WPIL Ltd – Pump Priming

No, this article is not about government action to stimulate the economy. Rather, it is about a pump company that is priming itself for a big new opportunity that is likely to open up for the sector.

WPIL (formerly Worthington Pumps India Ltd) is a 57 year old company based in India that designs, manufactures & services various types of vertical, horizontal & submersible pumps, for application in various sectors – water supply, mining, power, irrigation, fire-fighting, offshore etc

The company has a complete range of facilities - Design, Casting (own foundries), Pattern Manufacture, Fabrication, Manufacture , Quality Assurance and Testing.

The company's R&D facilities are considered among the best in the industry, apart from being recognised by the Ministry of Science & Technology, Govt of India. The company's quality systems are certified as per ISO 9001:2000 & ISO 14001:2004. It boasts of the largest test bed in the country at Panihati. Testing as per various international standards ISO, HIS, PTC & BS are undertaken.

Promoter Group
WPIL used to belong to the B M Khaitan group before the group sold a controlling stake to the Hindustan Udyog group in 2002. Thereafter in 2006 the B M Khaitan group sold their residual stake too, leaving the Hindustan Udyog Group in total control.

Since then, the company has improved it’s performance by leaps & bounds. Whereas Sales have increased from 73 Cr in FY06 to 159 Cr in FY09, Net Profits have risen from 0.5 Cr in FY06 to 8.3 Cr in FY09.

WPIL - Historical Benchmarks :
1952 - Commenced Business Johnston Pumps India as JV of Johnston, US.
1982 - License from Hayward Tyler, UK for Submersible Motor.
1983 - JV with Worthington - name changed -Worthington Pumps India.
1990 - CW Pump - 33,100 M3/Hr, 2600 KW, 500 MW NTPC Power Stn.
1995 - Association -(Worthington-Ingersol Dresser) ends & name changed to WPIL.
1997 - Export Order ($1.7 Million) from Vietnam - Inclined Pump.
2000 - Major Break through - $4.44 Mill - Four Lao PDR Pump Station.
2002 - APGENCO - Vijaywada Thermal Power Station - CW Pump
2003 - Turnkey contract for large CW Pump - NTPC Vindhyachal : 500MW
2005 - Completing large turnkey project for Drainage Pumping Station in Bagjola near Kolkata comprising of 19 large Propeller Pumps
2006 - Major sea water pumps (Duplex SS) for Saudi Arabia - JANA.
2007 - Joint venture with Mitsubishi-Japan for contract for Concrete Volute Pumps to be supplied for Indian Project

WPIL has had major successes overseas & it's pumps have been exported to various countries around the world including the USA.

But what is particularly heartening in the current context are the steps the company is taking to be ready for the next big opportunity for the pumps sector in India – supplying specialized pumps to the nuclear power plants in India, which is anticipated to grow by leaps & bounds in the next decade, following the recent Indo-US Nuclear Deal. The deal will lead to the more efficient import of nuclear technology and equipment which will ultimately translate into higher nuclear power generation.

“Nuclear Ready“
WPIL has moved quickly post the Indo-US nuclear deal by forming a JV with a global pumps major ClydeUnion Pumps to manufacture Boiler feed / Concrete Volute and other special pumps for the conventional & super critical thermal plants, as well as nuclear power plants. The JV would be up & running by end 2010.

The JV aims to be a major player in the power and oil and gas markets. The JV would also be a major player in the anticipated Indian Nuclear market. The specialised pumps to be manufactured by the JV are presently not being manufactured in the Country.

WPIL has a 40% stake in the JV, which over the years will surely give a superb return on investment.

ClydeUnion Pumps
ClydeUnion Pumps is one of the world's leading pump companies - a centre of excellence in Pump Technology, Hydraulic Design and Engineering. It was formed via the merger of 2 venerable & reputed companies - Clyde Pumps , dating back to 1871, and Union Pump, started in 1885.

