 onwards with revival in the economy

The management is confident that with revival in the Indian economy and subsequently revival in its volumes, Whirlpool will be well-positioned to grow notably as it focuses on new product offerings and cost leadership coupled with improvement in working capital.

Gearing itself to capitalise on low penetration levels in India

India remains a highly underpenetrated market for Consumer Durables. Key categories like Refrigerators, Washing Machines, Air Conditioners and Microwave Ovens have penetration levels of 19.3%, 7.3%, 3% and 1%, respectively. Rising per capita incomes, increasing urbanization rates and shift in favour of nuclear families will drive penetration levels for Consumer Durables over the long term.

Whirlpool India has a strong distribution presence, with a network of 3,500 dealers across ~150 towns. It plans to increase its reach in tier-2, 3, and 4 towns, which should help drive volumes from new customers. It is working on improving its distributor incentive structure to ensure that trade margins are in-line (currently lower) with other peers.

It hired BCG to restructure its distribution model and is in the process of implementing the new model in a phase-wise manner. The new model should be fully operational by October 2014.

Valuation

In FY 2014 we expect the company to register sales and net profit of Rs 2845.30 crore and Rs 118.98 crore. On equity of Rs 126.87 crore and face value of Rs 10, EPS works out to Rs 9.4. This EPS is likely to rise to Rs 11.8 in FY 2015. The share price trades around Rs 193. While P/E on FY 2014 projected EPS works out to 20.5, it falls to 16.4 on FY 2015 projected EPS.

Radiating encouraging signals

The company is a leading manufacturer of radiators for auto and earthmoving industries, which are likely to get back on decent growth track in FY 2015

Buy Banco Products (India)

BSE Code 500039

NSE Code BANCOINDIA

Bloomberg BNCO@IN

Reuter BNCO.BO


Current Price Rs 54 (as on 21st February 2014)

Banco Products (India) has been in the business of manufacturing Radiators since last five decades. These products are considered critical components in sealing and cooling applications of Automotive, Power, Earth moving and Industrial engines.

The Gasket Divisions of the company was transferred to its Own Subsidiary Company viz. Banco Gaskets (India) Limited w.e.f. 31.03.2012. Banco Products also controls Nederlandse Radiateuren Fabriek B.V. Netherlands, and its subsidiaries, which are engaged in the business of manufacturing and distribution of heat transfer products.

Foreign Promoters hold 37.63% stake in the company and the Indian promoters hold 25.27% stake. Thus total promoter’s stake is 67.89%.

Wide range of applications

The company cooling systems products (Radiators, Charge Air Coolers, Oil Coolers, Engine Cooling Assemblies, Product Configuration) find application in various fast growing industries. They are: 4×4's / SUV's, On Highway –

Trucks / Buses, Off-Highway / Mining Trucks, Tractors and Forest Machinery, Construction / Material Handling Equipment, Traction Locomotives, Gensets – 7.5 to 200 Kva, Gensets – 200 to 3000 Kva, Wind Mills, Compressors and Motorcycles / Micro Cars.

Sealing gasket products find applications in Heavy duty turbocharged diesel and CNG engines for Buses and Trucks, Agricultural and Forestry equipment, High horsepower traction Locomotives, Compressors, Smaller diesel engines for Power Generation equipment, Passenger Car petrol and diesel engines, gaskets for Chemical and Process Industries, Motorcycles and Scooters and Water Pumps and Fuel Injection equipment

Leading position n radiators

In the radiators business Banco is a leading manufacturer and exporter of radiators ranging from high performance radiator, auto radiator, car radiator, industrial radiators, intercoolers ranging from Air to Water intercooler, Air to Air intercooler, custom designed inter cooler, cabin heater and replacement cores for various Automotive, Industrial and Agricultural applications.

The company supplies to most of the auto and earthmoving OEM’s within India and have a ongoing supplier relationships with both Indian OEMs as well as for Indian affliates of Japanese/European MNC for many of their future projects.

The company’s list of clients include leaders like Bharat Earth Movers Limited, Yamaha, Bajaj, Honda, TVS, Ashok Leyland, Mahindra and Mahindra, Massey Ferguson, TAFE (AGCO), Cummins, CAT, Kirloskar Oil Engines, JCB, John Deere, Bombardier, Indian railways, MNC, Turkey amongst others.

The company caters to radiator replacement and car radiator markets with extensive range of radiators covering popular German, French and Japanese cars.

It is also India’s largest exporter of aftermarket radiators to the Europe, with a growing presence in the North American/Middle-Eastern/African and South American markets. As its products are designed to meet OE standards, it provides exceptional quality and product range for the aftermarket repair trade.

Second largest automotive gasket manufacturer in the country

In Gaskets business (now operated through subsidiary) Banco is India’s second largest automotive gasket manufacturer in the country, with revenues diversified across domestic OEMs, replacement and export markets. The domestic OEM segment is the largest contributor to the

company’s gasket revenues. It is the sole supplier of gaskets to Maruti Suzuki and also supplies to other leading players such as Hero Honda Motors, Bajaj Auto., and Yamaha, besides supplying to the TVS group amongst others.

December 2013 quarter sales rise 16% and PAT soar 289%

For the quarter ended December 2013, it registered a 16% rise in its consolidated sales to Rs 263.94 crore.

OPM improved 430 basis points from 8.8% to 13.1% taking OP up 73% to Rs 34.62 crore.

Other income soared from Rs 31 lakh to Rs 4.44 crore and interest cost was up just 8% to Rs 3.84 crore. After providing for depreciation (up 5% to Rs 8.20 crore), PBT grew 201% to Rs 27.02 crore.

Provision for taxation was up 36% to Rs 4.27 crore, after which PAT soared 289% to Rs 22.75 crore.

Nine month consolidated results – sales are up 13% and PAT is up 46%

For the nine months ended December 2013, consolidated sales grew 13% to Rs 880.09 crore. OPM improved from 12.7% to 14.4% after which OP grew 27% to Rs 126.38 crore.

