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Thursday, September 15, 2011

Kavveri Telecom Products Ltd:-Buy/sell/,growth prospects and recommendation,news and results,target price and analysis,view and outlook,multibagger

Calls review:Kavveri Telecom Products Ltd
Recommended price:29(4.4.09)
Present price:133

Scripscan:Kavveri Telecom Products Ltd

Story:KTPL manufactures telecom products and provides solutions to the frontline telecom majors. The largest maker of antennas and radio frequency (RF) products in India, KTPL also makes repeaters and solar products. With a capacity of more than one lakh antennas and 10,000 RF products per month, the company has Motorola, Alcatel, Ericsson, Nokia, Reliance, Aircel, Vodafone, Idea, Spice, MTNL and BSNL as its clients.KTPL has acquired two Canadian companies, Til-Tek Antennae and DCI Digital Communications, in the last year-and-a-half. Til-Tek is a leading antenna manufacturer, while DCI makes RF products and filters. KTPL has also acquired technology, intellectual property rights and patents for base station antennas from PCTEL, US. With these, the company can now manufacture base stations with better technology and get access to a larger customer base in developing and developed markets. This has also brought seven international patents into its fold. Instead of going for debt or a fresh equity issue, KTPL used the less risky route of internal accrual to pay for these companies.India has over 250 million telecom subscribers, a number expected to double by 2010. According to the Department of Telecommunication, the investment target for the sector is $25 billion, or Rs 1 lakh crore, in the next three years. This translates into more orders for telecom products manufacturers.Acquisitions in Canada and expansion in India will help KTPL increase its scale of operation and market share in India, which is presently dominated by international suppliers like Andrew Corporation and KATHREIN-Werke KG. Also, the international patents will help KTPL increase its global presence.Telecom companies are hard to miss in India. Be it their products or their ubiquitous ad presence. The industry has an average annual growth rate of about 40 per cent per annum. While the big brands get investor and analyst attention, smaller companies that supply to them, and which are also a part of this growth story, aren’t much in focus. Bangalore-based Kavveri Telecom Products (KTPL) is an example.At Rs 160 crore turnover (FY08) KTPL is a small company and investing in small-cap stocks brings inbuilt risk, as these are more volatile.Restrict purchases to give a return kicker,but don’t make it a core member of your portfolio.

Present update:As can be seen it has given a fantastic 450% returns in 2 odd years and still looks ripe for more.This telecom products manufacturer has posted a good set of numbers for Q1FY12. YoY, topline has grown by a whopping 127% at Rs.1109 crore and net profit rose 65% at Rs.8.37 crore. EBIDTA margin declined from 31% to 20% which the company has attributed to change in product mix. Sequentially, the growth has been lackluster, with the topline growing 6% and bottomline by 8%.The company has maintained its capex plan of Rs.800-900 crore over the next three years. It has got approvals to raise upto Rs.75 crore via QIP which might happen during the course of CY12. The company hopes to maintain its 30% growth in topline as well as bottomline growth. Its current debt stands at Rs.65 crore. On an equity of Rs.16.87 crore, its annualized EPS of Rs.20 (face value Rs.10), it discounts the current price by less than 7 times.

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