ClydeUnion Pumps operate in five key markets:
• Upstream Oil
• Downstream Oil
• Nuclear Power
• Conventional Power
• Water & Industrial

ClydeUnion Pumps has already secured major orders in 2009 in the Indian markets, where it will be supplying pumps for the 4000 MW Sasan Ultra Mega Project (it has bagged the order from the Chinese contractor Shanghai Turbo Machinery Co ) & the 1600 MW Krishnapatnam Power Project.

WPIL – Quick Facts
Website : http://www.wpil.co.in
Bse Code : 505872
CMP : 102.20 (Closing on BSE, 27th Oct , 2009)
Latest EPS : 10.39 Rs (FY09). EPS for Q1 of FY10 is Rs 2.79.

Recommendation : The company has shown a marked improvement in performance since 2006 when the present promoters took full control of the company. The pumps sector in India is booming & the company looks capable of making the most of the sector opportunity.

The management has also shown foresight in tying up with a foreign major to address the nuclear opportunity for the sector.

Keeping the above in mind, the author recommends investors to research & analyse this company in greater detail. The 2nd quarter results are due very shortly and will provide further data for analysis. The author feels that on steep corrections, and if held for the long term (5 years), the stock could prove to be a winner .

Disclaimer/Disclosure : At the time of writing this article the author has a position in the stock covered by this report. The author or any of his dependent family members may make purchases or sales of the securities mentioned in the report while the report is in circulation. Readers/recipients of this report are strongly advised to do their strict due diligence, and should be aware that the value of investments can go down as well as up. The author shall not be liable for any direct or indirect losses arising from the use of the contents of this report, and readers are therefore cautioned to use the information contained herein at their own risk. In fact, readers would do well to seek the advice of a qualified independent advisor. The author certifies that all of the views expressed in this report accurately reflect his personal views about the subject company at the time of writing this report. Feedback / brickbats may be hurled at the author at boscom@gmail.com .

Brahmaputra Infraproject Ltd – Road Runner

By appointing Mr. Kamal Nath as the Minister of Roads & Highways (MoRH) in the new UPA government, Dr Manmohan Singh may well have pulled off a master stroke.

The country’s crying need for infrastructure is well documented. The hopes & aspirations of the current & future generations cannot come to fruition without a huge & concerted effort to speed up the pace of infrastructure development, of which Roads & Highways are an integral & critical part. Frankly, no pace would be fast enough.

And selecting an aggressive & ambitious MoRH was just the right move, to give the Roads & Highways sector the push & impetus it badly needed. The MoRH has got cracking by announcing a stiff target of building 7,000 km of roads in a year.

While everyone knows the huge execution risks - land acquisition, plus multiplicity of agencies involved, leading to time/cost slippages, and higher working capital needs, this author believes that the new MoRH will be a game changer for the sector.

With most Infrastructure & Roads players already well researched, the author felt it was time to profile one rather unknown company in the listed space which could well be a big beneficiary of the likely improved prospects for the sector. This company is Brahmaputra Infraproject Ltd (BSE Code : 531194). This company was until recently known as Mewar Industries, before being taken over by the Mr. S. K. Prithani led Brahmaputra Group (Website : http://www.brahmaputragroup.com/index2.php ) to be their listed entity. The new promoters are a fast growing group in infrastructure development with significant presence in sectors like Mining, Building Construction, Bridges & Flyovers, Airports, Tunnels, Expressways & Highways, Other Civil Construction. The group appears to have already started routing new business through the listed entity.

For FY09 the company had a Net Profit of Rs 2.07 Cr on a turnover of 30.62 Cr resulting in an EPS of RS 2.96 on an equity of 7 Cr. Most of the revenues accrued in the 4th & final quarter, when the company has started executing it’s new projects. The company declared a dividend of 5% as a shareholder friendly measure.

In 1st Quarter of FY10, the company further improved it’s performance, clocking a net profit of 2.94 Cr for the quarter, on a turnover of 42.55 Cr, resulting in a quarterly EPS of Rs 4.20 .

Given the visibility of revenue following the announcement of it’s bagging orders worth 433 Cr in July 2009 from Jaiprakash Associates for construction of part of the Yamuna Expressway from Greater Noida to Agra, it is probable that the current year EPS would be in double digits. There is a good possibility that further orders of the group could be bid & executed through Brahmaputra Infraproject Ltd.