Other income soared 285% to Rs 13.35 crore and interest cost grew 19% to Rs 11.53crore. After providing for depreciation (up 13% to Rs 24.48 crore), PBT grew 45% to Rs 103.72 crore.

Provision for taxation was up 42% to Rs 23.24 crore, after which PAT jumped 46% to Rs 80.48 crore.

Outlook

The company is actively looking to develop new OEM Customers overseas. Due to low cost base and good quality systems, overseas OEMs present a very good opportunity.

That apart, the company is expanding the usage of its products in new applications within existing sectors also.

Apart from the revival in the automobile sector, the company sees better opportunities in earthmoving, infrastructure development and power sector.

In addition, there is an increased focus on achieving greater efficiency through cost reduction initiatives and better supply chain management.

It is expected that the transfer of Gasket Division to its Own Subsidiary will get focused attention of respective management to both main lines of Products viz. Radiators and Gaskets.

The company has consistently strived to improve its Technology skills in its both manpower and physical assets. Investment in this area has yielded benefits in the past and will do so in future.

After a sluggish FY 2014, automobile and earthmoving industries are expected to recover in FY 2015.

Valuation

In FY 2014 we expect the company to register consolidated sales and net profit of Rs 1162.70 crore and Rs 95.50 crore respectively. On an equity of Rs 14.30 crore and face value of Rs 2 per share, EPS works out to Rs 13.4. The share price trades at Rs 54. P/E works out to 4.

Caters to a good niche

Most of the equipment produced by the company are used in chemical and pharmaceutical industries

Buy GMM Pfaudler

BSE Code 505255

NSE Code Not listed

Bloomberg GMM@IN

Reuter GMMP.BO



GMM Pfaudler was incorporated in 1962 as Gujarat Machinery Manufacturers (GMM). In 1987 Pfaudler Inc., USA subscribed to 40% to form a joint venture. Pfaudler Inc. further increased their stake to 51% in 1999 and the name of the company was changed to GMM Pfaudler Limited. Now Robbins & Myers Inc., USA which is listed on the New York Stock Exchange owns Pfaudler Inc. Currently Pfaudler controls 76.66% equity stake in GMM Pfaudler.

Robbins & Myers, Inc. is a leading supplier of engineered equipment and systems for critical applications in global energy, industrial, chemical and pharmaceutical

markets. Robbins & Myers is headquartered in Dayton, Ohio, USA with primary facilities in 14 countries.

Caters to niche segment

The Company has a state of the art manufacturing facility spread over a 20 acre plot of land located at Karamsad in Gujarat State, about 45 km from Vadodara. The Company enjoys the leadership position in design, manufacture and marketing of glass-lined reactor vessels, storage tanks, valves and pipe & fittings.

The Company also undertakes design and fabrication of specialized chemical process equipment in Alloy steel. It has created for itself a niche position in the chemical process equipment market for proprietary products manufactured by it such as Agitated Nutsche Filters & Filter Dryers, Wiped Film Evaporators, EconoMix Mixing Systems, Thermal Control Units and PTFE lined pipes & fittings. Its access to the Mavag&146;s high end technology for top driven Spherical Dryers, Agitated Nutsche Filters & Filter Dryers for sterile applications and Magnetic Drive Agitators has complemented the Company’s position as a complete process solution provider for pharmaceuticals, bio pharmaceuticals, chemicals and allied segments.

GMM Pfaudler glass lined Glasteel® equipment are the long-recognized standard in the chemical process industries and are engineered and built per ASME code Section VIII Div. 1. European design codes like AD Merkblatter, Stoomwezen under the Pressure Equipment Directive (PED) are available on request. In addition the company is also certified by SELO for supplies to the People′s Republic of China.

GMM Pfaudler's Reactors range from 63 Litres to 50000 Litres and are manufactured to DIN 28136 and Glasslined as per DIN 28063. Along with its mixing systems technology the company can design the optimal agitator systems to meet all process requirements. GMM Pfaudler Glasteel® reactors offer the latest technology, world class quality and dependable service life.

Widening product range

GMM Pfaudler has moved beyond providing customers with singular glass-lined equipment to now offering complete reactor systems, which includes associated process equipment in and around the vessel.

Broadly the company’s business can now be trifurcated in to three business segments of Chemical Process Equipment, Mixing System and Filtration & Separation.

Chemical Process Equipment designs, manufactures and markets GMM Pfaudler Reactor Systems product line which primarily includes glass-lined corrosion resistant reactors, storage vessels and alloy steel equipment.

Mixing System Division designs, manufactures and markets Economix Agitators which provide solutions to customer's mixing requirements. In addition to serving

the Chemical Process Equipment Division this Division also caters to the bio-technology, mining and waste water treatment industry.

Filtration & Separation Division's primary business is design, manufacture and marketing of Agitated Nutsche Filter & Filter Dryers for separation of solids & liquid and Wiped Film Evaporators for separation of liquids & liquids. Mavag’s high end technology and products have greatly benefited this Division.

Acquisition of Mavag AG is highly value accretive in the medium-to-long term

The company had acquired 100% stake in Mavag AG in 2008 for 5 M Swiss Francs.

Mavag AG is located in Neunkirch, Switzerland. Mavag is a leading supplier of highly engineered equipment for the pharmaceutical, bioengineering and fine chemical industries.

Mavag′s product range includes the state-of-the art spherical dryer, agitated nutsche filter and filer dryers engineered for sterile application or for handling products that require high containment levels, Mavadisc and Funda Filters, and mixing systems which include magnetic drive agitators and specialized agitators suitable for fermentation for Biotech plants.

The company is in the same business line as what GMM Pfaudler is but has ready markets and reach in many Pharma players in EU and US. It has many specialized products but the cost of manufacturing them in EU is very high. Though the technology of Mavag is superior, the same cannot be used to manufacture and sell the equipment, given the high cost in EU. So the entire manufacturing of the high-end equipment will be outsourced to GMM Pfaudler in India and the finishing and other elementary work will be undertaken at Mavag. This will result in better profitability and better efficiency for Mavag and subsequently for the consolidated entity.

