Wednesday, February 18, 2009

Multibagger: HBL Power Systems

HBL Power Systems (Rs. 110.00)

BSE Code : 517271

TTM EPS : Rs. 39

Market Cap : 275 Cr.

Pmt Stake : 63 %

52W H/L: Rs. 420/96

P/E Ratio : 2.8x

Dividend : 15% (F.V. 2)

Founded in 1977, HBL Power Systems Ltd (HBL) is an acknowledged leader in design, development and manufacture of industrial & specialized batteries, allied electronic products and DC (direct current) systems in India. DC power systems are used across the world for a variety of application where the traditional power supply system cannot be sustained/ supported. It is specifically required in mobile (nonstationary)applications like rail coaches, aviation etc. Therefore company focuses mainly on five key sectors namely telecom, aviation, railways, defense and other industrial segment including oil & gas, power, petroleum, steel etc.

A. Batteries :- This is the core business of company deriving more than 90% of total revenue. HBL is a technology focused manufacturer of several ranges of specialized application batteries i.e. nickel cadmium (pocket, fibre, and sintered plate), lead acid (VRLA, Tubular, LMLA), silver oxide zinc, lithium, thermal, etc.

B.Railway Electronics :- Traditionally HBL has been sup- plying various batteries for train lighting, air conditioned coaches, locomotives, signaling and communications. But off late, company has designed and developed wide range of microprocessor based signaling products and power systems to cater to the needs of Indian Railways. It now offers integrated power supplies for railway stations and does turnkey signaling works contracts including design, installation and commissioning.

C. Defence Electronics :- Although HBL derives hardly 5% revenue from this division but it boasts of supplying several specialized, tailor made batteries to the Army, Navy and the Air Force. EPS of Rs 33 on equity of Rs 24.30 cr. Incidentally company has a debt of Rs 350 cr leading to a debt equity ratio of 1.2x times. In order to fund its expansion, company had planned a preferential allotment as well as a right issue, but due the stock market sentiment, had to shelve it off. Importantly, with telecom, power, railway & defense being its focus market, HBL isn't much affected by the ongoing recession. And in case if it witnesses any

slowdown in domestic demand it can always cater to international market and increase its export revenue which is currently around 10% of total sales. Considering all the factors investors are strongly recommended to buy at current levels with a price target of Rs 240 in 12~15 months.

Source: Internet (SmartInvestment)

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