Equity : 7 Cr

Latest EPS : 2.96 Rs (FY09). EPS for Q1 of FY10 is Rs 4.20.

Promoter Holding : 72%

CMP : 70.10 (Closing on BSE, 9th Sept , 2009)

Recommendation : Given the above background, at Rs 70/- the company does not look expensive to this author, and the author recommends investors to research & analyse this company in greater detail. On corrections, the stock could prove to be an astute investment.

Disclaimer/Disclosure : At the time of writing this article the author has a position in the stock covered by this report. The author or any of his dependent family members may make purchases or sales of the securities mentioned in the report while the report is in circulation. Readers/recipients of this report are strongly advised to do their strict due diligence, and should be aware that the value of investments can go down as well as up. The author shall not be liable for any direct or indirect losses arising from the use of the contents of this report, and readers are therefore cautioned to use the information contained herein at their own risk. In fact, readers would do well to seek the advice of a qualified independent advisor. The author certifies that all of the views expressed in this report accurately reflect his personal views about the subject company at the time of writing this report. Feedback / brickbats may be hurled at the author at boscom@gmail.com .

Balaji Amines - Scuttlebutt Winner, Will Stockmarket Recognition Follow ?

The great value investor Philip Fisher made famous an approach known as the “scuttlebutt”. He said that there was a lot of knowledge about a company that could give insight into its investment merits if the investor could merely find it out and synthesize it into a somewhat accurate and cohesive view of an entire corporation.

This author has polled views of several people with knowledge of the chemicals & pharmaceutical industry regarding Balaji Amines Ltd (BAL) & got uniformly good opinions about the company. So the scuttlebutt is certainly on the side of this scrip, but will stockmarket recognition follow ?

To summarize the scuttlebutt :-

• BAL is a leader in Amines & Specialty Chemicals industry in India
• Management of BAL is honest, intelligent , committed & professional
• Products are noted for highest quality
• The company continuously tries to introduce new products in the market , and to improve and optimise it's manufacturing processes
• Ongoing expansion plans : They have completed backward integration for NMP, commercial production of GBL has started . Production of PVPK-30, another import substitute, is also likely to start soon.
• Captive power plant will soon be operational , leading to savings in costs.
• More than decent track record, good results during downturn, monopolistic position in some products.

Background (from company website) :
Balaji Amines Ltd (BAL) , an ISO 9001: 2000 certified company, specialises in manufacturing Methylamines, Ethylamines, Derivatives of Specialty Chemicals and Natural Products.

BAL , one of the leading manufacturers of Aliphatic Amines in India was set up in the year 1988 to cater to the growing requirements of value based Specialty Chemicals. BAL commenced manufacture of Methyl Amines in the year 1989 and subsequently added facilities for manufacture of Ethyl Amines and other derivatives of Methyl Amines and Ethyl Amines. BAL has been consistently adding capacities and fine tuning processes to provide quality products at lowest cost to the customers.

World over, Amine technology is a closely guarded process with only a few handful companies having access to such technology. BAL for the first time in India tested on an indigenously developed technology and developed it further over a period of time.Today, BAL‘s products are accepted in international markets and have gained the distinct export quality status, which makes it one of the few companies in India having the potential to match the stringent international quality standards for which BAL has been awarded ISO-9001: 2000 Certification .

BAL has state-of-the-art manufacturing facilities at Tamalwadi & Chincholi, Solapur , Maharashtra , as well as at Medak, Andhra Pradesh.

Company website : http://www.balajiamines.com/index.asp

CMP : 91.40 (Closing on BSE, 19th Aug , 2009)
Latest EPS : 23.65 Rs (FY09). EPS for FY08 was 20, for FY07 was 16.

Recommendation : Accumulate , preferably below Rs 90/- . Though the chemicals industry is a highly competitive industry, the company has put together a very impressive & consistent track record . This, coupled with good market feedback about the quality of it's products, and it's highly professional approach in dealing with customers & suppliers, inspires confidence that BAL has the management & processes in place to weather any storm & preserve and enhance shareholder value.

