Power Sector
Important note - Still Indian Markets are directionless and indecisive due to which any further market correction may bring some more pressure on all researched stocks mentioned in following subsections.
The market volatility situation is for short term duration and in long term the markets will recover as Indian companies are having good fundamentals and good growth prospects.
Taking into consideration current market situation it is advisable to buy stocks in steps rather than buying in bulk in single trade.
Godawari Power and Ispat
Returns
CMP - Rs. 60.05
Buying Price - Below Rs.55 (It went down till Rs.42)
Returns - 50 to 80%
Duration - 2 to 3 years
Taking into consideration Rs.42 as buying price following are the returns
166% Target acheived in month of 21 May 2009. It went high till Rs.112 (Updated - May 2009)
Company profile
1. Godawari power and Ispat manufactures sponge iron, steel
billets and value added wire products, used by construction
and housing sectors.
2. The company is going to get huge benefit from recent
integration of iron ore and coal mining.
The conclusion is the company which was buying iron ore and
coal (raw materials) from outside will now use them from its
own mines and this will save its huge cost of which will add up
to its profit.
Forecast
The benefits from its ongoing investments and expansions of its manufacturing capacities should provide further boost.
A better demand outlook and robust growth for steel, mining, power, construction will lead to healthy growth in earnings.
Any positive developments with regards the pending approval of captive coal mines in the future will also lead to significant gains.
Its power sector
The company has a power plant of 53 megawatt (mw) capacity which generates power from waste flue gases from its sponge iron plant is qualified for carbon credit.
Acquisition
The company recently acquired 75% stake in Ardent Steel. This company is implementing a 600,000 tonne pelletisation plant and is expected to be commissioned by December 2009 pillates are used to manufacture sponge iron.
The Godawari will get benefit by this acquisition by way of higher revenue and profit growth in the years to come.
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All about company
1. KEC International, a leading engineering, procurement and construction (EPC) player in the power transmission and distribution
(T&D) space, which generates about 65 per cent of its revenue from international markets including 25 per cent for the Middle East
region. Among reasons that will help the company tide over the current crisis is its strategy of diversifying into other geographies
across the world, as well as increasing focus on the domestic market, where the growth potential is huge.
2. The company is catering to about 20 countries globally, including some of the potential markets like Africa, Central Asia and
North America. Notably, many of these markets are underdeveloped in terms of power infrastructure and thus offer significant
opportunities. Also, many of these projects are backed by funding from international development agencies like World Bank and
Asian Development Bank, which suggests that money should not prove to be a hindrance. The conclusion is that the company is
expecting its international business to grow at about 15-20 per cent, which is a result of growing demand and its strategy to keep
on adding new markets in its international portfolio.
Its Indian presence
1. Even as a large part of KEC’s revenue comes from the international markets, it is well focused on the domestic market, which
currently contributes about 30 per cent to its total revenue. In the domestic market and during April-September 2008, Power Grid
Corporation issued orders, of which, the company bagged about 14 per cent of the total, giving it the largest share of the orders.
2. The merger of RPG Transmission (in 2008), a dominant leading player in domestic power transmission market, will help KEC in
bidding for larger projects and thus further consolidate its position. All these, thus, point towards the company’s stronghold in the
domestic operations as well as its ability to seize emerging opportunities in the power transmission space in India.
Growth prospects
1. India has plans to add 78,000 mw in the 11th five-year plan (2008-12) and 80,000 mw in the 12th plan (2013-17), there is enough
growth visibility for companies in the T&D infrastructure space.
2. The government’s focus to electrify every village and the huge investments being made in setting up the ultra mega power plants
(4,000 mw each) provide further comfort in terms of growth potential.
Companies Expansion plan
KEC is now nearly doubling its combined (outsourced and own) manufacturing capacity from 110,000 tonne to 200,000 tonne per year.
Company’s Order Book
1. The company’s current order book stands at about Rs.5000 crore.
2. The company recently bagged overseas orders of Rs 636 from Egypt and Rs.42 crore from Australia.
Investment opportunities
CMP - Rs. 157.55
Investment period - 2 to 5 years
Returns Expected - 50 to 90 %
Taking into consideration Rs.157.55 as buying price following are the returns
155% Target acheived in month of 21 May 2009. It went high till Rs.401 (Updated - May 2009)
Latest Updates
(18 Feb 2009)
KEC International bagged order of Rs.3.65 billion
KEC International, the world leader in transmission towers manufacturing, has bagged new orders worth Rs 3.65 billion from three
state-run power companies in both rural electrification and transmission space.
The maker of power equipment bagged an order worth Rs 2.55 billion for rural electrification from West Bengal State Electricity Distribution Company and another worth Rs 670 million from Power Grid Corp.
The company also bagged a third order worth Rs 430 million for a turnkey transmission project from Transmission Corporation of
Andhra Pradesh.
KEC International Ltd
(updated - Dec 2008)
(Researched date - Feb 2009)
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