BSEIndia: All Stock Market News: 12/07/07

Friday, December 07, 2007

$$ DreamGains !! $$ Friday Telefolio : Pheonix Lamps

Phoenix Lamps

Illuminating prospects

With Actis, a strategic investment fund, at the helm, one can look forward to aggressive growth as well as value unlocking once Actis decides to exit

Buy	Phoenix Lamps
BSE Code	517296
NSE Code	PHOENIXLMP
Bloomberg	PL@IN
Reuter	PHLM.BO
52-week High/Low	Rs 211 / 108
Current Price	Rs 184 (as on 7th December 2007)

Phoenix Lamps is India's number 1 manufacturer of lighting sources for automotive and general lighting applications including Automotive Halogen Lamps and Compact Fluorescent Lamps (CFLs). It manufactures lamps at 5 state of the art facilities. Phoenix sells its lighting products under its own ‘Halonix’ brand, and also does white label manufacturing for other leading brands in India. A pioneer in lighting products in India, Phoenix Lamps is recognized and trusted for its high quality, technologically advanced and innovative products.

The company’s products include automobile headlamps under the Halonix brand, H3 type halogen lamps for fog lamps, J-type halogen lamps for general lighting applications, compact fluorescent lamps (single/double H-type), etc.

Actis at the helm

During May 2006, the company identified potential foreign investors namely Argon India Limited and Argon South Asia Limited (controlled by Actis, which manages funds of Commonwealth Development Corporation) to invest into its expansion project by way of Convertible Share Warrants. During the process of obtaining statutory approvals for the same, the Acquirers had also expressed desire to purchase 87,35,727 equity shares held by the Gupta Family (the main promoters of Phoenix Lamps) thereby acquiring controlling stake into the Company. Accordingly, a warrant subscription and share purchase agreement was entered on 3rd July, 2006 which was subsequently amended on 28th December, 2006, wherein Gupta family agreed to sell their shares at Rs.190/- per share.

As per the requirements of SEBI Takeover Regulations, the acquirers made an open offer to acquire 56,03, 860 equity shares from public at Rs 190 per share. Having complied with the SEBI Takeover Regulations, Acquirers have acquired the control of management of the company and inducted their representatives as well as independent directors on the Board. The company has also redeemed the entire preference share capital of IDBI Ltd. The new Board of Directors has thorough knowledge, expertise in every field and is confident of further strengthening the company and improve wealth of investors in the years to come.

Market leader in growing market

The company enjoys the status of Market Leader in automotive Halogen Lamp segment in India with supplies to all Major OEMs. Continued growth in automotive segment with increasing demand from replacement market has enabled the company to perform well on consistent basis.

The company is also leading player in Compact Fluorescent Lamps and other General Lighting Halogen Lamps. In case of General Lighting Lamps a rapid shift is taking place from Ordinary incandescent lamps to energy efficient Compact Fluorescent Lamps (CFLs). In FY 2007, this segment recorded a growth of over 27%. CFLs will be the main growth driver of the Company in next couple of years.

Consistent financial growth

Even when other automobile ancillaries have not registered good results, PLL has managed to register robust growth. And importantly, the company has been successful in expanding its profit margins along with handsome rise in sales.

For the quarter ended September 2007, while its sales rose 26% to Rs 91.31 crore, OPM improved by 90 basis points to 17.9%. This took OP up by 32% to Rs 16.36 crore. Falling interest cost (down 18% to Rs 1.59 crore) and lower depreciation growth (up 14% to Rs 2.76 crore), saw its PBT rise by a good 46% to Rs 12.59 crore. Even as taxation grew 211% to Rs 1.15 crore, PAT rose by a solid 38% to Rs 11.44 crore.

For the six month ended September 2007, while its sales rose 21% to Rs 162.02 crore, OPM improved by 70 basis points to 16.6%. This took OP up by 26% to Rs 26.92 crore. PBT went up 42% to Rs 19.85 crore. Even as taxation grew 305% to Rs 85 lakh, PAT for the six month too rose by a solid 38% to Rs 19.00 crore.