Disclaimer/Disclosure : At the time of writing this article the author has a position in the stock covered by this report. The author or any of his dependent family members may make purchases or sales of the securities mentioned in the report while the report is in circulation. Readers/recipients of this report are strongly advised to do their strict due diligence, and should be aware that the value of investments can go down as well as up. The author shall not be liable for any direct or indirect losses arising from the use of the contents of this report, and readers are therefore cautioned to use the information contained herein at their own risk. In fact, readers would do well to seek the advice of a qualified independent advisor. The author certifies that all of the views expressed in this report accurately reflect his personal views about the subject company at the time of writing this report. Feedback / brickbats may be hurled at the author at boscom@gmail.com .

Tyche Industries : Unknown & Unloved - but for how long ?

Company : Tyche Industries Ltd

BSE Code : 532384 ( CMP : Rs 17.15, closing price on BSE - 3rd June, 2009)

Website : http://www.tycheindustries.com/

Business : Contract Research / Manufacturing of API's, Intermediates, Nutraceuticals, and Fine & Specialty Chemicals

Company has :

• 5 manufacturing units across 2 sites in A.P – Kakinada & Tanuku
• Kakinada facilty in the process of obtaining USFDA approval
• Setting up new project in East Godavari., A.P.
• Got ISO 9001:2000 certification

Positives :

• Zero Debt Company
• Paying dividend since last 4 years
• Showing steadily increasing trend in Sales / profits

Also :
A company Tyche Chem has taken 14.88 % in market purchases in Dec 08 qtr. The name suggests that they are associated with Tyche Industries, though not listed as a promoter entity. The inference from this market purchase seems obvious – that there is value in the listed company.

Tyche Industries - Financials
Equity : 9.84 Cr
Book Value : 20.6
Year Ending : 2005 - 2006 - 2007 - 2008 - 2009 (9Mths)

Sales (Rs Cr) : 5.4 - 19.3 - 27.2 - 29.2 - 27.1

NP (Rs Cr) : 0.5 - 3.6 - 4.5 - 3.4 - 4.7

EPS (Rs) : 0.51 - 3.68 - 4.36 - 3.35 - 4.59

Dividend : 5% - 10% - 15% - 5% - n.a.

Negatives :

• Company was originally in the Software business (as Siris Soft Ltd) but shifted to current business in 2003-04. [ Note : The company is not listed as a part of the Siris Group of companies whose flagship company Siris Ltd is under BIFR. However the promoters are related - i beleive the Tyche promoter is the son of the Siris promoter.]
• Like with most small companies, there appears to be no proper compliance set-up , else the acquisition of 14.88 % stake by Tyche Chem should have been formally intimated to the stock exchanges when the 5% & 10% stake was triggered.
• Annual Reports of the company do not give sufficient details regarding the future plans of the company, nor the SWOT analysis

Conclusions & Recommendation :

The company looks worthy of analysis & research by investors. It's dividend paying track record (likely to be continued this year) & zero-debt status gives comfort. However, as with most small-caps, enough information is not freely available & so investors are advised to do their own strict due diligence.

Disclaimer/Disclosure : At the time of writing this article the author has a position in the stock covered by this report. The author or any of his dependent family members may make purchases or sales of the securities mentioned in the report while the report is in circulation. Readers/recipients of this report are strongly advised to do their strict due diligence, and should be aware that the value of investments can go down as well as up. The author shall not be liable for any direct or indirect losses arising from the use of the contents of this report, and readers are therefore cautioned to use the information contained herein at their own risk. In fact, readers would do well to seek the advice of a qualified independent advisor. The author certifies that all of the views expressed in this report accurately reflect his personal views about the subject company at the time of writing this report. Feedback / brickbats may be hurled at the author at boscom@gmail.com .

Brief Update On Recommended Scrips

Just a brief update of the stocks recommended on this blog so far, from the author's point of view. Readers are advised to do their own due diligence.

