Patels Airtemp - Long term story

   

Company Profile - 

Patels Airtemp (PAT) is one of the leading producer of Heat exchangers,Pressure vessels Vessels,Refrigeration and air conditioning equipments. PAT now mastered in the production of Air Cooled heat exchangers ,the product which is expected to replace the widely used water based heat exchangers in future.Company producing standard and custom made products and also offering turnkey solutions for large clients from the industries like Power,Refinery,Cement,Fertilizer ..etc.

PAT’s Product Segment includes: 

• Heat Exchangers: Heat Exchanger is equipment that transfers heat from one medium to another in the most efficient manner. Heat Exchangers are mainly used in the power plants, chemical plants, petrochemical plants & refineries and water treatment plants among others. 
• Pressure Vessels: This is a closed container used to store gases or liquids at a certain pressure. 
• Refrigeration & AC Equipment: PAT takes turnkey projects for humidification, ventilation and air-conditioning of industrial units and commercial spaces like offices, malls, residential complexes, and so on.

Why to buy?

1. Well positioned to benefit from the growing Heat Exchanger market: 
The global heat exchangers industry is expected to grow at 10% cagr due to: 

• Growing domestic demand from chemical, petrochemical and power sector 
• Replacement market demand from the Americas, Middle East and European market (useful life of Heat Exchanger is 20-30 years) 
• Significant growth kicking from India and China led by industrial demand and government effort to put industries into right direction where captive power plants and chemical processes requires heat exchangers 

2. Strong order book position; 
marketing efforts enhance future visibility: Over the past 4 years, Patels Airtemp’s outstanding order book has never exceeded 80% of its annual sales. Starting FY15, its order book stands at Rs. 137 crores (this is almost 2 times its FY14 sales).This clearly portends a very healthy sales growth for FY15.

 3. Experienced management, diversified client portfolio: 
PAT is promoted by N. G. Patel and his two sons, all of whom are very well qualified with mechanical engineering and MBA degrees. Together, the father-son trio has a total experience of 70 years in this field. Some other members of the board are also taking active role in strategic decision and capital allocation. 

 4. Growing business: 
At Rs. 135, Patels Airtemp is quoting at a market cap of Rs. 69 crores. This means a multiple of 10x its FY15 earnings. In FY15 company has posted 12.23 Rs EPS. And in the half year company posted 7.5 Rs EPS. Further, we think that Patels Airtemp profits should double in this financial year by strong order book (3 times of last year) and margin improvement. This indicates that the stock is available at 6 times price-to-earnings ratio. Based on improving domestic demand, thrust on export sales, visibility of order book, clean balance sheet and trustworthy promoters, there is a strong case for investment in this stock. Company also pays decent dividend. Hence, with significant undervaluation where entire market is flourishing, we recommend to Buy Patels Airtemp at the CMP of Rs. 135 to long term investors. 

bambino agro industries - best bet in FMCG?

Company Overview - 

Bambino Agro Industries Limited, incorporated in 1982, is a  well known brand with pan India marketing network. Company sells pasta, macaroni , noodles and a number of ready to eat items under the BAMBINO brand. From its ongoing efforts, Bambino has introduced an innovative range of products such as Spaghetti, Macaroni, and Instant Pasta besides Indian Ethnic Food like spices, masalas, instant food mix, ready to eat sweets, snacks, soups powders, and hing (compounded asafoefida) as value-added products to the already existing product line. At Present, Bambino has more than 80 prestigious products in variant styles, tastes n types and varieties.

Even this company is in operation for the past many years with a good brand recall ,its financial performance so far going smooth. However,higher debt level is the key reason for concern. Since promoters hold almost 75 % stake in it, it is easy to dilute some stake and raise funds to bring down debt burden.Considering the brand value and the premium valuations realized in some private equity deals in food sector it looks a good value bet.

In recent times company expanding to new territories and introducing various new products. Company is continuously rolling out new products in the market, same can be found here. To ramp up its sales force, company recruited many employees in recent past. To sell its ready to eat items BAMBINO started to open retail outlets in multiplexes.  Even in the financial front too , company has shown decent performance from last 2-3 years. Company's year ending is in September and it already posted an EPS of Rs.6 in 6 months  against last full year EPS of Rs.8. From last 3 years they are even consistent with their dividends which says promoters are trying to make an investor friendly relationship. If management is willing to take some steps like reducing debt,increasing corporate governance standards ..etc  ,this stock will be a multibagger in long term.