Its access to the Mavag's high-end technology for top driven Spherical Dryers, Agitated Nutsche Filters & Filter Dryers for sterile applications and Magnetic Drive Agitators has complemented GMM Pfaudler’s position as a complete process solution provider for pharmaceuticals, bio pharmceuticals, chemicals and allied segments.

Chemical and Pharma are key user industries

Most of the equipment produced by the company are used in chemical and pharmaceutical industries.

While the Chemical industry in India grew as a whole above 10% in 2013 and it is also expected to grow at a CAGR of above 10% in future.

The Pharmaceutical industry grew by about 15% during the year 2013 and it is expected to grow at a CAGR of 17% till 2016. Heightened competition and a greater

presence of branded generics are putting greater pricing pressures on the industry. The low priced segment of the market has almost doubled its share over the last four years. The continued focus on India as a base for bulk drugs, both of a generic nature and increasingly for specialty patent protected drugs chemicals, the industry is expected to continue its growth momentum in the near term.

With investments by established companies, both Indian and multi nationals, as well as from new companies, the Company expects to see broadening of its customer base as well as increase in revenues from its existing customers.

Financials make a strong comeback

After a lack-luster FY2013 when the company's sales fell 17% to Rs 167.5 crore and net profit grew 6% to Rs 9.68 crore, the company is on a strong growth curve in the current year.

For quarter ended December 2013, sales jumped 51% to Rs 54.95 crore. Improvement tin OPM from 8.5% to Rs 13.3% led to 115% rise in net profit to Rs 4.11 crore.

For nine-months ended December 2013, sales increased 16% to Rs 144.09 crore and after rise in OPM from 9.4% to 11.8%, net profit rose 31% to Rs 9.40 crore.

Ample opportunities

New markets due to migration of chemical business into India from the western world continue to be an opportunity for the company’s products. In addition to the inclusion of Mavag products the company has potential for greater share of the customer spend. In addition to the growth in the chemical industry, the capital spend in fertilizer, petrochemical, power, bio technology is expected to offer opportunities for growth.

The company makes specialized equipments largely used in Pharma, Specialty chemicals and Agro-chemical industries. Clarity on healthcare reforms in the USA has reignited investment in pharma industry in India. Agrochemical industry is also doing well due to high food prices globally which is leading to increased demand for agrochemicals and in turn higher investment in the industry.

Several initiatives taken by the company in absorption of Mavag AG’s technology, bringing Mavag's high end products to Indian customers and upgrading the facility for Non glasslined alloy products is expected to further increase business opportunity for the company.

There is more interest in the overseas market for the company’s equipment. The management of the company is confident that with the improvement in the global economy, the company will be well poised to take advantage of the improved export markets as well especially for its proprietary products.

With multiple code accreditations that allow its products to be sold overseas in markets in USA, Europe and China, the company is poised to exploit the export markets well especially due to rupee depreciation which will make exports from India more competitive.

Valuation

For FY 2014 we expect the company to register sales and net profit of Rs 195.29 crore and Rs 12.35 crore respectively. On a tiny equity of Rs 2.93 crore and face value of Rs 2 per share, EPS works out to Rs 8.4.

The share price trades at Rs 91. P/E works out to 10.8.

--

On a steady growth track

The company has strong brands in print media and sound balance sheet

Buy HT Media

BSE Code 532662

NSE Code HTMEDIA

Bloomberg HTML@IN

Reuter HTML.BO



HT Media found its beginning in 1924 when its flagship newspaper, Hindustan Times was inaugurated by Mahatma Gandhi. HT Media has today grown to become one of India's largest media companies.

It produces Hindustan Times (English newspaper) and Hindustan (Hindi newspaper through a subsidiary Hindustan Media Ventures Limited). Hindustan Times is the choice for nearly 3.7 million readers across India, who turn to it daily for news, information, analysis and entertainment. Hindustan, the group's Hindi daily, continues to be the second-largest daily in the country. Both dailies enjoy a strong brand recognition among readers as well as advertisers.

In addition to Hindustan Times, HT Media also publishes a national business newspaper, Mint. Mint is a one-of-its-kind newspaper in the sense that the company has an exclusive agreement with the Wall Street Journal to publish Journal-branded news and information in India. Mint is today the second-largest business newspaper

in India with presence in the key markets of Delhi, Mumbai, Chennai, Bengaluru, Chandigarh, Pune, Kolkata and Ahmedabad.

HT Media has also made its foray into electronic media. Diversifying its ambit of operations, the company in a consulting partnership with Virgin Radio, has launched the FM radio channel - Fever 104. Currently available in Delhi, Mumbai, Bengaluru and Kolkata, Fever 104 has established a strong presence as being one of the most vibrant channels on air.

Internet businesses of HT Media incorporated under Firefly e-ventures, operate leading web portals Hindustantimes.com and livemint.com in the general and business news categories respectively. The company's job portal Shine.com which has received high appreciation from consumers and industry for its innovative design and usability crossed 7 million registrations. The company also has an education portal www.HTCampus.com aimed at students passing out of school and college to help them take the right decision about their higher education.

December 2013 quarter results – highest topline and EBITDA

For the quarter ended December 2013, it registered a 6% rise in its consolidated sales to Rs 581.28 crore.

There was a 9% increase in advertising revenues of print segment to Rs 451.6 crore from Rs 414.9 crore primarily driven by increase in advertising yields and volumes.

There was an 18% increase in circulation revenues of print segment to Rs 66.5 crore from Rs 56.5 crore primarily driven by increase in realisation per copy.

OPM jumped from 16.0% to 16.3% taking OP up 8% to Rs 94.77 crore.

Other income jumped 50% to Rs 35.73 crore and interest cost rose 50% to Rs 16.43 crore. After providing for depreciation (down 9% to Rs 20.02 crore), PBT grew 20% to Rs 94.05 crore.

Provision for taxation fell 13% to Rs 19.32 crore, after which PAT grew 33% to Rs 74.73 crore.

Minority interest and profit from associate combined stood at Rs 7.71 crore (up 202%), after which consolidated net profit grew 25% to Rs 67.02 crore.

