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Thursday, December 17, 2009

Easun Reyrolle Ltd:Future growth prospects and outlook,why its moving?Target price?latest news and buy/sell/hold?

Scripscan:Easun Reyrolle Ltd
Code: 532751

Story:Easun Reyrolle, a forerunner in the field of power system protection for the past two decades, is a part of the Easun Group. It is an acknowledged leader in the field of electrical power management. The company has three manufacturing locations in Hosur, Chennai and Bangalore, besides a technology development center in Bangalore. It is one of the largest players in India in the field of power system protection products especially relays and control panels. From protection products and systems it has now diversified into power system automation, energy metering and switching solutions. The major customers include State Electricity Boards, Power Utility Companies and companies like BHEL, ABB, Siemens, Sterlite,etc.Easun is moving up the value chain from a product manufacturer to ‘One Touch Access’ strategy for all kind of power safety requirements. It was primarily into protection products and systems, has now diversified its offerings over the years to automation, meters, switchgears and turnkey projects. It expects these new segments to contribute at least 50% of the revenue over the next 1-2 years.India faces a huge power shortage (7% at base load and 13% at peak load). The government has undertaken an ambitious initiative under which it plans to provide “power for all by 2012”. Accordingly, the XIth plan (FY08-12) envisages a capacity addition of 66 GW and 86.5 GW is the target for the XIIth plan (FY13-17) vs. the current installed capacity of 128 GW. We expect the capex plan in the power sector across all segments to continue at a robust pace over the next 5 years, which will result in strong order flows for power equipment companies. Government has introduced APRDP scheme to accelerate reforms in distribution sector. One of the major objectives of the APRDP scheme is to introduce distribution automation for better management and control of power distribution system in India. As state run distribution networks are revamped in an effort to curb T&D losses, they will be required to spend heavily on monitoring, control and protection systems for their networks. Easun will be a direct beneficiary of this objective.The Easun group comprises a clutch of highly profitable businesses in areas related to the listed entity viz. ERL. We believe that promoters might at some stage seriously consider a consolidation of all these businesses under the listed company’s banner. This may lead to a positive re-rating for the company.Easun enjoys strong PBIDT and PAT margins being a cost leader in the industry. We remain positive on the acquisition of Nxtphase by Easun due to integration benefits arising out of better technology and foray into international market.A stock worth buying.

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