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Monday, September 28, 2009

BASF India Ltd and Sanghvi Movers Ltd:Future growth outlook and propsects

1)Scripscan:BASF India Ltd
Bse code:500042

Story:BASF India Ltd. (BIL) is a 71.18% subsidiary of BASF AG Germany headquartered in Mumbai, with manufacturing facilities in Thane, Mangalore and Dadra. BASF manufactures and markets expandable polystyrene, tanning agents, leather chemicals and auxiliaries including specialized metal complex dyes, leather dyes, textile chemicals, dispersions and specialty chemicals, acrylic polymers in primary forms and crop protection chemicals. BIL is also involved in the trading of chemicals including dyestuffs and related textile auxiliaries, and renders technical services to various industries. The parent BASF is the world's leading chemical company - The Chemical Company. BASF Group operates in six product segments: Chemicals, Plastics, Performance Products, Functional Solutions, Agricultural Solutions, and Oil & Gas. BASF India operates in five business segments, namely performance products, agricultural & nutrition, plastics, chemicals and others. BASF India's product portfolio is very diversified, innovative, safe and eco-friendly catering to a wide range of industries. Performance products along with agriculture & nutrition products continue to remain the mainstay of BASF India as they contribute close to 80% of its revenues and profits while plastics and chemicals constitute the remaining 20%. BIL's products cater largely to the following industries; Leather, Automobiles, Consumer goods, Pharma, Paper and Textiles.The performance products business of BIL includes performance chemicals and functional polymers. Performance chemicals business catering to wide spectrum of industries like textile, leather, plastics and coatings etc is set on a growth path due to good growth prospects of the user industry. The Agricultural and Nutrition division includes products like pesticides, herbicides, animal nutrition, pharmaceuticals and cosmetics. Agricultural products business includes agrochemicals like insecticides, herbicides, weedicides, fungicides and specialties. Agrochem industry is witnessing good growth on back of thrust given to agriculture by the government and greater emphasis on improving agricultural productivity. Nutrition business has product range that includes vitamins for human and animal nutrition, aroma chemicals and ingredients for cosmetic industry. The plastics business comprise of expandable polystyrene (Styropor) and performance polymers (engineering plastics). Styropor is primarily being used in the areas of packaging and insulation. The other chemicals business caters to the requirement of a wide range of user industries including pharmaceuticals, agro-chemicals, petrochemicals, plastics, fertilizers, organic and inorganic chemicals, coatings, leather & textile processing.In an important development, the Parent company BASF, AG Germany made an open offer to acquire 22.31% equity stake of the company at a price of Rs 300 per equity share in May 2008 to increase its stake in BASF India to 75%, which will give it more freedom to invest and expand its business in India. However it got 18.49% more stake, thereby increasing its stake to 71.18%. BIL has come up with decent numbers for the year ended March 2009. The net sales stood at Rs.1124 cr. in FY09 depicting a growth of 23.91%. Operating profits witnessed a growth of 20.81% to stay at Rs.124.66 cr.. The bottom line of the company increased to Rs.68.6 cr. portraying a growth of 15.61%. EPS for FY09 climbed to Rs.24.35, indicating growth of 15.61%. Dividend declared is 70%. At CMP of Rs. 220, BASF has a total market capitalization of Rs. 620 cr. The current year dividend yield works out to 3.2%. The book value per share works out to Rs 137.8 (FY'09) and PBV is 1.6 times. The PE ratio is 9 times on FY09 earnings. For FY08, BIL had reported net sales of Rs. 907 cr., EBITDA of Rs. 106.6 cr and an EPS of Rs. 21 on equity of Rs. 28.19 cr. The dividend declared was Rs. 7 (70%) for FY08.Given the technological superiority and quality of BASF products, BIL has become the preferred source of raw materials for products exported from India. The outlook for the business in the coming years is favorable, given the increasing focus on Asian markets by the BASF group. The stock looks good in the medium term given the expansion undertaken by the company for which the results will show in current year. BASF India will maintain a strong performance in its major segments and will continue to derive support from its parent company. At CMP, stock is trading at 9 times FY 2009 EPS of Rs. 24.3 and 7.5 times FY 2010 expected EPS of Rs.29. Overall BASF is an interesting investment proposition with decent fundamentals. Accumulate on declines for decent gains of 50-55% in the next 6-8 months.

2)Scripscan:Sanghvi Movers Ltd
Bse code:530073

Story:Pune based Sanghvi Movers Ltd. (SML) is the largest crane hiring company in India and the 12th largest in the world as per a recent ranking from Cranes International magazine. It is engaged in the business of providing hydraulic and crawler cranes to various industries in the infrastructure and core sectors. It has a fleet of 278 medium to large size hydraulic truck mounted telescopic and crawler cranes with lifting capacity of 20 tons to 800. While SML has a wide presence in the wind energy sector, in the next 5 years the company will focus more on renting out cranes to non-renewable power, steel, cement and refinery plants.SML's major clients include Suzlon, Lanco Infrastructure, Reliance Industries, BHEL, Tata Steel, L&T, Reliance Energy, Indian Oil, NTPC and Ultratech Cement. Unlike smaller players, SML has a pan-India presence through nearly 40 depots and owns 80 trailers to eliminate dependence on third party transport. By setting up depots, the company has saved cost and time involved in mobilisation of its cranes, thus increasing operational efficiency. This has enabled it to source 70% of Suzlon's and BHEL's crane requirement orders, enter into 5-year partnership with Enercon and have strong relationships with business houses like Reliance, Aditya Birla Group and L&T for their project requirements. This gives sufficient visibility into the company's earning capability over the next three to four years.In the past decade, thanks to a global construction and infrastructure boom and flourishing economies around the world accounting for much of the demand, the supply of high capacity and technologically superior cranes has been in acute shortage. Given this scenario, the crane rental sector is witnessing a steady growth in its revenue stream due to the latent demand for cranes as well as pricing power coupled with high utilisation rates. Particularly countries like India, where the labour is cheap, offer very profitable businesses to such players. Given that Sanghvi Movers is the largest crane rental company in the country and the 12th largest in the world, the potential for revenue growth for the company is very lucrative.India's largest crane service provider and a dominant player in the over 100 tonne segment, Sanghvi Movers, has grown at a scorching pace over last few years on the back of ongoing investments in various industries. While being the largest crane hiring company in the country and the 12th largest globally certainly adds to SML's advantage, the barriers to entry for its competitors are also high in the high-capacity crane (above 100 tonnes) segment. Its tie ups with some of the largest international crane manufacturers such as Liebherr, Kobelco and Manitowoc positions it very favourably amongst global crane rental companies. SML has 50% share of the organised market and is largely concentrated in the windmill business. The scope for growth in the non renewable power plant business and capital additions in the cement, steel and oil refinery sector offer ample scope to the company to multiply its revenue several fold in the coming years.Going forward , the company will be adding 50 more cranes in the current fiscal and would invest close to Rs 85 cr. in the expansion plan. This will bring the total number of cranes to 367 at the end of FY09. Further, SML would now be getting into the higher range of 1,350 tonne capacity cranes that would be useful for nuclear power and refinery projects. The company's purchase of technologically superior high-tonnage cranes and trailers and a wider presence offering proximity to large project sites are expected to strengthen its standing in the domestic market.At the current price, the SML stock is trading at a multiple of 3 times estimated FY10 earnings(Rs 24). Keeping in mind the company's strong presence in the domestic crane hiring industry and future growth prospects, Investors can accumulate the stock on declines. The downside to the stock remains very limited due to the company's unique and well-hedged business model. Accumulate

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