10000 to 4crs in 18 months 1000rs to 50crs 300% returns 75% promoter holdings A 50 bagger A sureshot 5 bagger Analysis Another fraud? Auto ancillaries Bank sector Blind sell Brand plays Broking Bse Nse Buy calls cements Ceramics/tiles Counters I don't like Debt free businesses Delisting candidates demerger bets Disclosure- I own them Domestic consumption plays E-Commerce pick Education Exit at rallies Famous analysts Famous stocks FMCG Footwear future multibaggers Gems andJewellery Hidden gems High conviction ideas High dividend plays High potential small caps High ROE stocks Holding companies Hotel sector How they looted you.. Indian stock market Infrastructure sector Interesting Microcaps IT KPO Landbank plays largecap ideas Less than 5 PE stocks Liquor Logistics Market lessons Market outlook for 2013 and 2014 Market underperformers Meeting with the CEO Metals Monopoly businesses My 5 baggers My Favourite counters My paid stock recommendations My stock picking techniques nse bse tips Oil exploration Operator calls Paints Penny stock outlook penny stock updates Pharma sector Poultry stocks PSU Publicity freaks Real estate Renewable energy plays Safe bets Sell recommendations Share market Live shipping stocks short term call SOTP plays stock tips stock under 10rs Stocks to watch out for Strong bonus candidates Takeover candidates TATA product tea Textiles The 13 bagger The 45 bagger Trading companies Transformers Turnaround bets Tyres Uncertain/Risky business models Unique businesses

Search This Blog(Over 800 companies covered in the blog).

Archives : Old artciles

Wednesday, August 29, 2007

A small cap idea-The potential multibagger

ScripScan=Rishi Laser Cutting Ltd
Face Value=10

Introduction-Rishi laser is a leader in the usage of Laser Cutting for manufacturing components and assemblies.Rishi(RLCL) set up its first Laser Cutting facility in 1995. Even though Laser Cutting was very popular in Western Countries at that time, Laser Cutting of metals was very new to India.The progress in the first five years was very slow because Laser Cutting was still looked as a very expensive method of processing steel. Also the Indian Engineering Capital Goods Industry was passing through a very difficult period in later nineties. The scenario has completely changed today for the sector and the company. The Engineering and Capital Goods sector is booming in India and Laser Cutting is fast becoming a very standard method of processing flat steel.The fabrication industry is highly fragmented and there are very few organised large Companies in the business. Rishi Laser continues to be the leader in the business in terms of capacity with 20 CNC steel processing machines. RLCL is now embarking on major growth path to add further facilities to enhance capacity.

Initiatives-Rishi was earlier concentrating on only being a service provider.The management says," We increasingly found that this was limiting growth since customers were demanding further processes including bending, welding, painting etc. We therefore started moving towards value addition and supplies of assemblies and fabrications and this trend is expected to increase.Since the company is a service provider and a supplier of assemblies it became imperative to move closer to the customers.To move up the value chain the company recently has acquired the plant & machinery of a British Sheet Metal Fabrication Company and the same is proposed to move it to India and install at its existing plants.On last fiscal 06-07 the company commisioned separate facilities to create a foundation for large exports in coming years by making a small beginning in exports. The welding capabilities of the Company too have been strengthened to ensure capability to service the sector.

Outsourcing Oppurtunity=Due to increasing cost pressures,the European Companies are increasingly being forced to outsource components and assemblies. RLCL is well placed to supply light and medium fabrications because of its modern facilities, good Engineering base and experience of similar supplies in domestic industry.We beleive,In the current global economic scenario the trend towards outsourcing will increase. Also it would important to note that,India has a tremendous cost advantage where the items have a high Engineering content. RLCLs products are not mass produced items and require Engineering inputs at all stages.Thus Outsourcing can become a huge growth provider for the company in future.

Risks And Concerns-Rishi is a supplier to the Engineering Sector.So any down trend in Engineering Sector will have an adverse effect on the Company's prospects.Interest rate hardening and higher inflation could increase costs, which cannot be passed on to customers. Any appreciation of the Rupee will affect the profitability of the company's exports. Poor export infrastructure could force overseas customers to look at other countries for their sourcing needs.

Prospects-The Company has continued to consolidate its position in the business by creating substantial additional capacity. The demand for quality steel profiles and fabrications made from such profiles, is very robust. Large capacity is a great competitive strength as deliveries can be made very fast as also greater flexibility/variety of supply is possible. As Indian Companies in' the engineering sector have increasing order backlogs their requirement is for quicker & timely deliveries. RLCL is very well positioned to fulfill this demand because of its large capacities as also due to plants at multiple locations. The Company is making further efforts to increase its reach as also to increase capacities. Also it must be noted that the demand for steel is expected to grow substantially in the coming decade. The bullishness in this sector is evident from the huge capacity creation that is being planned by the steel sector. The proportion of sheet steel and plates consumed by the engineering sector will grow proportionately. The processing of this steel into Components, assemblies and fabrications will require huge capacity creation by the fabrication industry. We therefore expect the requirement for the company"s products and services to increase manifold.

Outlook-The demand has grown for the sector and the company all round as the Engineering Industries have revived and are booming. As per CMIE the ongoing CAPEX by India Inc will be over Rs. 8,00,000 crores.The demand in Electrical Switchgear Industry and the Earth Moving sector has exploded due to increased spending on infrastructure. We believe that this process will get accentuated as India will have to spend increasingly large sums of money on infrastructure if GDP has to grow at 8-9% to p.a.The Company has moved towards more value addition to cut steel. By doing this the potential market that the Company can cater to has increased by 100 times. This has also opened opportunities for RLCL to move from light fabrication to medium fabrication.The management says," We believe that the opportunities in the medium fabrications are substantially higher - especially from the Earth Moving Industry".Thus all things are looking up for rishi laser and this all will take the company to new heights.

Conclusion=Rishi has been consistently perfoming well over the last 4 years or so and the same trend is expected to continue in the coming years as well.We expect RLCL to deliver a topline of aound 75crs and a bottomline of about 4.8crs for fy08 .With a low equity base of 6crs the bottomline results in an EPS about 8rs.At the current price of 67rs RLCL quotes at a P.E of slightly above 8.3 times.Present valuation looks attractive at the moment and considering its leadership in the sector,the export potential,outsourcing oppurtunities and booming exconomy,WE BELEIVE RISHI LASER WOULD BE A SCRIP TO WRITE A NEW SCRIPTURE FOR ITSELF IN THE COMING YEARS.WE ASSIGN A BUY ON THE COUNTER WITH A TARGET OF 105RS.

No comments:

Important Disclaimer&Privacy policy

This blog does not share personal information with third parties nor do we store any information about your visit to this blog other than to analyze and optimize your content and reading experience through the use of cookies.You can turn off the use of cookies at anytime by changing your specific browser settings.This privacy policy is subject to change without notice and was last updated on 20.3.2013. If you have any questions, feel free to contact me directly here: Investment in equity shares has its own risks.Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that I consider reliable. I,however,do not vouch for the accuracy or the completeness thereof.This material is for personal information and am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.The stock price projections shown are not necessarily indicative of future price performance.The information herein, together with all estimates and forecasts, can change without notice.

Subscription to Arunthestocksguru

Enter your email address:

Delivered by FeedBurner