Patel's Airtemp (India) Ltd is involved in the design and manufacture and sale of extensive range of Heat Exchangers such as Shell and Tube Type, Finned Tube Type and Air cooled Heat Exchangers, Pressure Vessels, Air-Conditioning & Refrigeration Equipments and Turnkey HVAC projects in India and marketing of equipments outside India.
The company has successfully executed several orders of Nuclear Power Corporation of India in the past. With the Government of India signing Nuclear deal with various countries, the company should see huge orders coming its way in the near future. The company will also benefit from the rapid industrialization taking place across country.
Patel's Airtemp & it's Product Category…
Basic Details...
Patels Airtemp India Ltd. was incorporated on August 28, 1992 and is promoted by Shri Narayan bhai G. Patel & associates who have been in the business of design and fabrication of process equipment and engineering goods.
The company is one of the leading manufacturers of high quality engineering products. The Company is engaged in the manufacturing of equipments like ASME'U' Stamp Vessels & Heat Exchangers, Pressure Vessels, Columns Shell & Heat Exchanger, Finned Tube Heat Exchanger, Air Cooled Heat Exchanger Ventilation Units, Exhaust Air Units, Refrigeration & HVACE equipments, HVAC Systems and Ventilation & Air Washer Plants which are supplied to leading Refineries, Steel, Copper, Aluminum & Automobile Plant, Fertilizers & Chemicals Plants, Textiles and Paper Industries, Refrigeration & Air Conditioning Units, etc.
Patels Airtemp received prestigious orders worth Rs 16.3 crore from Indian Oil Corporation (IOCL) for supply of Heat Exchangers for Paradip Refinery Project, Orissa in May 2010 and orders worth Rs 5.0 crore from Manav Nesvi Infrastructure Pvt., Ahmedabad for Air Conditioning of Shree Balaji Agora Mall, Ahmedabad in April 2010. The company keep getting orders from its regular reputed customers also.
Financial Highlights:-
· The company has been witnessing a consistent growth in sales and profits for the last 5 years, i.e. since restructuring took place. Compounded Annual Growth Rate in sales is 30% and profits 72% in the last 3 years.
· At the end of Mar'09, the company had just Rs 6.55 crore as debt, while it had close to Rs 5.5 crore as Cash and Cash Equivalents. With the Enterprise value of just Rs 51 crore, and an EBITDA of Rs 15.5 crore, the valuations are extremely cheap at EV/EBITDA multiple of 3.29
· The company has been managing it's working capital requirement well. It has not been piling up inventory and has been improving Asset turnover ratio, indicative of efficient operation.
· The Net Profit Margins of the company have been on a rise since the last 5 years. The company recorded NPM of 12% for FY 2009-10 which is a lot higher than it's peers.
Investment Rationale:-
· The company is operating in a sector, which is set to witness high growth.
· Amongst all its peers (GEI Industrial, Blue Star, etc) the commands the highest margins.
· The company is available at a PE of just 5.64, while companies like GEI Industrial and Blue Star are trading at a PE of 16-18.
· Patel's Airtemp has a strong order book at close to Rs 60-70 crore, and is expecting huge orders from IFFCO.
· The management has been purchasing shares in small quantity through open market purchase.
>>Expect at least 4-5 times return in next 2 years from now!!!
1st Phase: Buy at the current price Rs 95[50% of investment]
2nd Phase: Add if the price fall down to Rs 80-82 [50% of investment]
Support around 90-92 levels for the stock. So safe bet considering everything.
Risks & Concerns…
Risks:-
There are few challenges from cheaper imports and the industry is also facing risks from unorganized sector particularly from the marketing in the state and nearby states, which have major thrust on Air-conditioning and refrigerator parts.
The industry is facing stiff competition from big players who are producing on large-scale production and have the advantage of economies in cost.
Concerns:-
The strong performance in the past is not a bullish sign and doesn't indicate the same or better performance in the future. Each year is different from the previous one!
Do not let my bias win over your common sense! Always do your homework and do not forget to do a research before you invest your money!
Both the IT as well as the manufacturing sector seeks talent. This increases the cost of the talent. The company has to ensure that it acquires good talent and retains it in order to constitute its major competitive edge.
As and when there is a change in the Government, there might be a change in its policies too. Any adverse changes in its policies may affect the business operations of the company.
Happy Investing!!!
Book full at 172/- CMP
ReplyDeleteCongrats to all investors :)