Scripscan:Sujana Towers Ltd
BSE:532887
cmp:9
Story:Over the next three months Power Grid Corporation is likely to release orders for setting up of Transmission Towers worth over Rs 10,000 crore. This will benefit all the players in the sector including Sujana, KEC, Jyoti and Kalpatru Transmission. More important, considering the fresh power generating capacity proposed during the XIth plan, Transmission Tower projects worth Rs 10,000 crore could be a recurring requirement over the next five years, implying assured business for the sector from the GOI. Hyderabad based Sujana Towers has expanded its galvanised tower manufacturing capacity from 28125 tpa to 128125 tpa, while raising its heavy structural steel product capacity to 70,000 tonne per annum. The capacity of light and heavy structures is 80,000-85,000 tonne per annum. Post-expansion, 80 per cent of the structural steel requirement of the lower division is being met through in-house production. The company currently utilizes 85 per cent of its galvanized tower capacity.In order to meet the robust demand, it is further increasing its gavanised tower capacity by 75 per cent to 2,28,125 mtpa in Chennai, which is expected to be commissioned from march 2009. The additional capacity will be directed at meeting export demand for power and transmission towers from East and West Africa.As a policy, the company does not take orders which exceeds a six-month timeline to avoid variances arising from inputs costs. Fortunately, in the second half of CY09 almost all key inputs like Steel, Zinc, Welding Electrodes have become cheaper making Sujana more viable on the cost front.The management sees huge demand for towers, both from the power and telecom sectors. In the power transmission business, the relationship with Deepak Cable continues Sujana Towers executing orders up to 400kVA. The company is making additional investment for 756kVA capacity, government board approval for which is awaited. Sujana Towers recently changed its accounted year, to incorporate the effect of its expansion at Chennai (the unit is dedicated for supply to Bhel) and its latest results are awaited.Sujana Towers currently trades at a P/E of less than 2 times on FY09E fully diluted earning per share. The stock has had a massive price and time correction falling from a peak price of Rs 240 in January 2008 to Rs 9 now.Most risks are priced in and stock seems to be building a base for the next rally.So expect minimal downsides but lots of upsides from the present levels.A great great buy
Regards,
ARUN
I can be reached at:-arunanalyst@rediffmail.com
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