Hidden Gems By Ashish Chugh

Frontier Springs Ltd.

CMP - Rs.17.00 BSE Code -522195

The stock trades in `Z' Group of BSE and is thus advised for investors with an appetite for HIGH RISK.

Frontier Springs Ltd. is a part of Kanpur based Frontier group and manufactures Helical Coil Springs for Automobile & Railway Suspension, Helical Coil Springs for Railway Rolling Stock for their wagon, carriage & loco and Laminated Leaf Springs for Light commercial and heavy duty vehicles including Railway Rolling Stock.

The FRONTIER GROUP consists of different professionally managed companies having varied product mix. The present product range includes Helical Coil Springs, Laminated Leaf Springs, Steel Castings, Bogie Fasteners, Metal Bonded Rubber Products for Rail Stock.

All the Companies of the Group have Modern Manufacturing facilities and strive to provide its customers with highest quality product at most competitive prices. The Group has made sizable exports in its business with the export of Leaf Springs & Coil Springs to U.K., Holland, & U.S.A. The present turnover of the GROUP is R. 500 Million. The group has already developed Coil Springs for various cars like, FORD, OPEL, DIAMLER, BENZ, and BMW.

Rapid Expansion

The company has undertaken expansion by setting up production facilities for manufacture of Air Suspension Springs. The company has also established another assembly line for Heavy & Light Coil springs, catering mainly to the Auto segment. The company is finalizing orders for Leaf Springs with some foreign buyers and shall expand capacities of Leaf Spring once the orders are finalized.

The expansion projects will give a substantial boost to the revenues and profitability of the company in the years to come.

The company is seriously exploring collaboration/ tie ups with foreign companies for the manufacture of Air Suspension Springs to meet the requirements of Indian Railways and the growing demand from the Automobile Industry.

Research & Development

Research and Development is a key strength of the company. The company has developed various products in-house and has made key modifications in the products to suit customer's requirements and to improve bring about functional improvements. The company's R&D facilities are well equipped with most modern instruments including Tensile Testing Machines, CAD/ CAM facilities and Spectrometer.

Financials

The latest financials of the company are given as under :-

QUARTERLY - LATEST RESULTS - Frontier Springs Ltd (Curr: Rs in Cr.)
Particulars	Quarter Ended (Sep 06)	Quarter Ended (Sep 05)	Quarter Ended (% Var)	YTD / Latest Half (Sep 06)	YTD / Latest Half (Sep 05)	YTD / Latest Half (% Var)	Year Ended (Mar 06) (12)	Year Ended (Mar 05) (12)	Year Ended (%Var)
Sales	6.1	3.67	66.2	10.57	6.6	60.2	15.52	14.44	7.5
Other Income	0.02	0.03	-33.3	0.04	0.05	-20	0.08	0.07	14.3
PBIDT	0.77	0.38	102.6	1.23	0.78	57.7	0.97	0.64	51.6
Interest	0.07	0.07	0	0.13	0.14	-7.1	0.28	0.31	-9.7
PBDT	0.7	0.31	125.8	1.1	0.64	71.9	0.69	0.33	109.1
Depreciation	0.09	0.07	28.6	0.16	0.14	14.3	0.29	0.27	7.4
PBT	0.61	0.24	154.2	0.94	0.5	88	0.4	0.06	566.7
Tax	0.24	0.09	166.7	0.35	0.18	94.4	0.21	0.02	950
Deferred Tax	0	0	-	0	0	0	-0.06	-0.03	-100
PAT	0.37	0.15	146.7	0.59	0.32	84.4	0.25	0.07	257.1

The company has an Equity Capital of Rs.3.96 crores with the promoters holding 52%. For the first half of the current FY, the company has reported a 60% increase in its revenues to Rs.10.57 crores and 84% increase in its PAT.

Conclusion

Frontier Springs is a low priced stock catering to both the Locomotive and Auto Ancillary sectors - the company is well placed to encash the boom in the Locomotive and Auto sector. The company is rapidly scaling up its operations by expanding its capacities which will substantially boost the revenues and profits in the future.

With huge expansion and modernization plans of the Indian Railways by way of replacement and modernization of wagons, the company is expected to benefit immensely. The company caters to the Auto Ancillary sector where the demand for springs is shooting up. Moreover, with India emerging as a major outsourcing base for Auto components, exports are growing at a fast pace.

With the various expansion projects of the company going on stream, the company is expected to log substantial growth in revenues and profits in the times to come. There is thus a visibility of future earnings of the company.

The current market cap of the company is just Rs.7 crores. The company has been reporting increased revenues and profits for the last few quarters. With the new capacities going on stream, the pace of growth will increase in the future, which will provide a big impetus to the stock price of the company.

Frontier Springs is a low priced fundamental company operating in the Locomotive and Auto Ancillary segment and could turn out to be a potential multibagger over 2-3 years period.