walchandnagar ind...juss a report sharing

Walchandnagar Industries (WIL) businesses can be classified into manufacturing of heavy engineering equipment; and foundry and machine shops. Both these divisions manufacture sugar machinery, boilers (high-efficiency multi-fuel industrial boilers that use bagasse, coal, oil, wood and gas, either individually or in combination as fuel) in collaboration with Foster Wheeler of Canada), gear boxes in collaboration with Maag Gear Company of Switzerland, and material-handling equipment (for cement and sugar plants.
WIL also manufactures material handling equipment required by thermal power plants, metallurgical and steel industries; special engineering products used in (atomic energy, space research, synthetic fibers and other unique equipments related to science and Technology) and general engineering products used in heavy engineering equipment for petrochemicals, petroleum refinery, oil and gas processing, fertiliser, and hydro-electric applications.
The heavy engineering equipment business accounts for 87% of WIL’s business, with the rest coming from foundry and machine shops and 'others' (infotech, hospitality and pressure and temperature gauges businesses).
Due to fixed-price contracts and high steel prices, operating profit suffered in FY 2005. However, due to a much healthier orderbook (procured at decent rates) and lower steel prices this year, it is set to post a strong bounceback in profit.
The latest orderbook position stands higher by 28% to Rs 505 crore (on 1 January 2006) against Rs 395 crore in January 2005. Moreover, while earlier orders did not factor in higher steel prices, orders procured last year factors in higher steel prices or provides for passthrough of the rise in steel prices. Overall, orders will now fetch a much better margin as WIL has been very selective in order booking and is yet able to manage a healthy growth.
In FY 2005, WIL significantly improved its marketshare in steam generating plants, gear boxes and critical equipments for space and defence. The company is planning a special thrust to enhance its marketshare in space, defence, nuclear and co-generation power plants to take advantage of its core strength and growing opportunities in these areas.
WIL is also focusing on engineering, procurement and construction (EPC) projects and has created a separate division to execute such projects. To meet the growing requirement of manufacture of sophisticated equipment, the company is modernising and upgrading existing critical machines and adding new machines.
In FY ended September 2005, WIL recorded an export revenue of Rs 30.04 crore compared to Rs 7.58 crore—up 296%. The growth momentum in exports is likely to be sustained going forward as the company has very strong export orders. On 1 October 2005, export orders on hand were up 203% to Rs 63.59 crore as against Rs 21.07 crore a year ago. The company is actively participating in export enquiries for cement and sugar machinery.
After registering a spectacular 54% rise in revenue to Rs 99.35 crore and a jump 157% in net profit in the quarter ended September 2005, WIL recorded another sharp 54% rise in revenue to Rs 55.32 crore in the December 2005 quarter. It also registered a net profit of Rs 1.35 crore against a loss of Rs 1.10 crore a year ago.
The operting profit margin (OPM) improved from a negative 4.7% to a positive 6.6% in the quarter. The improvement in OPM is expected to continue as the company was severely affected by the abnormal increase in cost of steel material in FY 2005.
The outstanding investment in the manufacturing sector is expected to be at around mind-boggling Rs 4 lakh crore. Further, an estimated Rs 6 lakh crore are likely to be invested in various infrastructure projects, besides Rs 5 lakh crore in the power sector. These investments are bound to put the demand for the company’s heavy engineering products into a new growth orbit.
In FY ending September 2006, we expect WIL to register sales and net profit of Rs 350.42 crore and Rs 13.49 crore. Thus, in FY 2006, sales are expected to grow by 30% and net profit expected to jump 75%. On a very small equity of Rs 3 crore and face value of Rs 10 per share, EPS works out to Rs 45. The share price trades at Rs 637 (trade-to-trade segment). PE works out to only 14.2