Punj LLoyd - IPO

Source: opendb.net
Author: Mint

Business of Punj Lloyd

Punj Lloyd is an engineering and constructions company, which provides integrated design, engineering, procurement, construction and project management services for energy and infrastructure sector projects. The operations are spread across the regions of the Middle East, the Caspian, The Asia Pacific, Africa and South Asia. Punj Lloyd has got 13 subsidiaries and has executed upwards of 170 projects in 12 countries.
Punj Lloyd has over 20 years of experience in construction projects and in that time it has executed 11 refinery modernization and up gradation projects and engaged in 14 highway projects.

Financial Information

The topline of Punj Lloyd has grown consistently over the last few years. From revenues of around Rs. 500 crores in fiscal 2001, last year the company clocked in revenues of Rs.1492 crores. Although this was not significantly greater than the revenues it clocked in the year prior to that (Rs.14149 crores), when seen in the context of the growth overall in the last five years one can see that the growth enjoyed by the company is good.
While the topline has grown consistently the fluctuations in the bottomline and even the case of adjustments in the reported Net Profits is a cause for concern. From a profit of Rs.275 million in the year 2001 the profit was down to as low as Rs.6.25 million in the last fiscal.
Consequently the EPS last fiscal was just Rs.0.12 while it was Rs.12.58 the year before and Rs.4.52 the year before that and the Book Value per share last fiscal was Rs.209.80.

Objects of the Issue

The main reasons for the issue are to raise money for capital expenditure, to prepay debt and equity investments in infrastructure projects. Out of these three the company intends to spend Rs.1500 million on acquiring equipment like dozers, hydraulic excavators boring machines etc.
The company also intends to pay off debt to the tune of Rs.3500 million which it has taken from various financial institutions. Punj Lloyd has debt aggregating to Rs.11168 million both long term and short term as well as working capital.
Another Rs.500 million is to be raised to be invested in fully owned subsidiaries and bid in certain kind of projects both in India and abroad which required creation of Special Purpose Vehicles to execute projects of such nature.

Conclusion

The company has done well in its growth of revenues in the last few years and has been in existence for over 20 years and has expertise in the area of operations. The pricing of the IPO however must reflect the inconsistency in the profits over the past years and it should be at a considerable discount to its other peers like L & T.

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Ratnamani Metals and Tubes

Ratnamani Metals and Tubes
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs375
Current market price: Rs270

Stainless growth

Key points

• Ratnamani Metals and Tubes Limited (RMTL) is the largest player in the stainless steel (SS) tubes and pipes segment in the organised sector, with a market share of 35%. The company has an impressive list of clients including L&T, BHEL, IOC, HPCL and Reliance Industries.
• Given the buoyant demand for SS tubes and pipes and carbon steel (CS) pipes the company is increasing its capacity in both the segments. In SS tubes and pipes, the company is expanding its capacity from 6,960 metric tonne per annum (MTPA) to 14,460MTPA. The CS pipes capacity is being enhanced from 120,000MTPA to 220,000MTPA. This capacity expansion is being done through a greenfield expansion at Kutch, Gujarat.
• RMTL has a strong order book of Rs200 crore, to be executed over the next 6 months. We believe that the strong industrial activity and the solid order book position of its key clients will lead to a huge demand for its products. Moreover, RMTL's thrust in the export market has also led to strong export orders. The company is targeting an export turnover of Rs70 crore in FY2006 as compared to exports of Rs22 crore in FY2005.
• We expect RMTL's revenue to grow at a compounded annual growth rate (CAGR) of 45.9% over FY2005-07. We expect the net profit to grow at a CAGR of 63% during the same period due to the expansion in its operating profit margin (OPM). We expect RMTL to report an earning per share (EPS) of Rs27.2 in FY2006 and of Rs39.1 in FY2007. The stock trades at 9.7x its FY2006E and 6.7x its FY2007E earnings. Given the strong order book position and the company being a market leader in a growing industry, we believe the stock is grossly undervalued. We initiate coverage with a Buy in the stock with a target price of Rs375, which is 9.5x its FY2007E earnings.