The shares of Sujana Universal Industries are being acquired by FIIs and HNIs in fairly large quantities. Dealers say the buying in the counter is attributed to the strong numbers put out by SUIL in Q3FY06 and the bright future prospects of the company. SUIL is all set to post an EPS of about Rs.8.5 in FY06 going further to Rs.11 in FY07.
Incorporated in 1986 under the name of Sujana Domestic Appliances, SUIL was formed with an object to manufacture fans, washing machines and other domestic appliances. It was promoted by Y Jithin Kumar and V. Satyanarayana Choudhary. Its brand name ‘Padmini’ enjoys a good reputation in the domestic fan market. The company has three manufacturing units, one in the Hyderabad and two in Medak district of Andhra Pradesh.
SUIL is a well-diversified engineering major engaged in the manufacture of Bearings, Domestic Appliances, Industrial Castings, Auto Components and in the manufacturing of MS Ingots. The main products of the Company consist of fans, bearings, water pumps assembly, piston sets, break discs, wheel discs, MS ingots, etc. It is also involved in the trading of a variety of Steel products and has strong associations with multinationals. The Steel Division’s turnover consists of processed steel and other steel products like MS Castings, MS Rods, MS Angles, MS Flats and TMT Bars.
The Bearing Division of the company has been awarded ISO-9002 certification during 1999-2000, for implementing quality systems as per international standards by Underwriter Laboratories Inc. U.S.A. The company has also set up a wind farm power project of 2 MW in Anathpur Dist. A.P. at a cost of Rs.8.5 cr. assisted by IREDA and internal resources.
For the year ended June FY05, SUIL registered sales of Rs.796 cr. and earned a net profit of Rs.30.9 cr. EPS on the then equity of Rs.20 cr. worked out to Rs.15.5. It has now come out with good numbers during Q3FY06 wherein sales although remained flat at Rs.222 cr. but net profit shot up by over 302% to Rs.9.1 cr. from Rs.2.3 cr. in the same period last year. During the nine months ending 31st March 2006, sales increased marginally to Rs.671 cr. and net profit jumped by 266% to Rs.21.8 cr. from Rs.6 cr. in the corresponding previous period.
Due to the fresh equity allotment to FIIs etc, its equity capital has gone up to Rs.41.4 cr. With reserves of Rs.96.5 cr., the book value of the share works out to Rs.33.3.
According to the equity pattern, FIIs hold 48.3% in its equity capital, promoters hold 15.6% and non-promoter corporate holding is 6.9%. This leaves 29.2% with the investing public.
In a new development, Bennett, Coleman & Co (BCCL) has acquired a 6.5% stake in the company. FIIs, too, have taken a huge call on the counter. The company plans to focus on precision engineering components including auto components and taper roller bearings, industrial castings and a new range of domestic appliances.
SUIL expects precision engineering components including auto components and industrial castings to be the major drivers of growth in the current year. Its International Trade Division deals mainly in trade of bulk commodities with the Middle East, Far East Asia, Europe and Africa.
There are also excellent opportunities for steel products due to large-scale investments in infrastructure and construction activities and the constant growth in auto and engineering sectors.Based on the first three quarters, SUIL is likely to post an EPS of Rs.8.5 for the year ending June 2006. Currently, the shares of SUIL are available at Rs.30 discounting its estimated EPS of Rs.8.5 for the current year by just 3.5 times and projected EPS of Rs.11 for the next year by only 2.7 times. Applying a reasonable P/E of 6 into its EPS of Rs.8.5 for the current year, the share has all the potential to cross the Rs.50 mark in about six-to-nine months. The 52-week high and the low of the share has been Rs.46/14
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