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Technofab Engineering: For steady gains
Incorporated in 1971, Technofab Engineering Ltd (TFEL) (Code: 533216) (Rs.159.50) started off as a company providing piping, valves and vessel fabrication and has evolved in to an EPC firm for balance-of-plants (BOP) for turnkey projects. It provides engineering services for putting up the plant and caters to various sectors including power (thermal power & nuclear power), oil & gas, water & waste water management, industrial infrastructure and electrical equipment distribution.
TFEL tapped the capital market in June 2010 with 29.90 lakh shares at Rs.240 per share aggregating Rs.71.8 crore for procurement of construction equipment, to set up a maintenance and storage facility for construction equipment and to set up a training centre for employees apart for general corporate purposes.
The company is engaged in the business of providing engineering, procurement and construction (EPC) services on a turnkey basis and undertakes execution of a wide range of BoP and electro-mechanical projects in the power, oil & gas, water & wastewater treatment and other industrial & infrastructure sectors both in India and abroad. The company currently executes projects in 15 states in India as well as Kenya, Ethiopia and Fiji.
Power sector accounted for a little over 50% of its total FY10 revenue followed by 20% from the industrial sector and the rest by other sectors. Its closest peers among medium sized companies are Sunil Hitech and Hindustan Dorr-Oliver.
TFEL, which had largely targeted individual BOP packages required by customers in the steel, metallurgical and power sectors in the initial years has gradually evolved to undertake comprehensive turnkey projects in liquid waste and effluent treatment, raw and seawater intake systems and pumping stations, rural electrification works comprising transmission mains and distribution lines, rehabilitation and upgradation of city water & sewage treatment plants in later years.
It has a strong customer relationships and has worked with leading engineering consultants such as Development Consultants (DCPL), Desein, FITCHNER Consulting Engineers (India), Mecon, Tata Consulting Engineers, Engineers India, M.N. Dastur, L&T, Sargent & Lundy, Uhde India.
TFEL has also made inroads in West Asia and Africa. Close to a third of its current order-book (together with L1 orders) are international projects. Its water-related projects in countries such as Kenya and Ethiopia can be expected to deliver high returns.
As far as its revenue model goes, the company banked on its top five clients for almost two-thirds of total revenues for FY10 but these customers comprise only a third of the total order book.This means that the company has relatively de-risked its business from the total order book. No single company commands over 20% share of its outstanding projects.
During Q3FY11, its net profit shot up by 82% to Rs.5.4 crore on 42% higher sales of Rs.57 crore. For the first nine months of FY11, net profit shot up by 50% to Rs.15.1 crore on 48% higher sales of Rs.166 crore yielding a nine monthly EPS of Rs.14.4.
TFEL’s equity capital is Rs.10.5 crore and with reserves of Rs.111.3 crore, the book value of its share works out to Rs.116. The promoters hold 38.2% in the equity capital, foreign holding is 13.7%, institutional holding is 6.6% and with PCBs holding of 16.4% leaves 25.1% with the investing public.
To bid for bigger projects through a consortium three years ago, it divested 9% of it's holding to infrastructure major Gammon India and a 6.7% stake to Associate Transil Structure (now merged with Gammon India).
Gammon India accounts for 20% of its current order backlog including one large road construction contract worth Rs.103.32 crore, which is its largest ticket size. Gammon India, which forayed into the power equipment business with its acquisitions in boilers, turbines and balance of plant equipments sees a synergic fit for electro mechanical EPC for water and fuel oil systems. TFEL may not only get subcontracts from Gammon India but may also qualify for large ticket orders in association with Gammon India.
TFEL has 38 years of experience in the EPC business with a good track record in project execution as well as its ability to move up the value chain. The confidence of the user industry in its ability to handle large projects has been vindicated with quite a few large orders as well as steady growth in the rise of its order ticket size.
The Indian oil & power sector offers significant growth potential. Incumbents enjoy growth and optionality, which could be in multiples of the current size. Private companies and PSUs have announced significant expansion projects, which augurs well for the future prospects of TFEL.