New facility, overwhelming demand and new strategic markets to boost performance further

The company is riding high on the increased production with the start of the Haridwar facility having been commissioned since July 2007. Buoyed by the overwhelming response from the export market, Phoenix Lamps has also entered new strategic markets for auto exports and plans to increase market penetration in the coming years.

Buoyant outlook; Management confident of robust future and significantly higher margins

Rajeev Prasad, Managing Director, says. "The growth in profit is mainly because of better planning, forward and backward integration of units, better realization of value addition products, and working capital management .The management expects the current fiscal to be robust on account of capacity enhancement with the commissioning of Haridwar plant. We are confident of achieving significantly higher margins in the current year. In addition the company has started looking at acquiring synergistic businesses in India and Abroad".

Setting up of a new Unit at Haridwar will result in further tax saving for the company. The management’s stringent focus on cost management to remain competitive will enhance operating margins.

The company has also introduced new generation lamps like LED, HID etc.

Moreover, the management is confident that the Compact Fluorescent Lamp shall witness exponential growth going forward.

Valuation

Actis is a strategic investor in Phoenix Lamps. Normally Actis enters into a company when it feels it is undervalued and it can add value to it. Over a period of time when appropriate value is realised it exits from the company. In the process minority shareholders also gets the benefit of its management and value creation strategies.

We expect the company to register sales and net profit of Rs 336.12 crore and Rs 40.29 crore respectively in FY 2008. On equity of Rs 28.02 crore and face value of Rs 10 per share, EPS works out to Rs 14.4. This EPS is expected to rise to 18.7 in FY 2009 on sales of Rs 420.15 crore and PAT of Rs 52.51 crore. The share price trades at Rs 184. While the P/E on FY 2008 EPS is just 12.8, it falls to an attractive 9.8 on FY 2009 EPS. Expectations are building up that automobile industry will soon come back on growth track and interest rates will come down. This will help rerating of Phoenix Lamps, which in any case is doing well in spite of the recent sluggish phase in the auto industry. With Actis, a strategic investment fund, at the helm, one can look forward to aggressive growth as well as value unlocking once Actis decides to sell its 66% stake which it bought from earlier promoters at Rs 190.

Phoenix Lamps: Financials

	0403 (12)	0503 (12)	0603 (12)	0703 (12)	0803 (12P)	0903 (12P)
Sales	162.83	202.75	232.72	277.83	336.12	420.15
OPM (%)	20.3	18.7	17.4	15.9	16.9	17.2
OP	33.03	37.86	40.60	44.24	56.93	72.27
Other Inc.	1.64	1.5	5.44	2.78	3.31	3.50
PBIDT	34.67	39.36	46.04	47.02	60.25	75.77
Interest	7.16	7.51	6.88	7.23	5.90	5.50
PBDT	27.51	31.85	39.16	39.79	54.35	70.27
Dep.	14.18	14.83	14.30	10.75	12.33	13.81
PBT	13.33	17.02	24.86	29.04	42.02	56.46
Tax	3.89	4.18	0.97	-2.43	1.74	3.95
PAT	9.44	12.84	23.89	31.47	40.28	52.51
EPS* (Rs)	3.9	5.5	8.5	11.2	14.4	18.7
*Annualised on current equity of Rs 28.02 crore; Face value of Rs 10 each (P) Projections, Figures in crore, Source: Capitaline Corporate Databases

Phoenix Lamps: Results

	0709 (3)	0609 (3)	Var. (%)	0709 (6)	0609 (6)	Var. (%)	0703 (12)	0603 (12)	Var. (%)
Sales	91.31	72.71	26	162.02	134.42	21	277.83	232.72	19
OPM (%)	17.9	17.0		16.6	15.9		15.9	17.4
OP	16.36	12.38	32	26.92	21.33	26	44.24	40.60	9
Other inc.	0.58	0.60	-3	1.58	1.31	21	2.78	5.44	-49
PBIDT	16.94	12.98	31	28.50	22.64	26	47.02	46.04	2
Interest	1.59	1.93	-18	3.05	3.80	-20	7.23	6.88	5
PBDT	15.35	11.05	39	25.45	18.84	35	39.79	39.16	2
Dep.	2.76	2.42	14	5.60	4.90	14	10.75	14.30	-25
PBT	12.59	8.63	46	19.85	13.94	42	29.04	24.86	17
Tax	1.11	1.06	5	1.64	1.99	-18	0.62	3.71	-83
Deferred Tax	0.04	-0.69	-106	-0.79	-1.78	-56	-3.05	-2.74	11
PAT	11.44	8.26	38	19.00	13.73	38	31.47	23.89	32
EPS* (Rs)	16.3	11.8		13.6	9.8		11.2	8.5
*Annualised on current equity of Rs 28.02 crore; Face value of Rs 10 each Figures in crore, Source: Capitaline Corporate Databases

