It is question of playing right cards - IMP Powers
The economic slowdown, which finds its origin to financial meltdown and has led to the demand destruction, has its silver lining. There is general consensus building in the country that to stimulate the demand,
the government needs to speed up its spending on infrastructure, in general and power sector, in particular, which plays a pivotal role in demand acceleration.
IMP Powers (IMPP), which is into manufacturing of entire range of power and distribution transformers, electrical meters and testing equipments, is in a right
position to exploit this opportunity IMPP has manufacturing facility at Silvassa and Mumbai. It manufactures transformers ranging from 10MVA to 1 50MVA in 220 KV class at Silvassa plant with installed capacity of 3600MVA. For meters it has installed capacity of 214400
units. Recently the company has taken an expansion plant of Rs 30 crore after which installed capacity of transformers will increase to 6000MVA and meters to
314400 units by the end of FY09. (The company has June as year ending). It has already secured funding for this expansion plan. Motilal Oswal Venture Capital
Advisors Private Limited have invested Ps 19 crore and the balance is financed by promoters of the company and Brescon Corporate Advisors bysubscribing to warrants at a rate of Rs 164. Apart from increasing the capacity the company plans to enter higher rang of transformers up to 400 KV class. This will help the company to target new sets of clients. It earns 96 per cent of its revenue from the transformer business and the rest from meters. IMPP also exports its product to various countries and 30 per cent of the total revenue is earned from this market.
IMPP topline grew by 44 per cent CAGR (Compounded Annual Growth Rate) between FYO5-FYO8. It increased from Ps 44.81 crore in FY05 to Rs 134 crore in FY08. Bottomline for the same time period improved from loss of Ps 5.58 crore to Ps 9.36 crore. NPM improved from negative 12.37 per cent to 6.94 per cent in same time. For QIFYO9 (Sept. 08) the company maintained its sales growth and posted 94 per cent growth against Q1FYO8. It recorded sales of Ps 51.4 crore compared to Ps 26.5 crore in Q1FYO8. During the same time period profits grew by 58 per cent. It increased from Ps 2.09 crore to Ps 3.3 crore. The company has order book of Ps 110 crore at the end of 31/03/2008 which is executable in next 8-9 months. This gives good earning visibility for the company. Going forward we
feel that the company will be able to improve its bottomline in far better way than topline due to fall in commodity prices. Raw material forms almost 85 per cent
of total cost (FY08) and major raw material used in the manufacturing of these transformers like copper, steel, CRGO (cold rolled grain-oriented) has seen sharp
decline in the price recently. At the current market price of Ps 42.8 the company is discounting its last trailing twelve month (TTM) earning by 2.6 times which
looks cheaper with the type of growth the company is demonstrating. Even market cap to sales (TTM) of 0:18 times seems at lower end. (Voltamp Transformers have
0.43 times). Hence we feel that the company scrip at current price seems value grab for the investors, and will give value appreciation of 20-25 per cent in next
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