Sanghvi Movers Ltd. (530073.BO)

 

 

» Sanghvi Movers Ltd. (530073.BO) CMP -285 -Chanakya's Master Strokes

 

Before you start some work, always ask yourself three questions - Why am I doing it, What the results might be and Will I be successful. Only when you think deeply and find satisfactory answers to these questions, go ahead. - Chanakya

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SANGHVI MOVERS LIMITED, incorporated in 1989, a flagship company of the Sanghvi Group, is one of the largest crane hiring company in Asia and ranked 19th in the world by Cranes International. It supplies two main types of cranes — hydraulic and crawler and presently has a fleet of around 258 medium to large sized Heavy Duty Hydraulic and crawler cranes with capacity ranging from 20 tons to 800 tons. 

Sanghvi Movers provides cranes on a hiring basis to various industries like oil and gas, steel, refinery, cement, automobile, chemicals, wind mill, and power sectors. It undertakes turnkey projects, which includes providing equipment, technical services, and skilled manpower. Its clients include ONGC, Reliance, L&T, NFC,BHEL, IOCL, TISCO, ACC, Gujarat Ambuja, Hyundai, Ispat, Indogulf Fertilisers, Balco, Skanska Construction, Suzlon Energy, Delhi Metro, and Petron Engineering. 

Investment Theme Sanghvi Movers is a good play on India's increasing industrial and infrastructure capex. Sanghvi Movers' largest clients are in the wind mills, refineries and petrochemicals, and power sectors. Research indicates that the market opportunity for hiring cranes in its client sectors is likely to be more than INR 28 bn, of which, Sanghvi Movers is likely to corner a lion's share because of its established market position. Recent orders include:

1. Name of the Client : Suzlon Energy (Wind Power)
Value of Order : Rs 45.00 crores

2. Name of the Client : BHEL (Power Project)
Value of Order : Rs 24.00 crores

3. Name of the Client : Hajee A P Bawa (Cement Ind.)
Value of Order : Rs 11.25 crores

4. Name of the Client : Metro Tunneling Group(Delhi Metro)
Value of Order : Rs 5.25 crores

5. Name of the Client : Toyo Engineering (Refinery)
Value of Order : Rs 2.00 crores.

Financial Summary-Rs. Mn
Year to March	Q2FY08	Q2FY07	Y-o-Y%	Q1FY08	Q-o-Q%	FY07	FY08E	FY09E
Net sales	573	473	20.9	530	8.1	1,798	2,300	2,750
Employee expenses	19	17	14.8	18	3.9	63	82	107
Operating & other expenditure	28	24	19.4	23	23.9	434	589	751
EBITDA	429	343	25	406	5.7	1,301	1,629	1,892
Depreciation	114	85	34.3	111	2.2	347	535	589
EBIT	326	198	64.6	295	10.5	954	1,094	1,303
Other income	11	2	620.8	1	1,669.40	15	15	15
Interest (Net)	75	62	21.1	74	1.5	245	299	344
PBT	251	198	26.8	222	13.4	724	810	974
Taxes	84	67	24.9	77	9.8	252	273	374
PAT	168	131	27.8	145	15.4	472	537	600
EBITDA margins (%)	74.9	72.5		76.6		72.4	70.8%	68.8%
NPM (%)	28.7	27.6		27.4		26.2	23.3%	21.8%

Key Risks Sanghvi Movers derives ~55% of its revenues from the wind power sector. Hence,any slowdown in this user industry may drastically affect the company's performance and its business prospects.

Chanakya's Master Stroke 

The company will grow faster in the future, driven by expansion, higher demand from user industries and pricing power. Considering that most of its fleet is booked for the next 18-24 month, Sanghvi is expanding its fleet size and investing about Rs 200 crore (Rs 2 billion) a year in FY08 and FY09.

Valuation
	FY05	FY06	FY07
EPS (INR)	3.4	7.9	15.7
Y-o-Y growth (%)	122	134.8	46.6
P/E (x)	58.4	24.9	12.5 18.68*

 * as on 18.12.2007

However, the market has already discounted the scrip. See the technical chart below - The right time to enter the scrip was sometime around Oct 20'07 when the indicators turned bullish. If you want to enter the scrip, better wait for some time. The range of 175 - 225 will be the right band to accumulate this scrip.

 

 

Source:The Stock Editor