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Investment Rationale
Rishi Laser is one of the few listed independent fabricator engaged in contract manufacturing for the engineering industry in India. All its manufacturing units are equipped with machining, plasma and laser cutting facilities. It operates in four different verticals: construction equipment, power, railways and automotive and has considerable spare capacities to leverage on the growth prospects in these four user segments.
The company has over the past few years invested close to `1 billion at its 12 manufacturing facilities in India of which nearly `350 million was invested at its Bangalore and Pune facility and we believe that the present market capitalisation of `311 million does not truly reflect the value of this `2 billion enterprise.
Having completed its investment phase, Rishi Laser in our opinion is at an inflexion point and is poised to grow its net profits at a CAGR of 40% over FY’11-13 and this would be driven by a 23% CAGR growth in consolidated revenues over the same period.
In a bid to augment future growth in a competitive market, Rishi Laser made a strategic decision and added new business of “Wear Plate” to its offerings. The company has commenced the manufacturing and marketing of “Armour” wear plates from its state-of-the-art manufacturing facility at its Savli plant in Gujarat.
Given its wide array of diverse and marquee clientele, we believe that Rishi Laser is well placed to capture the growth envisaged in segments like excavators and construction equipment and more so because being a high end steel processor it would be able to fabricate large steel capacities that would start coming in the next 18 months.
Valuation
We believe that the fortunes of Rishi Laser is meshed with infrastructure creation in the country and given its presence across the country except Eastern India we are optimistic on its ability to leverage growth in all its four verticals going forward.
L&T holds a 26% equity stake in its subsidiary – Rishi Consfab Ltd. We forecast a 40% CAGR growth in profits for Rishi Laser over FY’11-13 which would be driven by a 23% CAGR growth in consolidated revenues.
We recommend a BUY on Rishi Laser having a price to book of 0.6x and trading at 4.3xFY’12E and 3xFY’13E earnings with an 18 month price target of `72.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Investment Rationale
Rishi Laser is one of the few listed independent fabricator engaged in contract manufacturing for the engineering industry in India. All its manufacturing units are equipped with machining, plasma and laser cutting facilities. It operates in four different verticals: construction equipment, power, railways and automotive and has considerable spare capacities to leverage on the growth prospects in these four user segments.
The company has over the past few years invested close to `1 billion at its 12 manufacturing facilities in India of which nearly `350 million was invested at its Bangalore and Pune facility and we believe that the present market capitalisation of `311 million does not truly reflect the value of this `2 billion enterprise.
Having completed its investment phase, Rishi Laser in our opinion is at an inflexion point and is poised to grow its net profits at a CAGR of 40% over FY’11-13 and this would be driven by a 23% CAGR growth in consolidated revenues over the same period.
In a bid to augment future growth in a competitive market, Rishi Laser made a strategic decision and added new business of “Wear Plate” to its offerings. The company has commenced the manufacturing and marketing of “Armour” wear plates from its state-of-the-art manufacturing facility at its Savli plant in Gujarat.
Given its wide array of diverse and marquee clientele, we believe that Rishi Laser is well placed to capture the growth envisaged in segments like excavators and construction equipment and more so because being a high end steel processor it would be able to fabricate large steel capacities that would start coming in the next 18 months.
Valuation
We believe that the fortunes of Rishi Laser is meshed with infrastructure creation in the country and given its presence across the country except Eastern India we are optimistic on its ability to leverage growth in all its four verticals going forward.
L&T holds a 26% equity stake in its subsidiary – Rishi Consfab Ltd. We forecast a 40% CAGR growth in profits for Rishi Laser over FY’11-13 which would be driven by a 23% CAGR growth in consolidated revenues.
We recommend a BUY on Rishi Laser having a price to book of 0.6x and trading at 4.3xFY’12E and 3xFY’13E earnings with an 18 month price target of `72.
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