Sunday, October 24, 2010

Cooling will make it hot soon!

Lloyd electric and engineering an Airconditioner coil manufacturer is the largest producer of coils used in all types of ariconditioners, domestic or industrial. It also manufatures complete air conditioner units on contract basis. Almost all the leading players in India such as Voltas, Blue Star, Hitachi, samsung etc are its clients.

Demand for air conditioners are rising at exponential pace, and are expected to continue for next few years thanks to global warming and rising income of Indian people. The company is diversifying into Metro rail airconditioning which is likely to give boost to order book thanks to Metro rail expansion in various cities in India.

The current market price of the company is Rs. 78/- which translates into the market cap of approx Rs 242 crores. The company is expected to do around 850 crores on standalone basis while on consolidated basis it is expected to clock a revenue of 1050 crores. As its last years european acquisition not expected to yield any profits due to overall slowdown in European region, the expected PAT for this year on standalone and consolidated basis is expected to be around 48 crores which translates into an EPS of approx Rs 16/-

At the CMP of 78 the stock is available at less than 5 times its current year earnings which is extraordinarily cheap with respect to other air conditioner players in the market such as Hitachi, voltas, blue star etc as these companies are trading at somewhere close to 15-25 times its current year earnings.
The company's FY-09 book value was approx Rs 132/-. For the current year i.e FY-10 the BV is expected to be around 147. so at CMP the stock is available at 0.53 times or 47% discount to its book value.

Considering the industry it is part of and the kind of low valuation it is trading at, the stock is expected to generate around 80% return from these levels in 6 to 12 months time.

So this cooling business is expected to make Lloyd Electric & Engineering a hot stock on dalal street soon.

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