Almondz Global Securities :
Recommended initially at approx Rs 25 on some investor forums, then at approx Rs 62 in the form of a research note & then at approx Rs 77 on the opening of this blog in Oct 2007, Almondz now quotes at Rs 36.50 on the BSE.
Almondz continues to do well in it's core operations of distribution of financial products , debt market operations & debt syndication.
However the equity broking division which was to be the growth driver was hugely impacted by the events of Jan 2008 & the subsequent bear market thereafter. To conserve cash, Almondz curtailed it's expansion plans in equity broking, and even closed down a few branches. Even so, losses from this division have impacted the overall financial performance.

UT Ltd
This company, a leading manufacturer of hydraulic cylinders & systems for earth moving equipment, was recommended at Rs 43 in Oct 2007.
However despite the excellent prospects of it's industry, the company was not able to seize the opportunity, and has reported insipid numbers ever since. Poor top-level management & lethargy in bringing in much needed funds appear to be the main reasons.
Stock quotes at Rs 13 today.

Zen Technologies
Recommended at Rs 135 in Jan 2008, this company operates primarily in the niche segment of Simulations Systems for Defence industry.
Quoting at Rs 165 currently, the company continues to do well, and with the enormous potential for increasing business from the Indian defence forces, as well as export potential, the future continues to be very bright.

Camson Biotechnologies
This author had profiled this stock in July 2008 with the recommendation to buy at Rs 55 & lower , for a 3-5 year hold. Stock quotes at Rs 41 currently.
Given the humungous opportunity in the bio-fertilizer, bio-pesticide & genetic seeds industry, especially with the increasing focus on organic farming & chemical-free food, both in India & abroad, what this company only needs now is a better marketing focus & innovative ideas to ensure that it does not miss the speeding jet .

Saag RR Infra
Recommended at Rs 20 in Nov 2008, this E&P services player quotes at Rs 26 currently.
With the Rs 288 Cr ONGC order for Workover Rig Services set to start in the near future, the company looks to be on the growth path, even though it’s construction business (which going forward will not be the focus area) may continue to decline.
The company has also faced a cash crunch recently, and was facing difficulty in funding it’s working capital needs to execute the ONGC order, but with liquidity now easing, this problem should get resolved going forward.
Though the company has not shared any details regarding the profitability of the ONGC order, it is expected that the ONGC order will be a turning point in the prospects & profitability of the company.

KRBL
This rice miller was recommended in Jan 2009 for picking up in the Rs 50-75 range. It currently quotes at Rs 113.
Despite higher interest burden due to higher working capital requirements (as a consequence of bumper rice crop & the storage requirements – basmati rice needs proper ageing) the prospects continue to look very bright for the company.

KRBL - Agro Bet

Highlights :

• KRBL (Bse Code : 530813) is the largest Basmati Rice Miller in India
• India's largest rice exporter, with premium brands such as "India Gate", now marketing aggressively in the country too, taking advantage of the explosion of "big retail"
• Pioneer of Pusa-1121 variety of rice, now declared a "basmati" variety
• Going into production of "organic" (chemical free) rice in a big way
• Addresses a market which will continue to expand, never contract

What can go wrong :

• Govt regulations
• Rice milling entails storing rice for months/years , hence is very capital intensive. So interest burden is a factor to track closely.

Recommendation :
KRBL can be picked up in the 50-75 range for reasonable returns in the medium term .

Author : Bosco Menezes

Recommendation Date : 27.1.2009

Disclaimer/Disclosure : At the time of writing this article the author has a position in the stock covered by this report. The author or any of his dependent family members may make purchases or sales of the securities mentioned in the report while the report is in circulation. Readers/recipients of this report are strongly advised to do their strict due diligence, and should be aware that the value of investments can go down as well as up. The author shall not be liable for any direct or indirect losses arising from the use of the contents of this report, and readers are therefore cautioned to use the information contained herein at their own risk. In fact, readers would do well to seek the advice of a qualified independent advisor. The author certifies that all of the views expressed in this report accurately reflect his personal views about the subject company at the time of writing this report. Feedback / brickbats may be hurled at the author at boscom@gmail.com .