The company achieved highest topline and EBITDA this quarter, despite continued uncertainty in the macroeconomic environment.

Nine month results – sales are up 7% and PAT is up 35%

For the nine months ended December 2013, sales grew 7% to Rs 1656.86 crore. OPM improved from 13.6% to 14.3% taking OP up 12% to Rs 237.10 crore.

Other income soared 74% to Rs 120.24 crore and interest cost grew 53% to Rs 47.59 crore. After providing for depreciation (down 6% to Rs 64.19 crore), PBT grew 36% to Rs 245.56 crore.

Provision for taxation was up 21% to Rs 55.40 crore, after which PAT grew 41% to Rs 190.16 crore.

Minority interest and profit from associate combined stood at Rs17.47 crore (up 135%), after which consolidated net profit grew 35% to Rs 172.69 crore.

Maintains its leading positions

The results of the recent Indian Readership Survey (IRS) confirm the company’s strong brand salience among English and Hindi dailies.

It is now a clear No.2 in the markets of Mumbai and UP and No.1 in Uttarakhand. It has also retained its leadership positions in Delhi, Bihar and Jharkhand.

HT Mumbai continued to consolidate its No. 2 position with a Total Revenue growth of 27% and achieved operational breakeven in Q3 FY14.

Other business also grow impressively

Digital business continued to report buoyant performance. During the quarter there was a 42% increase in revenues from Digital segment to Rs 19.5 crore from Rs 13.8 crore.

Shine.com registered revenue growth of 65%.

Radio Business continued to improve its performance. It saw a 25% increase in revenues to Rs 26.7 crore from Rs 21.4 crore in Q3 FY13. EBITDA grew 166% to Rs 10.2 crore.

The management feels that Mint should see breakeven in March 2014 quarter.

HT Media inaugurated Bridge School of Management in October 2013. It launched its first 2 centers in Delhi NCR. This will provide higher education for working professionals with the aim to address the education-employment mismatch and to equip professionals with skills and practical knowledge of real business values for a global workplace.

Hefty cash position

It has a strong balance sheet capable of supporting investments in growing businesses whilst exploring new opportunities. It has net cash of Rs 746.1 crore. Excluding HMVL’s cash the company’s cash will be about Rs 380 crore.

Good outlook

The company’s business outlook continues to be strong as increasing returns in new businesses like HT Mumbai, Radio and Mint will contribute towards revenue growth and improved profitability.

The company had 25% rate hike in the UP market. True effect of rate hike will happen from April. In print media, effect of rate hike happens over a period of one year.

Also newsprint expenses will be flat in March 2014 quarter as newsprint prices were higher in December 2013 quarter.

Benefits of election-related advertisements have already started coming.

The management is confident that its diversified business model, established brands and sustained focus on cost reduction will continue to create value for all stakeholders as the macroeconomic environment improves

Valuation

For FY 2014 we expect the company to register EPS of Rs 9.2. The share price trades at Rs 72. P/E works out to 7.8.

Exports-heavy

The company is a major player in boilers and other heavy engineering items and derives 45% of revenues from exports

Buy Isgec Heavy Engineering

BSE Code 533033

NSE Code Not listed

Bloomberg IGSEC@IN

Reuter ISGE.BO



Isgec Heavy Engineering has a history of 80 years and is a diversified heavy engineering company with interests in Process Equipment, EPC Power Plants, Boilers, Sugar Plants & Machinery, Mechanical & Hydraulic Presses, Castings, Contract Manufacturing, and Trading.

In FY 2011 the company changed its name from Saraswati Industrial Syndicate Ltd. to Isgec Heavy Engineering Ltd. All businesses were consolidated and now marketed under a common brand name – Isgec.

Present in various fields of engineering business

The company has good share in the domestic and overseas markets in Boilers. In recent years it had embarked on supplying turnkey power plants. In addition to the Boiler, it also supplies the Turbo set and balance of plant. This business has come of age. In some cases, it is also doing civil works.

The company has emerged as a leading Sugar Machinery and Sugar Boiler manufacturer both in domestic as well as international markets. It also received a number of orders for export and the Company is striving to become a world leader in this business in the next few years.

Its Process Equipment Division books orders for large Pressure Vessels and Heat Exchangers. It has capacities in Yamunanagar as well as Dahej. The Division also books orders for critical equipment used in Fertilizer sector like Transfer Line, CO2 Absorber, LP/HP Flash Drum.

American Society of Mechanical Engineers (ASME) has approved the Process Equipment Division of the company for manufacturer of equipments for Nuclear Plants and the Company has been awarded the 'N' and 'NPT' stamps.

With a view to broadening its portfolio, the company has ventured into new products, like Feed Water Heaters, Surface Condensers, Breech Lock Heat Exchangers and Electrostatic Precipitators, Castings for Pumps and Valves.

Due to year to year fluctuations in the automobile sector, the Machine Building Division of the company is making efforts to book orders for Presses from other sectors such as Defence, White Goods and Forgings. With the slowing down of the automobile sector in India, exports are being given a lot of thrust.

The company also manufactures heavier and more complex castings in the Steel Casting Unit of the company. This offers heavier and more complex castings to the market including P-91 and Duplex Stainless Steel Castings. P-91 is an alloy which is used for making castings to be used under very high temperature and pressure, such as Super critical grade steam turbine castings. Duplex grade of stainless steel is used for making castings for special Pumps in order to increase corrosive resistance.