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$$ DreamGains !! $$ Wednesday Telefolio : W S Industries (India)

W S Industries (India)

Has a winning formula for strong growth

Surging investment in power T & D sector, yield improvement in tie-up with PPC Insulators, USA and commissioning of a new plant will keep this insulator major on strong growth path

Buy	W S Industries (India)
BSE Code	504220
NSE Code	WSI
Bloomberg	WSI@IN
Reuter	WSIN.BO
52-week High/Low	Rs 107/41
Current Price	Rs 106 (as on 05/12/07)

W S Industries (India) (WS) manufactures insulators within the power equipment sector. Insulators are basically protective tools, which subdues the current. They are non-conductors which are used in transmission and distributing (T&D) segment. Often when the current from grid say of 400 KV needs to be stepped down to around 4 MW to reach to household, one needs a strong equipment to withstand or hold the current and to act as a safety wall so that only that portion of the electricity which is required passes and the rest is distributed to various locations as per the capacity norms specified.

WS manufactures insulators of high end starting from 220 KV till 1200 KV. Various types of insulators manufactured by WS are Hollow insulators, Pin insulators, solid core insulators and hollow porcelain insulators.

Strong visibility in Power Transmission and Distribution (T&D) sector

The government has planned a capacity addition of 78000 MW in the 11^th plan to reach the overall target of 2 GW by 2012. This massive requirement of the power addition would require huge investment both in power generation and in power transmission and distribution sector. Also the power sector performance is very critical for maintaining the growth rate of 8-9% of GDP. The country was able to achieve 52% of the planned generation capacity in 10^th plan.

T&D sector however is not entirely dependent on the generation sector. Although the growth in generation sector would of course provide additional requirement for power transmission and distribution sector, the current imbalances in the inter regional grid capacities will augur well for the growth of entire T&D sector. There is a surplus in the north-grid whereas deficit in west-grid. So power grid, rural electrification etc present tremendous opportunity for T&D sector and anything from new generation capacity will be a bonus. The inter-regional capacity for power evacuation increased to 14000 MW, which the government has planned to reach to 34000 MW in 11^th plan. Insulators form about 8% of the total power T&D requirement. Aditya Birla Nuvo, Bhel are some other existing players in insulator industry. The company has technology, which is at par or even better than its competitors.

The company has installed capacity of 8000 tons of substation insulators and 8000 tons of transmission insulators. The company is operating at more than 100% of the installed capacity.

Nearly 95% of the transmission insulators manufactured are being sold domestically. Power Grid is the largest customer with more than 50% of the transmission insulators being sold to it.

Of the total production of substation insulator, most of the insulators are exported to OEM’s like ABB, Siemens, Areva etc. There is a huge demand for substation insulators both in India and in exports and the company has set a standard of 50:50 on domestic and export to balance out any risk in both the markets. Relaisations even at the current appreciated rupee levels are better in exports compared to domestic markets.

The company has rolled out an expansion plan to increase the installed capacity of substation insulators from 8000 tons to 18000 tons in two phases. This is a Greenfield expansion in Visakhapatnam, Andhra Pradesh. For this the company had raised Rs 107 crore by preferential allotment to Schroder Credit Renaissance fund at Rs 67 per share. Phase 1 of 8000 tons new capacity will be on stream from July’08. Gradually the phase 2 will be operational by end of FY’09. Once again the company will balance out the geographical risk by sales to domestic and export markets in ratio of 50:50.

