IMP POWER

Multibaggers 24th-December-2007

 

            K.R Choksey Picks,

            IMP Powers Ltd :   Reco Price Rs. 221.50  CMP: Rs.221.50 (Gain 0.00%)

            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.
            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.