Strategic Partnerships

The company has many strategic partnership which helps it in being technologically advanced products and stay ahead of the competition. These partnerships are: with:

Envirotherm GmbH, Germany: License & Cooperation Agreement for Design, Engineering, Manufacturing and Commissioning of ESPs upto 1000 MW

Foster Wheeler, USA: License Agreement for PC Fired Boilers upto 1000 MW

Foster Wheeler, Spain: Licensing Agreement for HP & LP Feedwater Heaters & Condensers

Bosch Projects, South Africa: Technology Transfer for Chainless Cane Diffusers

Foster Wheeler, USA: Collaboration Agreement for CFBC Boilers upto 99.99 MWe and Oil & Gas Fired Package Boiler upto 260 TPH

Belleli, Italy: Technology Agreement for manufacture of Breech Lock Heat Exchangers

ABB Lummus Heat Transfer, USA: Technology License Agreement for Helix Heat Exchangers

Hitachi Zosen Corp., Japan: Technology Transfer Agreement for Chrome-Moly Vanadium Reactors

Hitachi Zosen Corp., Japan: Agreement for Critical Heat Exchangers for Fertilizer industry

The Management plans to look for new technologies and new diversification areas so as to broaden its portfolio of products and also move into higher value added products/projects.

FY 2013 was a year of consolidation

For FY 2013 (ending September 2013), sales fell 6 % to Rs 2512.63 crore. OPM improved 50 basis points to 5.5%. Thus OP was up 3% to Rs 138.64 crore.

Other income grew 16% to Rs 42.61 crore and interest cost fell 12% to Rs 22.50 crore. Depreciation jumped 20% to Rs 54.16 crore after which, PBT grew 4% to Rs 104.79 crore.

Provision for tax grew 6% to Rs 32.37 crore, after PAT grew 3% to Rs 72.42 crore.

In FY 2013 the revenues were lower mainly due to ‘hold’ by customers due to financial problems. Most of these orders have now become active.

Consolidated sales and profits are higher than standalone figures

In FY 2013, its consolidated sales were 17% higher at Rs 2934.29 crore as compared to standalone sales and PAT was 13% higher at Rs 81.84 crore as compared to standalone PAT.

In FY 2013 consolidated sales had fallen 4% and PAT was down 13%.

Almost half of revenues come from exports

Exports increased 7% to Rs 1128.71 crore in FY 2013, accounting for about 45% of total revenues.

Intensive marketing efforts continued both for domestic and export orders. The efforts included extensive visits and participation both in domestic exhibitions and international exhibitions.

The notable exhibitions in which the company participated internationally are exhibitions at Sao Paulo, Brazil., organized by International Society of Sugarcane Technologists, at Istanbul organized by International Metal Working Technologies Exhibition and Fabtech - North America’s largest metal forming, fabricating, welding and finishing event organized by American Welding Society in Chicago.

Record order book in tough environment

FY 2013 Performance has been steady despite bad economic conditions in the entire world including India. The company was, however, able to increase its margins.

With aggressive marketing and improved position in the market vis-à-vis competitors, it was able to have a record order booking in the year ended 30th September 2013.

Overall orders as well as export orders, as on date, are at a record level.

Therefore the management expects to have higher sales in the coming year.

Profit grows in December 2013 quarter

For the quarter ended December 2013, it registered a 6% fall in sales to Rs 556.00 crore. OPM jumped 100 basis points to 6.2% which saw OP rising 13% to Rs 34.38 crore.

Other income soared 164% to Rs 12.11 crore and interest cost grew 39% to Rs 6.36 crore. As depreciation jumped 12% to Rs 13.78 crore, PBT grew 45% to Rs 26.35 crore.

Tax grew 52% to Rs 8.97 crore after which PAT ended up 42% to Rs 17.38 crore.

Promoters are constantly increasing their stake

The promoters are constantly increasing their stake in the company. Promoters stake was 61.67% at the end of December 2012, which went up to 61.98% in September 2013 quarter. As on December 2013 it stood at 62.06%.

Buy back of Rs 60 crore at Rs 890 per share

The board of the company has approved the proposal to buy back its fully paid up equity shares of the face value of Rs. 10/- each for a total consideration not exceeding Rs 60.00 crore and at a price not exceeding Rs. 890.00/- per Equity Share. Buy back will be done through open market.

The minimum buyback size will be Rs 30 crore to be implemented over six months.

Valuation

The company is changing the FY from September to March thus next FY will be of six months and will end in March 2014. However, due to nature of its business, presenting six months figures and annualising EPS will not be appropriate. Hence we have given projections for next twelve months ending September 2014, to present a proper picture.

We expect the company to register EPS of Rs 111 for next twelve months ending September 2014. The share price trades at Rs 880. P/E works out to 7.8.

On the move

A constituent of Hero group, the company is a key supplier of exhaust systems for two-wheelers

Buy Munjal Auto Industries

BSE Code 520059

NSE Code MUNJALAU

Bloomberg GCY@IN

Reuter MUAU.BO



Munjal Auto Industries (MAIL), a constituent of Hero group (flagship Hero Motocorp), is a TS 16949 and ISO 14001 accredited, leading auto component manufacturing company in India producing Exhaust systems complete for two wheelers and four wheelers, Spoke rims for two wheelers, Steel Wheel Rims for Two Wheelers and Four Wheelers, Fuel Tanks for Four wheelers, Seat Frames for four wheelers and other automotive assemblies.

The company has a technical collaboration with Samsung Industries Ltd. of Korea for the manufacture of Fuel Tanks for Four Wheelers.

It holds the pride of being among the largest manufacturer of the exhaust systems in the world, manufacturing close to 22,000 systems per day.

Besides, the company produces more than 10,000 spoke rims for motorcycles and steel wheel rims every day.

Sales jump 25% and PAT leap 50% in December 2013 quarter

For the quarter ended December 2013, it registered a solid 25% rise in sales to Rs 217.79 crore. OPM improved 80 basis points to 8.5% which saw OP growing 37% to Rs 18.41 crore.

Other income fell 58% to Rs 41 lakh and interest cost fell 22% to Rs 1.41 crore. As depreciation grew 11% to Rs 3.30 crore, PBT grew 46% to Rs 14.12 crore.

Provision for taxation fell 1% to Rs 63 lakh after which PAT grew 50% to Rs 13.49 crore.

Nine month results

For the nine months ended December 2013, sales grew 8% to Rs 569.98 crore. OPM improved 70 basis points to 8.3%. Thus OP was up 18% to Rs 47.04 crore.