During FY11, sales are expected to touch Rs.300 crore with net profit of Rs.24 crore, which would fetch an EPS of Rs.23, this could further rise to Rs.27 in FY12. At the current market price of Rs.159.50, the share is traded at a P/E ratio of 6.9 on FY11 estimated earnings and 5.9 times its FY12 earnings. The TFEL share is recommended with a target price of Rs.200 in the medium-term. The 52-week high/low of the share has been Rs.311/117.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Technofab Engineering: For steady gains
Incorporated in 1971, Technofab Engineering Ltd (TFEL) (Code: 533216) (Rs.159.50) started off as a company providing piping, valves and vessel fabrication and has evolved in to an EPC firm for balance-of-plants (BOP) for turnkey projects. It provides engineering services for putting up the plant and caters to various sectors including power (thermal power & nuclear power), oil & gas, water & waste water management, industrial infrastructure and electrical equipment distribution.
TFEL tapped the capital market in June 2010 with 29.90 lakh shares at Rs.240 per share aggregating Rs.71.8 crore for procurement of construction equipment, to set up a maintenance and storage facility for construction equipment and to set up a training centre for employees apart for general corporate purposes.
The company is engaged in the business of providing engineering, procurement and construction (EPC) services on a turnkey basis and undertakes execution of a wide range of BoP and electro-mechanical projects in the power, oil & gas, water & wastewater treatment and other industrial & infrastructure sectors both in India and abroad. The company currently executes projects in 15 states in India as well as Kenya, Ethiopia and Fiji.
Power sector accounted for a little over 50% of its total FY10 revenue followed by 20% from the industrial sector and the rest by other sectors. Its closest peers among medium sized companies are Sunil Hitech and Hindustan Dorr-Oliver.
TFEL, which had largely targeted individual BOP packages required by customers in the steel, metallurgical and power sectors in the initial years has gradually evolved to undertake comprehensive turnkey projects in liquid waste and effluent treatment, raw and seawater intake systems and pumping stations, rural electrification works comprising transmission mains and distribution lines, rehabilitation and upgradation of city water & sewage treatment plants in later years.
It has a strong customer relationships and has worked with leading engineering consultants such as Development Consultants (DCPL), Desein, FITCHNER Consulting Engineers (India), Mecon, Tata Consulting Engineers, Engineers India, M.N. Dastur, L&T, Sargent & Lundy, Uhde India.
TFEL has also made inroads in West Asia and Africa. Close to a third of its current order-book (together with L1 orders) are international projects. Its water-related projects in countries such as Kenya and Ethiopia can be expected to deliver high returns.
As far as its revenue model goes, the company banked on its top five clients for almost two-thirds of total revenues for FY10 but these customers comprise only a third of the total order book.This means that the company has relatively de-risked its business from the total order book. No single company commands over 20% share of its outstanding projects.
During Q3FY11, its net profit shot up by 82% to Rs.5.4 crore on 42% higher sales of Rs.57 crore. For the first nine months of FY11, net profit shot up by 50% to Rs.15.1 crore on 48% higher sales of Rs.166 crore yielding a nine monthly EPS of Rs.14.4.
TFEL’s equity capital is Rs.10.5 crore and with reserves of Rs.111.3 crore, the book value of its share works out to Rs.116. The promoters hold 38.2% in the equity capital, foreign holding is 13.7%, institutional holding is 6.6% and with PCBs holding of 16.4% leaves 25.1% with the investing public.
To bid for bigger projects through a consortium three years ago, it divested 9% of it's holding to infrastructure major Gammon India and a 6.7% stake to Associate Transil Structure (now merged with Gammon India).
Gammon India accounts for 20% of its current order backlog including one large road construction contract worth Rs.103.32 crore, which is its largest ticket size. Gammon India, which forayed into the power equipment business with its acquisitions in boilers, turbines and balance of plant equipments sees a synergic fit for electro mechanical EPC for water and fuel oil systems. TFEL may not only get subcontracts from Gammon India but may also qualify for large ticket orders in association with Gammon India.
TFEL has 38 years of experience in the EPC business with a good track record in project execution as well as its ability to move up the value chain. The confidence of the user industry in its ability to handle large projects has been vindicated with quite a few large orders as well as steady growth in the rise of its order ticket size.
The Indian oil & power sector offers significant growth potential. Incumbents enjoy growth and optionality, which could be in multiples of the current size. Private companies and PSUs have announced significant expansion projects, which augurs well for the future prospects of TFEL.
During FY11, sales are expected to touch Rs.300 crore with net profit of Rs.24 crore, which would fetch an EPS of Rs.23, this could further rise to Rs.27 in FY12. At the current market price of Rs.159.50, the share is traded at a P/E ratio of 6.9 on FY11 estimated earnings and 5.9 times its FY12 earnings. The TFEL share is recommended with a target price of Rs.200 in the medium-term. The 52-week high/low of the share has been Rs.311/117.
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