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Thursday, November 8, 2007
Sunday, November 4, 2007
MULTIBAGGER: Genus Power Infrastructur
India Infoline Picks,
Genus Power Infrastructur : Reco Price Rs. 611.00 CMP: Rs.611.00 (Gain 0.00%)
Genus Power Infrastructures Ltd (Q2 FY08)Q2 FY08 revenues post healthy growth of 29.2% to Rs 1 billion. Lower excise duty, other expenses and staff costs help operating margin expand to 16.9%. Q2 FY08 profits jump 62.8% to Rs 92 million against Rs 56 million in Q2 FY07. BUY with a one-year price target of Rs818, providing 36% upside.
Genus Power Infrastructures Ltd (Q2 FY08)
• Q2 FY08 revenues post healthy growth of 29.2% to Rs 1 billion.
• Lower excise duty, other expenses and staff costs help operating margin expand to 16.9%.
• Q2 FY08 profits jump 62.8% to Rs 92 million against Rs 56 million in Q2 FY07.
• We recommend a BUY with a one-year price target of Rs 818, providing 36% upside.
Result table:
Period to 09/07 09/06 Growth 09/07 09/06 Growth
(Rs mn) % %
Net sales 1,007 780 29.2 1,843 1,290 42.9
Expenditure -837 -659 26.9 -1,540 -1,090 41.2
Operating profit 171 121 41.6 303 200 51.7
Other income 10 6 71.7 14 8 80.2
Interest -61 -48 27.5 -103 -75 37.8
Depreciation -14 -12 13.9 -26 -24 8
PBT 105 66 59.5 188 109 73
Tax -14 -10 40.5 -27 -16 74.1
PAT 92 56 62.8 161 93 72.8
OPM (%) 16.9 15.5 1.5 16.4 15.5 1
Equity capital 123 108 - 123 108 -
EPS (Rs) 7.5 5.2 43.7 13.1 8.6 52.5
Source: Company
Revenues grow 29.2% to Rs 1 billion with enhanced capacity coming into play:
Genus Power Infrastructure Ltd (GPIN) Q2 FY08 revenues grew by 29.2% to Rs 1 billion against Rs 780 million in the corresponding period last year. During the period, meters, projects and inverters contributed Rs 554 million, Rs 353 million and Rs 101 million respectively. During the end of FY07, GPIN enhanced its meter manufacturing capacity from 1.4 million pieces per annum to 2.9 million pieces. The company expects to derive about 33% of its total revenues from its Haridwar facility. With this facility coming on stream, it intends to improve its revenue share from three-phase meters, where realizations and margins are better than conventional meters. GPIN has an order book of Rs 4 billion, which is to be executed over the next two quarters. With the outlook for the sector being robust, we expect the company to witness 55.6% CAGR over FY07-09E.
Lower excise duty, other expenses, staff costs expand operating margin to 16.9%:
During Q2 FY08 the company carried out operations from its Haridwar facility, which qualifies for zero excise duty for a period of 10 years. Coupled with this, GPIN witnessed 570 bps decline in other expenses and 120 bps decline in staff costs. Higher raw material cost by 540 bps in Q2 FY08 offset savings from the above. Operating margin improved by 150 bps during Q2 FY08 to 16.9% from 15.5% in the corresponding period last year. Since the company imports about 10-12% of its raw materials, it gained marginally from the appreciating rupee.
Q2 FY08 profits jump 62.8% to Rs 92 million:
With rising revenues, there was a greater need for working capital as a result of which interest expense was higher by 27.5% during the quarter. Due to robust growth in revenues coupled with improvement in operating margin, GPINs net margin expanded by 200bps to 8.6% in Q2 FY08. Q2 FY08 profits jumped 62.8% to Rs 92 million, posting an earnings of Rs 7.5.
Mobix JV – A gateway to the high margin Latin American market:
GPIN has entered into a 50:50 joint venture with the Brazilian telecom firm Mobix for the manufacture of electronic meters. Through this tie-up, GPIN will sell its products with communication technology being provided by the partner. The JV requires an investment of US$ 15 million, of which US$ 9 million will be raised through debt from banks in Brazil and the rest through equity by both firms. The JV will have an installed capacity of 1mn meters, which is expected to be commissioned by end of FY08. With usage of electronic meters becoming mandatory in Latin America, just as in India, this JV will open up huge opportunities for the company. Since it will be the pioneer of the product in the region, we believe margins will be better than they are here.