Other income fell 20% to Rs 2.63 crore and interest cost fell 11% to Rs 4.86 crore. Depreciation rose 10% to Rs 9.485 crore after which, PBT grew 22% to Rs 35.32 crore.

Provision for tax grew 2% to Rs 1.32 crore, after which nine month PAT grew 23% to Rs 34.00 crore.

Technical expertise

The company has Technical collaboration with Samsung, Korea for Design, development & manufacturing of modern age fuel tank assemblies for 4 wheelers including passenger Car.

Working with Japanese company since last 2 decades, the company has developed technical expertise & best manufacturing skills by practicing innovative strategies to deliver best to its customers. Continuously it explores best possible opportunities to adopt & share most advance & next generation technology with world renowned global leaders.

Solid infrastructure

Keeping in mind highly competitive global business scenario & to meet specific demand of its esteemed customers, the company has created world class facility in tool design, Tool manufacturing & product manufacturing including surface treatment, pre-treatment along with testing labs under one roof.

Munjal Auto has integrated facility to manufacture exhaust system, steel wheel rim, fuel tank assemblies & many other assemblies for automobiles.

Its central Tool Room & Technical Center is spread in 1600 square meters area which is a world class facility for design & manufacturing of small to large sized tools, fixtures & gauges required in various manufacturing locations to manufacture large parts & assemblies of automobiles. It is in operation since April 2011.

The company has latest CAD / CAM & CAE software's –Unigraphics, Catia V-5, FTI, and hyperform are being installed in tool design section. Total nos of design station -40.

Munjal Auto Industries has achieved high maturity through rigorous adherence to highly evolved processes, which have been systemically benchmarked against world class operating models. The conformance to quality begin at design stage, where the multi-disciplinary approach brings out the best of process designs. The high end design software like mechanical desktop Autocad and Pro E wild fire 2.0 are the essence of product development tool & die fixture and gauges designs.

Future Outlook

To succeed in current difficult times, the company is undertaking the following initiatives:

As times are becoming more competitive, the management understands that it is imperative that the company moves away from being a commodity supplier towards becoming a system supplier. For this it is actively working towards setting up its own R&D center. For this the company is currently looking for global partners to help the company in the area of increasing R & D capabilities.

The company is also constantly working on broadening its product portfolio. From manufacturing Rims and Mufflers untill three years back, it today manufactures, other than mufflers, fuel tanks for cars and chassis components like impact beams. Also within the category of mufflers as a product, the company is studying and pursuing opportunities of higher capacity motorcycles for export markets.

As the business environment gets more competitive, it is imperative that the company constantly looks for better ways of doing work. In the past year, the company has gone in for various automations like robotic welding, spray phosphating, tool manufacturing to name a few. Also through technical partnerships with certain expert organizations, it has worked towards increasing efficiencies and reducing operational costs.

Auto two-wheeler industry, which is company’s key user industry is currently on a slow growth track. However growth rate should pick-up from next year.

Valuation

In FY 2014 we expect the company to register sales and net profit of Rs 781.29 crore and Rs 47.92 crore respectively. On an equity of Rs 10.00 crore and face value of Rs 2 per share, EPS works out to Rs 9.6. The share price trades at Rs 41. P/E works out to 4.3. For FY 2013, the company had paid dividend of Rs 2 per share, which yields almost 5% at current price.

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On a solid ground

A strong and growing order book augurs well for this water infrastructure major.

Buy Indian Hume Pipe Company

BSE Code 504741

NSE Code INDIANHUME

Bloomberg INHP@IN

Reuter IHME.BO


Current Price Rs 125 (as on 31st January 2014)

Water is a prime natural resource and a basic human need for survival and existence. Indeed water is fundamental to life. In view of the vital importance of water for human, animal & plant life, for maintaining ecological balance and for economic and developmental activities of all kinds and considering its increasing scarcity, the planning and management of this resource and its optimal economical and equitable use has become a matter of national importance.

One company strongly linked to this business is Indian Hume Pipe Company. The company is considered a pioneer in the field of water industry, it is in this line of business for last more than 85 years.

The Indian Hume Pipe Co. Ltd. (IHPL) is in the business of manufacturing, laying and jointing of pipelines of various pipe materials such as RCC pipes, Steel pipes, Prestressed Concrete pipes, Penstock pipes, Bar Wrapped Steel Cylinder pipes (BWSC), Prestressed Concrete Cylinder pipes (PCCP) etc., which provide infrastructure facility and development for drinking water supply projects, irrigation projects, Hydro Electric Projects, Sanitation and Sewerage Systems.

For over a decade, the company has also been executing on turnkey basis the combined water supply projects i.e. undertaking the complete job of water supply from source to distribution centers which apart from manufacturing, laying and

jointing of pipelines included construction of intake wells, water sumps, water treatment plants, water pumping stations, installation of pumping machineries, electro-mechanical works, branch mains, ground level reservoirs, elevated reservoirs, leading to executions of complete systems for water supply to various towns and villages of India.

In FY 2013, the company set up a new factory near Dhule, Maharashtra for manufacturing Prestressed Concrete pipes, Bar Wrapped Steel Cylinder pipes, Prestressed Concrete Cylinder pipes and Steel pipes at a total investment of Rs 18.38 crore.

The total number of factories stands at 22.

State / Central government and reputed companies in the private sector are its clients.

The company’s clients include various State / Central government.

Its central government clients are:

Indian Railways

Indian Railway Construction Company (IRCON)

Rail India Technical And Engineering Services (RITES)

Bharat Heavy Electricals Limited (BHEL)

National Hydro Power Corporation (NHPC)

National Thermal Power Corporation (NTPC)

Indian Farmers Fertiliser Co Operative Limited (IFFCO)

Satlaj Jal Vidyut Nigam Limited (SJVN)

etc

Its State government clients are include:

Andhra Pradesh

Delhi

Gujarat

Karnataka

Madhya Pradesh

Maharashtra

Rajasthan

Tamil Nadu

Uttar Pradesh

etc

Among the private companies whom it caters to are reputed and solid companies like L&T, HCC, NCC, Tata, IVRCL, Pritabha Industries, ABB, GMR etc.