Enters into turnkey projects

The company has also entered into turnkey projects from FY’07 onwards. The company renders the design, execution, and construction work of insulators and transmission lines of below 220 KV as against its manufacturing insulator facility of above 220 KV. Since the company is new in this business, it is moving cautiously and is currently into lower end turnkey projects. The company is looking for strategic alliance in this business and going forward will scale up the capacity but with a cautious view. Of the total sales of Rs 165 crore in FY’07, insulators formed Rs 145 crore of sales and the rest came from turnkey projects. The company has order book position of Rs 180 crore for insulators (Rs 145 crore last year) and Rs 30 crore for turnkey projects (Rs 15 crore last year).

After a year of consolidation in FY 2007, a new growth phase has started

The company has rationalized its products by manufacturing only high capacity products. In 2007, the prices of fuel (kerosene) increased by 46%. It was not possible for the company to manufacture at this level some of the low end products. Hence the company rationalized its product base and concentrated only on high voltage capacity of above 220 KV. So FY’07 was a low growth year for the company in terms of topline. As against a CAGR of 20% growth in previous three years, the company reported a modest 12% growth in sales in FY 2007. However, the product rationalization advantage helped the margins to increase by 200 basis points.

In Chennai, now the company uses LPG along with kerosene as a fuel and hence has reduced to some extent its high fuel cost. The new capacity, which will come up in Andhra Pradesh, will use gas as its fuel. Hence there will be overall significant savings in fuel cost.

This has resulted in optimum capacity utilization and economies of scale advantage, which are seen in the first half results. The company reported topline growth of 30% in H1 FY’07 to Rs 104.49 crore and OPM improved by 340 basis points to 15.3%.

The company has technology collaborations with Westinghouse Electric, US and MWB AG, Germany from its inception. Later on the company absorbed the entire technology and is presently working independently.

In order to further increase the yield in manufacturing insulators, the company has entered into strategic alliance with PPC Insulators USA, who are the world’s largest insulator manufacturer having 23 geographical presences across the globe. It is a mutual sharing agreement where both the parties share their technologies and benefit each other. This is one of the important reasons for optimum output and hence better margins in the current year. Also there is a possibility of PPC using WS manufacturing facilities as a base going forward, due to the cost advantage.

The subsidiary will generate rental/sale of property income in future without any investment

The company has 60% stake in WS Electric, which has surplus land of more than 2 Million sq feet in industrial estate of Chennai. The company has entered into an agreement with one of the developers in Chennai, whereof the company has allocated its land to the developer and will have a stake in the developed property. Hence there will be no capex on part of the company except the land. There will be a total development of 2000 thousand sq feet area in four phases. FY’09 will see completion of the phase 1 of 300 thousand sq feet area and the company has the right to sell or lease 60 thousand sq feet area.

The above will bring regular or one-time cashflow depending on the company’s decision on sale/lease and will boost its financials further. However we have not taken in to account these incomes/cash flows in our projections.

Financials are surging

During the quarter-ended Sep’07, the company reported topline growth of 38% to Rs 56.83 crore, The OPM stood at 15.7% from 12% last year. The insulator sales stood at Rs 51.72 crore and the PBIT stood at Rs 7.64 crore. The revenues from turnkey projects stood at Rs 5.10 crore and company booked profits of Rs 0.34 crore in this quarter. After providing interest cost and deprecation of Rs 1.60 crore and Rs 0.93 crore respectively, the PAT stood at 3.17 crore, up by 68%.

For the half year ended Sep’07, the company reported topline growth of 30% to Rs 104.49 crore, The OPM stood at 15.3% from 11.9% last year. The PAT stood at Rs 7.11 crore, up by 104%.

Valuation

For the year ended Mar’08, we expect the company to report net sales and PAT of Rs 206.20 crore and Rs 14.24 crore. For Mar’09, we expect the company to register net sales and PAT of Rs 303.13 crore and Rs 23.63 crore. This gives an EPS of Rs 6.7 for FY’08 and Rs 11.2 for FY’09. At current market of Rs 106, the scrip is available at 15.8 times its FY’08 earnings and 9.5 times its FY’09 earnings.