GPIN is targeting developing countries where electricity reforms are under way, which will help it to increase the contribution of exports to total revenues. Installation of AMR meters coupled with services like energy auditing and selling prepaid meters will be major drivers for the JV. GPIN has already made significant inroads into markets like Iran, France, Jordan, Turkey, Brazil, etc.
Haridwar facility enjoys zero excise duty for 10 years:
GPINs Haridwar facility, its second manufacturing unit (first being in Jaipur), enjoys 16% excise duty exemption for a period of 10 years. The Rs 260 million Uttaranchal plant commenced operations for meters and inverters in April 2006. With this expansion, the company’s meter capacity increased to 2.9 million pieces per annum from 1.4mn pieces, enabling it to undertake more orders for both single-phase and three-phase meters.
Going forward, the company intends to relocate its single-phase meter manufacturing base to Haridwar and continue its three-phase manufacturing at its existing facility in Jaipur.
Newer products and newer market will lead to margin expansion:
GPIN undertakes continuous research and development activities not only for developing newer products but also for making its existing products technologically superior. This allows it to charge a premium over the conventional meters. Coupled with the sale of meters the company is also into the metering business, i.e. providing services like meter reading, collection, etc. Greater focus on sale of three phase meters, increasing production from its Haridwar facility, appreciating rupee, the Latin American JV and economies of scale should enable operating margin to expand.
Newer products, market and margin expansion will result into 85.8% profit CAGR, BUY with a price target of Rs 818 Implementation of APDRP and RGGVY schemes makes the outlook for the sector robust, resulting into higher demand for meters over the next couple of years. Coupled with this, upgradation of existing substations and setting up of new ones will benefit the company’s projects division.
With robust growth opportunities in both domestic and international market, launching of newer products and its Latin American JV, we expect GPIN to register 55.6% and 85.8% revenue and profit CAGR over FY07-09E respectively. In order to fund this growth it has done a preferential allotment to the promoters and some strategic investors. Despite this dilution we expect benefits accruing from the above will be greater than the effect of dilution. We recommend investors to buy with a one year price target of Rs 818, an upside of 36%.
At the current market price of Rs 611, the stock is trading at about 10.3x its FY09E earnings of Rs 58.4. We maintain BUY with a one-year price target of Rs 818, implying 36% upside.
Genus Power Infrastructur : Reco Price Rs. 611.00 CMP: Rs.611.00 (Gain 0.00%)
Genus Power Infrastructures Ltd (Q2 FY08)Q2 FY08 revenues post healthy growth of 29.2% to Rs 1 billion. Lower excise duty, other expenses and staff costs help operating margin expand to 16.9%. Q2 FY08 profits jump 62.8% to Rs 92 million against Rs 56 million in Q2 FY07. BUY with a one-year price target of Rs818, providing 36% upside.
Genus Power Infrastructures Ltd (Q2 FY08)
• Q2 FY08 revenues post healthy growth of 29.2% to Rs 1 billion.
• Lower excise duty, other expenses and staff costs help operating margin expand to 16.9%.
• Q2 FY08 profits jump 62.8% to Rs 92 million against Rs 56 million in Q2 FY07.
• We recommend a BUY with a one-year price target of Rs 818, providing 36% upside.
Result table:
Period to 09/07 09/06 Growth 09/07 09/06 Growth
(Rs mn) % %
Net sales 1,007 780 29.2 1,843 1,290 42.9
Expenditure -837 -659 26.9 -1,540 -1,090 41.2
Operating profit 171 121 41.6 303 200 51.7
Other income 10 6 71.7 14 8 80.2
Interest -61 -48 27.5 -103 -75 37.8
Depreciation -14 -12 13.9 -26 -24 8
PBT 105 66 59.5 188 109 73
Tax -14 -10 40.5 -27 -16 74.1
PAT 92 56 62.8 161 93 72.8
OPM (%) 16.9 15.5 1.5 16.4 15.5 1
Equity capital 123 108 - 123 108 -
EPS (Rs) 7.5 5.2 43.7 13.1 8.6 52.5
Source: Company
Revenues grow 29.2% to Rs 1 billion with enhanced capacity coming into play:
Genus Power Infrastructure Ltd (GPIN) Q2 FY08 revenues grew by 29.2% to Rs 1 billion against Rs 780 million in the corresponding period last year. During the period, meters, projects and inverters contributed Rs 554 million, Rs 353 million and Rs 101 million respectively. During the end of FY07, GPIN enhanced its meter manufacturing capacity from 1.4 million pieces per annum to 2.9 million pieces. The company expects to derive about 33% of its total revenues from its Haridwar facility. With this facility coming on stream, it intends to improve its revenue share from three-phase meters, where realizations and margins are better than conventional meters. GPIN has an order book of Rs 4 billion, which is to be executed over the next two quarters. With the outlook for the sector being robust, we expect the company to witness 55.6% CAGR over FY07-09E.