Growth opportunities are huge

The population of the country is expected to reach a level of around 139 crore by year 2025 (Source National Water Policy 2002) which will further aggravate the scarcity of water to the people of India. As it is with the growing population demanding more food, more products and higher standards of living, the shortage of drinking water can only get worse. Thus there is a vast scope for improvement in Infrastructural developmental activities in water supply, drainage schemes and sewerage schemes in sanitation segments leading to good scope for company's manufacturing & contracting activities in this field.

Growth of population and the expansion of economic activities inevitably lead to increasing demands for water for diverse purposes i.e. domestic, industrial, agricultural, hydro-power, thermal power, navigation, recreation etc. Domestic and Industrial water needs have been largely concentrated in or around major cities, however the demand in rural areas is expected to increase sharply due to the development programmes of State Governments to improve the economic conditions of the rural mass.

Demand for water for hydro and thermal power generation and for other industrial uses is also increasing substantially. As a result water which is already scarce will become even more scarce in future. This underscores the need for the utmost efficiency in water utilisation and its distribution. Through awareness of efficient water supply system and water quality, water supply can be kept adequate and provide clean & healthy water for our future generations. It is their fundamental right. Hence there is a good scope for many water supply projects coming up in near future and this auger well for the company.

During the last decade, Urban area limits are spreading wider and wider to peripheral areas, but at the same time, the basic amenities like Water Supply, Drainage, etc are not meeting the requirement of more and more urbanization. Apart from the above, most of the rural areas in India fall short of access to drinking water. Government of India, State Governments and local bodies are making best efforts to supply safe drinking water, hence, number of water supply schemes are

under anvil. Further to make cities and rural areas more hygienic conditions, lot of sewerage disposals and drainage schemes are also coming up.

Considering the above factors, outlook for the company in water supply, sewerage and drainage segments is encouraging.

Developing surplus real estate

In October 2013, Indian Hume Pipe Company Limited informed that it was having its erstwhile factory on freehold industrial plot of land admeasuring about 6.7966 Acres situated in, Mathura Road, Badarpur, New Delhi which is closed w.e.f. August 31, 2013.

Recently the Ministry of Urban Development, Delhi Division has notified modifications to Master Plan Delhi - 2021 (MPD - 2021) wherein conversion of industrial plot / unit to Residential use is permitted within Development Control Norms of Group Housing subject to the payment of conversion charges (yet to be notified). This is in addition to the norms for conversion of existing industrial units / plots to Commercial use as per MPD - 2021.

Accordingly the Board of Directors at their meeting held on October 30, 2013 has given its in-principle approval for exploring the possibility of joint development of company s industrial land at Badarpur, New Delhi. The company is in discussion with M/s. Jones Lang LaSalle Property Consultants (India) Pvt. Ltd., Property Consultants to find a suitable Developer for undertaking joint development of Company’s industrial land at Badarpur.

The company has converted its industrial land admeasuring about 48288 square meters approx. at Hadapsar, Pune, hitherto held as fixed Asset in to Stock in Trade with effect 31 July 2013 at a book value of Rs 1.32 crore.

Its land at Wadala, Mumbai, admeasuring about 14070 square meters approx. hitherto held as fixed Asset is converted into Stock in Trade with effect 31 October 2013 at a book value of Rs 69709.49.

Solid show in December 2013 quarter pulls up performance for the nine months

IHPL registered a 48% rise in sales to Rs 242.29 crore in December 2013 quarter. OPM fell from 8.9% to 8.7% which saw OP growing 45% to Rs 21.09 crore.

Even though other income fell 47% to Rs 36 lakh and interest cost grew 33% to Rs 8.80 crore, PBT jumped 61% to Rs 10.70 crore as depreciation stagnated fell 3% to Rs 1.96 crore.

Tax was up 68% to Rs 3.76 crore after which PAT jumped 57% to Rs 6.94 crore.

For the nine months ended December 2013 sales grew 19% to Rs 585.00 crore. OPM improved from 9.1% to 9.5% taking OP up 23% to Rs 55.54 crore. As other

income fell 69% to Rs 1.46 crore, interest cost rose 29% to Rs 24.01 crore and depreciation grew 6% to Rs 5.61 crore, PBT grew 6% to Rs 27.38 crore. Tax was up 24% to Rs 9.59 crore after which PAT fell 1% to Rs 17.79 crore.

Order backlog up 38% to Rs 1828 crore

In spite of 19% rise in sales in the first nine months, the company’s order backlog has increased 38%. The balance value of the orders on hand as on December 2013 was Rs 1828 crore against Rs 1321 crore in the corresponding period of the previous year.

Encouraging outlook

During the last decade, Urban area limits are spreading wider and wider to peripheral areas, but at the same time, the basic amenities like Water Supply, Drainage, etc are not meeting the requirement of more and more urbanization. Apart from the above, most of the rural areas in India fall short of access to drinking water.

Government of India, State Governments and local bodies are making best efforts to supply safe drinking water. Hence number of water supply schemes is under anvil. Further to make cities and rural areas under more hygienic conditions, lot of sewerage disposals and drainage schemes are also coming up.

Considering the above factors, outlook for the company in water supply, sewerage and drainage segments is encouraging and good.

Valuation

In FY 2014 we expect the company to register sales and net profit of Rs 827.13 crore and Rs 24.12 crore respectively. On a very tiny equity of Rs 4.84 crore (around 70% held by the promoters) and face value of Rs 2 per share, EPS works out to Rs 10.0. The share price trades at Rs 125. P/E works out to 12.5.

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Can board this bus

This Tata group company is well-placed to capitalise on growth in bus industry

Buy Automobile Corporation of Goa

BSE Code 505036

NSE Code AUTOCORP

Bloomberg ACGL@IN

Reuter ATOG.BO


Current Price Rs 211 (as on 29th January 2014)

Automobile Corporation of Goa (ACGL), the first major engineering unit to be set up in Goa, a tiny but picturesque state of India, was jointly promoted in 1980 by Tata Motors Ltd (formerly known as Tata Engineering & Locomotive Co. Ltd.) , the largest automobile manufacturer in the country and EDC Ltd (formerly known as Economic Development Corporation of Goa , Daman & Diu Ltd.).

