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Note: The artciles are not research reports but assimilation of information available on public domain and it should not be treated as a research report.

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Monday, July 28, 2008

HBL Power Systems Ltd:Too good to be true

Scripscan:HBL Power Systems Ltd
CMP:240
Traded in:-Bse-nse

Story:-HBL power is engaged in the business of making specialised batteries, electronics and DC power systems and caters to a variety of end-user requirements across industries.The customer segments include telecom, railways, defence, power, solar energy, petroleum, oil and gas, and uninterrupted power supply systems.A secured communications product,(a gateway encryptor) developed by HBL has passed all the tests required and is likely to be used widely by several government agencies,beginning early 2008.The product can prove to be a blockbuster for the company.

Orders:The company made 2 bids during early 2007 for defence electronics contracts, totaling over 500 crores. The time lines in defence are such that the final result will be known only in end of 2008.The products are already in field trials.Further, Its JV with IAI-ELTA of Israel has commenced exports recently.Two bids were made by the JV to the Ministry of Defence.Results may be known in mid 2008.The management expects to increase its margins as each and every contracts of the company are now on variable cost and the price hike has been pass on to the clients.Last year the company faced several problems because of the high volatility of input cost prices, this fiscal they have given a decent check in managing the raw material procurements.

Conclusion:In these sort of competitive environment where most companies are struggling to grow by 20-25%,Hbl is going to have a huge jump in its turnover and Profit these fiscal.Further the company is expected to post turnover worth 1650crs in 09 and profit is expected to inch to around 120crs.Eps for 09 is expected to clock 50rs.The company as on march 2007 has got over 215crs reserves in its book which is around 9 times its equity capital.Its of one"s easy assumption that HBL remains one of the primate candidates for a liberal bonus issue.If the assumptions vindicates that can certainly as a big trigger for the company. At present price of 240 the company is quoting at less than 5 times its fy09 earnings.One of the finest buys.


Regards,
ARUN
I can be reached at:-arunanalyst@rediffmail.com

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