Lower excise duty, other expenses, staff costs expand operating margin to 16.9%:
During Q2 FY08 the company carried out operations from its Haridwar facility, which qualifies for zero excise duty for a period of 10 years. Coupled with this, GPIN witnessed 570 bps decline in other expenses and 120 bps decline in staff costs. Higher raw material cost by 540 bps in Q2 FY08 offset savings from the above. Operating margin improved by 150 bps during Q2 FY08 to 16.9% from 15.5% in the corresponding period last year. Since the company imports about 10-12% of its raw materials, it gained marginally from the appreciating rupee.
Q2 FY08 profits jump 62.8% to Rs 92 million:
With rising revenues, there was a greater need for working capital as a result of which interest expense was higher by 27.5% during the quarter. Due to robust growth in revenues coupled with improvement in operating margin, GPINs net margin expanded by 200bps to 8.6% in Q2 FY08. Q2 FY08 profits jumped 62.8% to Rs 92 million, posting an earnings of Rs 7.5.
Mobix JV – A gateway to the high margin Latin American market:
GPIN has entered into a 50:50 joint venture with the Brazilian telecom firm Mobix for the manufacture of electronic meters. Through this tie-up, GPIN will sell its products with communication technology being provided by the partner. The JV requires an investment of US$ 15 million, of which US$ 9 million will be raised through debt from banks in Brazil and the rest through equity by both firms. The JV will have an installed capacity of 1mn meters, which is expected to be commissioned by end of FY08. With usage of electronic meters becoming mandatory in Latin America, just as in India, this JV will open up huge opportunities for the company. Since it will be the pioneer of the product in the region, we believe margins will be better than they are here.
GPIN is targeting developing countries where electricity reforms are under way, which will help it to increase the contribution of exports to total revenues. Installation of AMR meters coupled with services like energy auditing and selling prepaid meters will be major drivers for the JV. GPIN has already made significant inroads into markets like Iran, France, Jordan, Turkey, Brazil, etc.
Haridwar facility enjoys zero excise duty for 10 years:
GPINs Haridwar facility, its second manufacturing unit (first being in Jaipur), enjoys 16% excise duty exemption for a period of 10 years. The Rs 260 million Uttaranchal plant commenced operations for meters and inverters in April 2006. With this expansion, the company’s meter capacity increased to 2.9 million pieces per annum from 1.4mn pieces, enabling it to undertake more orders for both single-phase and three-phase meters.
Going forward, the company intends to relocate its single-phase meter manufacturing base to Haridwar and continue its three-phase manufacturing at its existing facility in Jaipur.
Newer products and newer market will lead to margin expansion:
GPIN undertakes continuous research and development activities not only for developing newer products but also for making its existing products technologically superior. This allows it to charge a premium over the conventional meters. Coupled with the sale of meters the company is also into the metering business, i.e. providing services like meter reading, collection, etc. Greater focus on sale of three phase meters, increasing production from its Haridwar facility, appreciating rupee, the Latin American JV and economies of scale should enable operating margin to expand.
Newer products, market and margin expansion will result into 85.8% profit CAGR, BUY with a price target of Rs 818 Implementation of APDRP and RGGVY schemes makes the outlook for the sector robust, resulting into higher demand for meters over the next couple of years. Coupled with this, upgradation of existing substations and setting up of new ones will benefit the company’s projects division.
With robust growth opportunities in both domestic and international market, launching of newer products and its Latin American JV, we expect GPIN to register 55.6% and 85.8% revenue and profit CAGR over FY07-09E respectively. In order to fund this growth it has done a preferential allotment to the promoters and some strategic investors. Despite this dilution we expect benefits accruing from the above will be greater than the effect of dilution. We recommend investors to buy with a one year price target of Rs 818, an upside of 36%.
At the current market price of Rs 611, the stock is trading at about 10.3x its FY09E earnings of Rs 58.4. We maintain BUY with a one-year price target of Rs 818, implying 36% upside.
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