WS Industries (India): Standalone Financials

	0403 (12)	0503 (12)	0603 (12)	0703 (12)	0803(12P)	0903(12P)
Net Sales	103.73	120	147.06	165.25	206.20	303.13
OPM %	14.1	10.2	10.1	12.1	15.2	15.5
OP	14.63	12.29	14.89	19.95	31.28	46.99
Other income	1.75	0.21	0.19	0.42	0.32	0.32
PBIDT	16.38	12.5	15.08	20.37	31.60	47.31
Interest	6.49	6.2	6.36	7.12	6.63	7.00
PBDT	9.89	6.3	8.72	13.25	24.97	40.31
Depreciation	4.07	4	3.32	3.24	3.29	5.04
PBT	5.82	2.3	5.4	10.01	21.68	35.27
Tax	0	0.19	1.08	3.46	7.44	11.64
PAT	5.82	2.11	4.32	6.55	14.24	23.63
EPS	2.8	1.0	2.0	3.1	6.7	11.2
* Annualised on current equity of Rs 21.41 crore of face value of Rs 10 each (P): Projections, Figures in crore, Source: Capitaline corporate database

WS industries (India): Standalone Result

	0706(03)	0606(03)	Var	0706(06)	0606(06)	Var	0703(12)	0603(12)	Var
Sales	56.83	41.07	38	104.49	80.49	30	165.25	147.06	12
OPM%	15.7	12.0		15.3	11.9		12.1	10.1
OP	8.90	4.91	81	16.02	9.56	68	19.96	14.90	34
Other Income	0.01	0.01	0	0.03	0.05	-40	0.34	0.07	386
PBIDT	8.91	4.92	81	16.05	9.61	67	20.3	14.97	36
Interest	1.6	1.79	-11	3.33	3.68	-10	7.04	6.25	13
PBDT	7.31	3.13	134	12.72	5.93	115	13.26	8.72	52
Depreciation	0.93	0.95	-2	1.84	1.91	-4	3.24	3.32	-2
PBT	6.38	2.18	193	10.88	4.02	171	10.02	5.4	86
Tax	3.21	0.29	999	3.77	0.53	611	3.46	1.08	220
PAT	3.17	1.89	68	7.11	3.49	104	6.56	4.32	52
*EPS	6.0	3.6		6.7	3.3		3.1	2.0
* Annualised on current equity of Rs 21.41 crore of face value of Rs 10 each Figures in crore, Source: Capitaine Corporate database

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$$ DreamGains !! $$ Deputy Fed Chief Kohn Hints At A Rate Cut-The Liquidity Geyser Will Flow

WASHINGTON, Nov 28 (Reuters) - Federal Reserve Vice Chairman Donald Kohn on Wednesday signaled a deliberate shift in the tone of policy toward further interest rate cuts during a speech and debate before the Council on Foreign Relations.

The following is a selection of excerpts from his remarks during the question-and-answer session that followed his speech:

MARKET DEVELOPMENTS SINCE OCT. 31

"The one thing that has really changed since the last meeting is the deterioration in credit markets and financial markets.

"I never expected the markets to return to normal functioning very rapidly after the upsets of August and September. I thought this was a process that would take some time. Credit is going to have to rechannel out of the securities markets, back into the banks to a certain extent.

"Instruments are going to have to be restructured so that they are more transparent, and are better able to be understood. The housing market and the macro economy are going to have to stabilize so that uncertainty goes away before things can get better. And I expected some year-end pressures.

"But I have to admit that, speaking for myself ... the degree of deterioration that has happened over the last couple of weeks was not something that I personally anticipated.

"I think the losses that ... seem in train and have been announced were greater than people expected. This raised questions about financial institutions, how much capital they had, how vigorous they would be in pursuing new loans.

"Financial institutions became more cautious, and I think this process is one that we are going to have to take a look at when we meet in a couple of weeks."

GROWTH OUTLOOK MIXED - LABOR SOLID, SPENDING SOFTER

"We've got a lot of information since the last FOMC (Federal Open Market Committee) meeting (on Oct. 30-31), and we've got a lot of information to come in before the next FOMC meeting. I think the economic information that we've got about the path of the economy has been kind of mixed since the meeting.