Right from the inception, ACGL, with its emphasis on quality, safety, productivity & reliability in line with the Tata ethos has been endearing itself to its customers.

The company manufactures Sheet metal components, assemblies and Bus coaches at its factories situated at villages Honda & Bhuimpal, Goa.

It is in operation since 1982 and is a major supplier of pressings and assemblies to Tata Motors' Pune factory. To meet "Just In Time" supplies to the customer, the Company has set up a Press shop at Jejuri, Pune.

The Sheet Metal Division at its three units has High tonnage presses with an output of more than 17,620 tonnes that have ensured complete customer satisfaction.

In 1987, the company entered into a Technical Collaboration Agreement with Fuji Heavy Industries Ltd., Japan, makers of Subaru car for various models of chassis mounted bus bodies and set up a full-fledged Bus Body Building Division. The company had a further agreement with FHI Ltd. to build Monocoque buses in 1995.

Excellent production facilities, highly skilled and continuously trained manpower of Engineers, Technicians and other staff have ensured world class products and services. In its quest towards business excellence, the company practices Integrated Management Systems including Quality, Environment, Health and Safety in all its operations.

December 2013 quarter sees sharp rise in sales and profitability

Sales for the quarter ended December 2013 jumped 31% to Rs 86.22 crore. OPM jumped 510 basis points from 5.6% to 10.8% which saw OPM rising 150% to Rs 9.28 crore.

Other income fell 13% to Rs 2.01 crore. Interest cost grew 214% to Rs 8 lakh.

As deprecation rose 2% to Rs 1.39 crore, PBT jumped 112% to Rs 9.82 crore.

Provision for taxation was up 125% to Rs 3.37 crore. Finally PAT jumped 106% to Rs 6.45 crore.

Nine month performance sees sales rise 15% and PAT grow 16%

Sales for the nine month ended December 2013 grew 15% to Rs 223.50 crore.

OPM improved 60 basis points from 7.1% to 7.7% which saw OPM rising 25% to Rs 17.13 crore.

Other income fell 4% to Rs 6.16 crore. Interest cost grew 80% to Rs 16 lakh.

As deprecation rose 1% to Rs 4.05 crore, PBT improved 19% to Rs 19.09 crore.

Provision for taxation was up 25% to Rs 6.54 crore. Finally PAT grew 16% to Rs 12.55 crore.

Bus Body Segment is the star performer

While orders from Tata Motors forms major portion of the buses manufactured by the company, its own marketing department has been contributing in a significant way over the last couple of years.

For the quarter ended December 2013, sales from the Bus Body Segment jumped 44% to Rs 76.54 crore. It accounted for 88% of total.

PBIT from the same jumped from Rs 1.60 crore to Rs 7.76 crore, up 387% and accounted for 94% of total.

During the quarter PBIT margins from the bus body segment soared from a mere 3% to 10.1%.

For the nine months ended December 2013, sales from the Bus Body Segment jumped 27% to Rs 189.22 crore. It accounted for 84% of total.

PBIT from the same jumped from 92% to Rs 12.16 and accounted for 86% of total.

During the nine month PBIT margins from the bus body segment jumped from 4.2% to 6.4%.

The company focused attention on obtaining orders for buses through its own efforts and has been able to make a good progress in this area. The company has decided to de-risk its bus business by strengthening its internal marketing department and focusing on STUs, fleet operators, city buses for various municipal corporations etc

Pressing segment – failing to take off

The pressings segment is operating as a tier-I supplier of stampings and assemblies to OEM customers such as commercial vehicle / engine manufacturers. Decline in demand for OEM customers' products directly affected production at its pressings division

For the quarter ended December 2013, sales from the Pressing Segment fell 21% to Rs 10.42 crore. It accounted for 12% of total.

PBIT from the same fell to Rs 52 lakh against Rs 86 lakh and accounted for 6% of total.

PBIT margins stood at a meager 0.05% against 0.1%.

For the nine months ended December 2013, sales from the Pressing Segment fell 24% to Rs 36.05 crore. It accounted for 16% of total.

PBIT from the same crashed 53% to Rs 1.91 crore and accounted for 14% of total.

PBIT margins stood at a meager 0.1%.

This segment of the company's business suffered heavily due to drastic cut down of schedules by the customers. The segment is fully dependent on the requirements of OEMs. Certain additional business has been obtained; however, the same is yet to take off in big volumes.

Publicity through exhibition

ACGL participated with a grand fleet of its state-of-the-art products in the Busworld Exhibition 2013 held in Mumbai in February'13. It displayed five buses at the Exhibition which included a Sleeper Coach, Classic Bus and Buses with new face. Sleeper Coach manufactured by the company for the first time was a star attraction.

Demand likely to improve

Allocation through Central Budget of large funds towards JnNURM is expected to generate good demand for buses.

In addition, STUs, and municipal city transport would require large number of buses for augmenting their fleet.

The government is moving towards implementing 'bus code' which is aimed at strict adherence to CMVR rules for enhancing safety of passengers. Government have also assessed design and manufacturing capabilities of all body builders across the country through various institutions such as CIRT, ARAI etc. While many body builders did not come up to the levels desired by the government, ACGL has received 'A' grade accreditation for its bus manufacturing facility. It is expected that bus orders on ACGL will improve once government mandates bus manufacturing to be made only by the accredited body builders.

Valuation

In FY 2014 we expect the company to register sales and net profit of Rs 307.04 crore and Rs 18.78 crore respectively. On equity of Rs 6.42 crore and face value of Rs 10 per share, EPS works out to Rs 29.2. The share price trades at Rs 211. P/E works out to 7.2. The company pays good dividend. For FY 2013, it paid dividend of Rs 12.5 per share. For FY 2014, it has already declared interim dividend of Rs 2.5 per share (ex-dividend on 29-01-2014)

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