RTS Power Corporation Ltd: On the Super Growth Trajectory:
CMP--->Rs.92.55
BSE Code: 531215
Group: B2
Face Value:Rs.10
Book Value: Rs.25.43
EPS: Rs.9.83
Sector:Electric Equipments
Performance:Market Performer
Incorporated Bhanwarlal Bhutoria Pvt. Ltd., Kolkata-based RTS Power Corporation became a Public Limited Company in 1984 and the company acquired its present name in Jan.'94. In 1971, the company set up production facilities to manufacture power and distribution transformers at Jaipur and subsequently at other places. It started operations by manufacturing 16 KVA transformers. In 1995, the company diversified into the manufacture of high-rated power transformers. The company came out with a public issue in Aug.'95 to part-finance its diversification into power transformers and a simultaneous modernisation-cum-backward-integration programme. The latter involves processing major raw materials, while modernising the existing facilities by augmenting the wire-drawing and coating plant capacity, improving the functioning of the lamination plant by installing a slitting line and setting up a transformer oil-filteration unit. During 1995-96, its paid-up capital increased from Rs.0.98 cr. to Rs.5.19 cr. due the public cum Right issue made by the company. It then expanded the capacity of transformers ten fold from 5000 KVA to 50000 KVA ranging from 25 KVA to 3150 KVA. It added another unit to manufacture and repair Power & Distribution Transformers at Salkia, West Bengal. During 1996-97, it set up another factory at Jaipur to manufacture Transformer upto 132 KV Class. At present, the company has one transformer plant in Calcutta, one in Agra and three in Jaipur.
Shareholding Pattern: The promoters hold 32.67% while the public holding is 67.33% as of promoters have increased the holding after 31st March’06 from 29.25% indicating their confidence in the future of the company.
Financials: The company came up with a good set of numbers for the Sept.’06 quarter where net sales jumped to Rs.23.31 cr. from Rs.14.95 cr. in the corresponding previous period. The net profit shot up from 1.04 cr. to about Rs.1.19cr. The Minimum Expected EPS for 2006-07 should be around Rs.11 to Rs.12.
Investment Rationale:
1) The company has completed the expansion of its Power Cable & Conductor Division and thetrial run started from last month. From the next month, the company will start production in full swing and has someorders from Rajasthan State Electricity Board. More orders are likely from Maharastra State Electricity Board, UP Stateelectricity board (UPSEB), etc.
2) The present order book position of the company is around Rs.60 Cr.
3) The company has participated in tenders and is expected to get orders worth at least Rs.70 to Rs.100 cr. in this fiscal, 2006-07 itself. Hence the total order book for the Fiscal 2006-07 should be at least around Rs.120--Rs.130 Cr.
4) The company is diversifying into for High Tension Cable manufacturing, which will be completed in 2008-09. This is a mega project whose turnover will exceed the turnover of the Transformer Division.
5) The company came up with a stronger performance in the last quarter.
6) It has one of the lowest Price / Book Value Ratio as compared to its peers.
Name of the company Price (P) Book Value(BV) P/BV
RTS Power Corp. Ltd Rs.92.55 Rs.25.43 3.64
ABB Rs.3425.20 Rs.209.78 16.33
Siemens Ltd Rs.1205.85 Rs.235.59 5.12
Areva T & D Rs.812.9 Rs.52.87 15.40
BSEL Rs.2450 Rs.298.31 8.21
7. With the governments thrust on the Infrastruture and power sector reforms, the company is expected to gain handsomely in the days ahead.
8) The company paid a total dividend of 10% for FY06 and has the shareholders’ approval to raise Rs.19 cr. through an issue of up to 20-lakh convertible warrants,
to promoters on preferential basis.
9. According to higly placed sources close to me, there are also lot of talks going on Merger & Acquisition and on Takeover front, inside the company. The sources are very tighlipped in this cases and said, "at appropriate time everything will be disclosed to the media". The said sources however did not deny about Siemens Ltd taking a stake in the company. "We do not want to say anything at this juncture...", the sources commented. There are also talks of another MNC thinking of taking a stake in the company.
Hence looking from all angles the scrip of RTS Power Corporation Ltd, trading at Rs.92.55 is undervalued at the current price. Moreover the power sector companies enjoy better valuation and hence with the expected EPS of Rs.12, the share price of the company should cross Rs.200 within 8 to 18 months time. Those who have bought on last Friday when it dipped to around Rs.91 will smile on Monday.
Keep accumulating Conart Engineers Ltd on all declines.Start accumulating Hazoor Media and Power Ltd from Monday at around Rs.19--Rs.20. Coral India Finance and Housing Ltd ( Recommended at Rs.16.55) shot up to more than Rs.30 on last Friday on early trade before cooling down a bit--Keep watch on the counter.
Morgan Venture Ltd came out with decent set of numbers, considering Sequentially. Keep accumulating Gravity(I) Ltd and Chandra Prabhu International Ltd on all declines. Avoid playing on the stocks whose story is unknow to you....always accumulate the counters where the story is known and the stock is consolidating after a correction.
Shova Developer Ltd IPO Seems to be too steeply price, so avoid ......
On Monday in the intial hours there might be some selling on account of the RBI draft proposal on Banking. But these types of "Absurd Laws" will never get passed in the long run and hence at the end of the day the overall markets are expected to 'Close in the Green'.
THE "NOVEMBER EFFECT" HAS KICKED IN AND THE CHANCES OF ANY BIG CORRECTION IS ALMOST REMOTE, AT THIS STAGE OF THE MARKET. KEEP ACCUMULATING SMALL AND MID CAP COUNTERS. MOST OF THE LARGE CAPS ARE FAIRLY VALUED IF NOT OVERVALUED AT THIS PRICE, ACCORDING TO MY ASSESMENT[At the same time I also do not deny that they deserve better valuations due to India growth story gathering momentum]. THE LARGE CAPS WILL CONSOLIDATE AT THIS STAGE WHILE THE SMALL, MICRO AND MID CAPS ARE EXPECTED TO TAKE THE CENTRE STAGE FROM NOW ONWARDS.
Additions from Internet:
Let's take break and talk about BRIC economies. The general consensus of many economists is that Brazil, Russian, Inda, and China will combine to be the prevailing economic powerhouses of this century. They all have GDP's that continue to soar and they've signed trade agreements that assure economic ties for years to come.
One of the main reasons that the BRIC's (Brazil, Russia, India, and China) have potential to be the economic powerhouse of the 21st century is because of their recent adoption of global capitalistic economies. Goldman sachs reported that BRIC economies currently are responsible for 20% of the world growth in GDP. That number is expected to swell to 40% in 2025. Ultimately, this will....... Part of the reason why these economies are so intwined is that China and India are becoming dominant providers of manufacturing and services, while Russia and Brazil have much of the supply of raw materials[Sugar, Ethanol, Oil etc]. It's a match made in the Heaven. As far as the stock market goes, here is how these markets have performed in the last 12 months
1. China (Shanghai) - up 40%
2. Brazil - up 40%
3. India(Sensex) - up 42.8% [In calender Year 2006].
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