If I think about labor markets, I think that we and many people in this room were surprised ... at the strength of the employment gain in October. And since then, initial claims for unemployment insurance have been higher, on a moving average basis, but they remain pretty low.

"I would say what we know is that ... employment has continued to expand. This provides an important pillar underpinning for the economy, because when employment is expanding, incomes are expanding and people can consume out of those incomes. That has been on the positive side in terms of incoming data.

"I think on the other side, the spending data have been maybe a little to the soft side ... I would say that there has been a noticeable slowing in the growth of consumption. From what we know now, the partial data that we have in hand doesn't suggest that consumption has stopped growing. It is still expanding, but at a slower pace.

"That is not entirely unexpected. I think when you've looked at the surveys of household attitudes, you saw people getting more concerned. When you thought about the declines in housing prices, and certainly the failure of housing prices to go up, and many of them to decline, folks are looking at their balance sheets and thinking that their wealth is eroding to some extent ... and they are going to be a little more cautious in spending. And I think that we are beginning to see that on the consumer side ... (but) we expected a little softness."

HOUSING NOT BOTTOMED

"I think the housing sector has continued to decline and erode at a very, very rapid rate, and while this was expected, I think it would be nice to see some early signs that it was beginning to stabilize and we haven't seen that yet.

"It would be nice to get a clue that sales were beginning to stabilize and builders were beginning to make some more progress in working down those inventories. As long as the inventories of unsold homes are there, and the new inventories of homes coming on to the market, particularly in the foreclosure process, looks high, that is going to put a lot of downward pressure on the housing market.

"I think we've seen weak housing data. We expected weak housing data, so it will be hard to assess. But I don't think that we've seen the bottom of that market yet."

INFLATION OUTLOOK - RISKS HAVE NOT EASED SINCE OCT. 31

"On the inflation side, I think the core data have come in at about a moderate pace. It is kind of stable. On the other hand, the dollar has dropped further, so import prices will under some upward pressure, and energy prices have gone up.

"So I don't think that the sources of risk that the committee saw on inflation at the last meeting -- (they) haven't gone away, and it is something that no central bank can afford to ignore. I think it is very important that we keep prices roughly stable, and people perceive that we are keeping prices stable. We cannot let inflation expectations start to rise. That would be a very bad dynamic."

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

Nothing in this article is, or should be construed as, investment advice.

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$$ DreamGains !! $$ Patels Airtemp India: Sharekhan Stock Idea dated December 07, 2007

Stock Idea
[December 07, 2007] Please see the attachment for details

Sharekhan
www.sharekhan.com

Summary of Contents

STOCK IDEA

Patels Airtemp India
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs135
Current market price: Rs88

Catch it young

Key points

Booming user industries: Patels Airtemp India, which manufactures heat exchangers, pressure vessels, industrial fans and blowers and other heat-transfer-technology products, would benefit from the ongoing boom in its user industries such as oil and gas, refineries, power, cement, and fertilisers. The heating, ventilation and air conditioning (HVAC) business, where the company undertakes turnkey projects and manufactures HVAC equipment is also expected to benefit from the ongoing retail boom.

Expect strong growth in new order booking: The company has a healthy order book of Rs45 crore, out of which Rs40 crore is executable over the next six months. We expect the orders to continue to grow at a strong rate of 45-50% annually for the next two years. We expect new order booking of ~Rs70 crore in FY2008, which should increase to ~Rs120 crore by FY2009, while the momentum is expected to continue considering the current buoyancy in its user industries. Exports too are expected to grow at a fast pace. Out of the current order book of Rs45 crore, about Rs15 crore pertains to export orders as against export orders of 0.98 crore in FY2007.

Healthy return ratios: We expect a strong improvement in its return ratios going forward on the back of improved margins and no major capex requirement in the next two years. We estimate the topline to grow at a compounded annual growth rate (CAGR) of 49.1% and the bottomline to grow at a CAGR of 72.7% between FY2007-09.

Attractive valuations: At the current market price, the stock discounts its FY2009E earnings by 5.9x and quotes at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 3.5x. We believe the valuations are very attractive and recommend a Buy on the stock with a price target of Rs135.

Regards,
The Sharekhan Research Team

myaccount@sharekhan.com