Scripscan:GEI Industrial Systems Ltd
cmp:140
Code:530743
Story:Promoted by Mr. C E Fernandes and Mr. P L Mundhra, GEI Industrial Systems Ltd.(GEI) is currently engaged in design engineering and specialized manufacture of Air‐cooled heat exchangers and Air‐cooled heat condensers in which it has a monopoly.The Company has successfully completed the Phase I and Phase II of expansion with the total investment of Rs. 55 crs. The capacity has increased from 1000 MW to 3000 MW and the Company has started bidding for the orders for the same.The Company’s Phase III will further increase the capacity to 5000 MW by Q1FY13.Net sales increased by 24% YoY in Q1FY12 to Rs. 63 crs due to increasein order book and other operating income (subsidy and erection income). GEI currently has order backlog of Rs. 400 crs with Rs. 125 crs worth order booked during Q1FY12. The current order book comprises of orders from Power (70%) sector and Oil and Gas (30%) segment. The management expects the order book position toincrease to Rs. 500 crs by FY12E.GEI’s operating performance increased with EBITDA growing by 68% YoY. The increase in EBITDA was due to a considerable increase instock (290%). The sudden increase in inventory was due to a sudden flow of orders during FY11 and slowdown in execution. The stock position is a onetime phenomenon and is expect to normalize by 30‐40% in the coming quarters. Besides the one time increase in stock,the operating expenses increased considerably due to a hike in rawmaterial prices (88% of net revenue in Q1FY12 vis‐à‐vis 75% in Q1FY11). GEI’s EBITDA margins increased to 23% from 16.8% (Q1FY12) and 14% (Q4FY11). The management expects margins to sustain at 17‐ 18% for a couple of years before eventually averaging out to 14‐15%.GEI’s PAT increased by over 16% YoY to Rs. 4.8 crs translating to a PAT margin of 5%. Interest expense increased by 141% YoY and decreased6% QoQ due to increase in working capital loan and interest rate.The Q1FY11 performance was muted as expected in all the EPC/engineering companies. However, with the back of increase in capacity and technological tie up with Innospin we expect an increase in order book flow from UMPP, EPC, and alternate fuel segment in the coming quarters translating to buoyant growth and solid returns.Due to promising order visibility, on track expansion, growing demand for air cooled condensers and boost from GEI power, we reiterate our call and estimate FY12E revenue and earnings estimate to Rs. 548 crs and Rs. 50crs respectively. At CMP of Rs. 140, GEI is currently trading at a PE of 4x FY12E EPS of Rs. 35.We maintain our BUY rating on the stock and upgrade out price target to Rs. 280/share with an upside of 100%.
Source:NSB
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