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Sunday, October 11, 2009

Precision Wires India Ltd and Sudal Industries Ltd:Future growth prospects,news/views/results/analysis/recomendation.

1)Scripscan:Precision Wires India Ltd

Story:Sensex has doubled in the Year 2009 although, fundamentals of the economy have not improved in the same proportion. It gives rise to the fear in the mind of investors whether such levels of sensex/nifty will sustain. However, in such a scenario, there are reasonable chances for investors to create wealth by investing in selected well managed companies of promoters with credibility in small cap and mid cap segments which still have growth potential and are available at low P.E. Ratio. PWIL is one such company which meets all such parameters.PWI is a market leader for producing Enameled Copper Winding Wires which are used for electric motors, switch gears and transformers. It has 3 factories with total capacity of 32820 TPA and has cost advantage to inhouse production of enamles and insulating varnish. It caters to a wide spectrum of industries like Power, Electronics, Industrial Equipments, Consumer Durables, Agri-equipments, Special Purpose Equipments etc. Company also produces CTC and PICC. Manufacture of CTC is highly capital intensive and long gestation period project. Process yields higher scrap generation in initial phase of production. Once Manpower is fully trained, scrap generation reduces.In 2008-09, production was 21472 tonnes, an increase of approx. 6%. However, sales were lower due to lower prices of copper in second half of the year. Company suffered sharp set-back in profitability because during the period July - Dec. 08, there eas unprecedented fall in copper prices which declined to USD 3072 from USD 8414. Due to such meltdown, its customers unilaterally refused to take delivery of finished products against confirmed orders. However, Company had to take delivery of high priced copper against its commitments. Due to this mismatch,Company had to sell finished product at very low prices which led to very low profits. It speaks of the efficient management that, Company increased sales volume despite huge meltdown.This largest producer of copper wires deserves much higher valuations considering that, it has consistently performed well, with very attractive financial ratios/parameters. Company will, in view of better performance, definitely raise dividend to earlier levels of 36%. Copper prices are unlikely to crash and hence chances of inventory losses in current year are remote.Altogether a great buy at dips.

2)Scripscan:Sudal Industries Ltd

Story:SIL, Nasik based Company, is engaged in the production of Aluminium Extruded parts with installed capacity of 8000 tonnes. It caters to industries like automobiles,electronic/electrical equipments, architectural, consumer products and power transmission etc. Company has its own Casting facilities which leads to savings in production cost. Some of its clients are:M&M,L&T,Godrej,Crompton Greaves etc.Scrip is being recommended as demand for its products is rising sharply and fall in aluminium prices has improved profit margins sharply. Further, Company is diversifying into hospitality business and is planning for 5 star hotel at surplus land in its Nasik factory.Despite global meltdown and erratic fluctuations in R/M prices, SIL has reported excellent results in 2008-09. Stock is trading at 4.65 x FY09 EPS.SIL holds an edge to get better and higher realization due to sound base of the customers and locational advantage. Overall growth in economy has slowed to a certain extent but, Company has been able to retain its market in sectors like electrical equipment manufacturing, consumer goods etc. Prospects, growth and future lie in markets like power sector, transport sector and other potentiality in railways, furniture etc.In current year, Company has a strong order book and its turnover may touch even 3 digit mark.5 Star Hotel: Company has valuable surplus land in its Nasik factory. Nasik has grown to be an important location for new industrial operations. Nasik and its surroundings, specially, Trambakeshwar Temple complex are popular tourist destination. Hence, Company has decided to set up a 5 star hotel on this surplus land. It has already received enquiries from various hotel chains who wish to construct/manage proposed hotel. As per our sources, most likely SIL willtie-up with Hyatt and Hyatt will invest the money for construction of the Hotel and also manage the same. SIL will get some fixed lease and also revenue related royalty.In 2009-10 Company is likely to report all time high performance. Estimates for current and next year are from the core business as income from Hotel business will accrue only after 3 years.Recently, promoters have taken preferential offer of warrants as they must be confident of bright.In anticipation of good performance, trading volumes have already surged.Company will definitely declare dividend in current year and most likely there may be interim dividend also.Current valuations/P.E. Ratio are very low due to investor ignorance about its potential.Even if SIL gets low P.E. Ratio of 4, based upon FY10E performance, share price should be Rs. 80/-.


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