IMP Powers is undertaking $ 7 Mn (Rs 30 Cr) expansion plan after which the installed capacity of Transformers would increase from 3600MVA to 6000MVA (67% rise) meters from 164400 units to 314400 units (47% growth). The expanded capacities are expected to be operational by Q1FY09.
IMP Powers Ltd
Investment Rationale
The company is undertaking $ 7 million (Rs 30 crore) expansion plan after which the installed capacity of Transformers would increase from 3600MVA to 6000MVA (67% rise) meters from 164400 units to 314400 units (47% growth). The expanded capacities are expected to be operational by Q1FY09. The expansion is part financed by investment of $ 4.7 million (Rs 19 crore, 11.80 lakh Compulsorily Convertible Preference Shares (CCPS) at Rs 161 per share) by Motilal Oswal Venture Capital Advisors. Brescon Corporate Advisors was the financial advisor to the deal. Further, promoters of the company and Brescon Corporate Advisors Ltd have subscribed to the warrants to finance the balance capital expenditure (7 lakh warrants at Rs 163.90). Post conversion of the warrants, Motilal Oswal Venture will hold 13.75% in the company.
The company is having a strong order book position of Rs 130 crore as on 30th Sept 2007 (1.26x FY07 net sales), executable over next 8-9 months. The company recently bagged order worth Rs 65 crore from a renowned EPC Contractor for supply to Maharashtra State Electricity Board.
The capacity utilization level for the Transformers has witnessed improvement over the past years (FY05: 27.7%, FY06: 38.3%, FY07: 41.9%). Going forward we expect the levels to improve further to 50% for FY07 & 55% for FY09.
The share of exports (FOB) in total sales has increased from 18% in FY06 to 22% in Fy07. The company enjoys 5% higher margin on exports than domestic sales. We expect the share of exports will further increase to 25% in FY08 & 30% in FY09.
The company’s dependence on SEBs has reduced to 50% which is expected to go down further helping the company to reduce its working capital cycle and thus improved margins.
Besides, IMPPL is having land at Kandivli (W) in Mumbai. If it decides to develop it into residential / commercial complex, it will fetch additional money for the company.
Financial Performance
Transformers constitute about 95% of its FY2007 sales. The company has successfully turned around after a bad phase in 2000-2005. Subsequent to the turnaround, it has achieved a CAGR of about 55% in sales over last 2 years. The EBIDTA margins have improved to a current level of 17.9% for FY07 as against a low of 10.1% in FY05 because of growth in sales and operational efficiency.
For the Q1FY08 the company’s Total Income grew by 38.7%, EBIDTA by 46%, PBT by 103% and PAT by 57%. Also the EBIDTA margin improved from 16.9% to 17.9% and PAT margin from 6.9% to 7.9%.
Valuations
At current market price, the stock is quoting around PER 17.9x. On EV/Sales and EV/EBITDA it is available at 2.0x and 11.4x of TTM September 07 earning respectively.
- K.R Choksey
Disclaimer: As per SEBI requirements it is stated that, Kisan Ratilal Choksey Shares & Sec Pvt Ltd., and/or individuals thereof may have positions in securities referred herein and may make purchases or sale thereof while this report is in circulation.
IMP Powers Ltd
Investment Rationale
The company is undertaking $ 7 million (Rs 30 crore) expansion plan after which the installed capacity of Transformers would increase from 3600MVA to 6000MVA (67% rise) meters from 164400 units to 314400 units (47% growth). The expanded capacities are expected to be operational by Q1FY09. The expansion is part financed by investment of $ 4.7 million (Rs 19 crore, 11.80 lakh Compulsorily Convertible Preference Shares (CCPS) at Rs 161 per share) by Motilal Oswal Venture Capital Advisors. Brescon Corporate Advisors was the financial advisor to the deal. Further, promoters of the company and Brescon Corporate Advisors Ltd have subscribed to the warrants to finance the balance capital expenditure (7 lakh warrants at Rs 163.90). Post conversion of the warrants, Motilal Oswal Venture will hold 13.75% in the company.
The company is having a strong order book position of Rs 130 crore as on 30th Sept 2007 (1.26x FY07 net sales), executable over next 8-9 months. The company recently bagged order worth Rs 65 crore from a renowned EPC Contractor for supply to Maharashtra State Electricity Board.
The capacity utilization level for the Transformers has witnessed improvement over the past years (FY05: 27.7%, FY06: 38.3%, FY07: 41.9%). Going forward we expect the levels to improve further to 50% for FY07 & 55% for FY09.
The share of exports (FOB) in total sales has increased from 18% in FY06 to 22% in Fy07. The company enjoys 5% higher margin on exports than domestic sales. We expect the share of exports will further increase to 25% in FY08 & 30% in FY09.
The company’s dependence on SEBs has reduced to 50% which is expected to go down further helping the company to reduce its working capital cycle and thus improved margins.
Besides, IMPPL is having land at Kandivli (W) in Mumbai. If it decides to develop it into residential / commercial complex, it will fetch additional money for the company.
Financial Performance
Transformers constitute about 95% of its FY2007 sales. The company has successfully turned around after a bad phase in 2000-2005. Subsequent to the turnaround, it has achieved a CAGR of about 55% in sales over last 2 years. The EBIDTA margins have improved to a current level of 17.9% for FY07 as against a low of 10.1% in FY05 because of growth in sales and operational efficiency.
For the Q1FY08 the company’s Total Income grew by 38.7%, EBIDTA by 46%, PBT by 103% and PAT by 57%. Also the EBIDTA margin improved from 16.9% to 17.9% and PAT margin from 6.9% to 7.9%.
Valuations
At current market price, the stock is quoting around PER 17.9x. On EV/Sales and EV/EBITDA it is available at 2.0x and 11.4x of TTM September 07 earning respectively.
- K.R Choksey
Disclaimer: As per SEBI requirements it is stated that, Kisan Ratilal Choksey Shares & Sec Pvt Ltd., and/or individuals thereof may have positions in securities referred herein and may make purchases or sale thereof while this report is in circulation.
