Bartronics

Telefolio Friday- dated 16-nov-2007
52-week High/Low
Rs 288 / Rs 92
Current Price
Rs 224 (as on 16th November 2007)
Incorporated in 1990, Bartronics started its business in the field of bar coding and smart card technology. Later it started experimenting with the new Automatic Identification & Data Capture (AIDC) solutions.
The company is involved mainly with the manufacturing sector and has implemented a number of projects across companies in their manufacturing set-ups. The projects primarily involved inventory & logistics management, time & attendance and asset tracking systems. AIDC is seen as an enhancing technology as it automates the data collection for the main systems. Currently, the company offers diverse range of AIDC technologies – barcode, biometrics, radio frequency identification (RFID), radio frequency data communications (RFDC) and electronic article surveillance (EAS).
Established player in the fast-growing business
Being one of the first organized players to provide end-to-end AIDC solutions in India with more than 1,600 clients and five international distribution centers, BIL has the advantage of being the first mover. Strong technical know-how has helped the company move up the value chain from bar code to RFID solutions and increase realization per client. The company has also diversified into the retail space considering the low penetration of organized retail.
BIL has established a brand value amongst its clients (about 1,600) over a period of 16 years. The work includes system integration for barcode solutions, which has applications in areas such as inventory management, attendance recording, dispatch management etc. The companies clientele includes Tata Steel, Tata Motors, HLL, ITC, Ashok Leyland, TVS, CMC, Ranbaxy, Compaq, VST, Whirlpool, ITW, Dr. Reddy’s to name a few. The company also provides services to the devotees of Lord Balaji (Tirupati) by managing the inflow logistics of the pilgrims. Some of its multinational clients include Compaq, Panasonic, IBM, GM, Mercedes Benz, etc. The company has also started providing RFID solutions to the same set of customers and moving up the value chain.
The AIDC industry is rapidly moving towards the use of RFID in a number of high value and high volume market segment. The RFID market is expected to grow from $1.4 billion annually to $6.1 billion in 2010. RFID and biometrics solutions are growing at an exponential rate with retail and manufacturing growth in India.
Host of foreign alliances
To take the company into a new league, BIL constantly strikes alliances with the best in the industry across the globe. To offer state-of-the- art AIDC solutions, it has associations with companies worldwide who are the leaders in their respective range of AIDC equipment and solutions. They manufacture hardware and associated communications software too. The alliances are with Intermec, US; Escort Memory Systems, US; IDMicro, US and Synel Industries Ltd, Israel. Intermec is the world’s largest manufacturer of bar coding scanners; Synel Industries is the leading manufacturer of security products globally. In case of Synel Industries, BIL has an exclusive arrangement to market its products in India. Escort Memory Systems and IDMicro are the global leaders in RFID products and BIL markets their products in India. In the area of smart cards, it has entered into a MoU with Muhlbauer AG, Germany, for implementing projects based on RFID, AIDC and smart cards and a software and marketing tie-up with Watchdata Technologies, Singapore. These companies are acknowledged leaders in their areas of operations and BIL actively derives its competence from these companies.
Taping the smart card potential
The Indian smart card market is at a nascent stage with the demand coming from various sectors such as banking, retail, telecom, healthcare and government organizations which are likely to witness exponential growth over next three years with most companies looking at data security and collection.
To capture the demand for smart cards estimated at more than 150 million units per year and growing at a CAGR of 48%, BIL set up the first smart card manufacturing plant in India having a capacity of 80 million units. Initially, BIL plans to capture around 70% of the SIM card market,. A further fillip to the smart card market is expected from the proposed Multipurpose National Identity Card to be implemented by the central government. BIL is among the companies shortlisted and the pilot project in underway. The banking sector will also drive this industry with switch from the current magnetic tapecards as Visa & Master Card deadline will expire in next three years.
Good geographical spread
In order to have strong global presence the company has five international distribution centers. These centers cater to the growing AIDC demand in the countries such as Malaysia, Sri Lanka, Bangladesh and Dubai. Having strong relations with clients has also helped the company expand to newer geographies as the clients moved to the other markets and wanted BIL to provide solutions. These new geographies will help the company expand the market and gain market share.
Strong financial performance
On consolidated basis, during half year ended September 2007, Bartronics has registered revenue of Rs 93.27 crore. This is against standalone revenue of Rs 54.74 crore (up 93%). And consolidated PAT stood at Rs 17.29 crore against Rs 8.93 crore (up 63%).
Forex loss for the quarter was Rs 50 lakh against Rs 38 lakh in the sequential quarter. Currently 50% of the revenues is export. The company has a natural hedge with regards to import of chips.
The Company has established a wholly owned subsidiary based at Singapore during the period June 2007 to cater to the need of South East Asia countries and reorganised business for better focus. Hence the comparable consolidated figures for the corresponding period previous year are not available.
Full benefits of smart card plant will be reflected in future
The company started dispatches from its smart card facility. For Q2FY08, it is working at 20% capacity with dispatched 4 million cards with revenues at Rs 14.4 crore and EBITDA of 15%. The target net margin for the business is 20%. The company has plans to work at 50% capacity (total capacity 80 million) by end FY08 meaning dispatch of 40 million cards for FY08.
The company has contract for 56 million smart cards every year for next 2 years from Giesecke & Devrient, Germany. G&D supplies smart cards with SIM technology to Indian Telecom players and for South East Asian market.
Phase II wherein the company would set up the chip manufacturing facility would be commissioned in January 2008. Currently, the company has tied up with ST Microelectronics and Infineon for the chips.
Revenues to grow handsomely in coming years
For FY08, the company expects revenues of Rs 200 crore of which Rs 100 crore would be from smart card segment and Rs 100 crore from solutions segment. The net margins expected are 20%.
For FY09, the revenue target is Rs 350-400 crore with net margins of 20%.
The current year promises to be a very exciting year for the company: On one hand the traditional business of the company viz. providing solutions is showing a healthy trend while on the other hand, the company has invested significantly into a smart cards manufacturing facility. Smart cards as the emerging technology in the AIDC umbrella offers the company a great chance to break into the big league.
Valuation In FY 2008, we expect the company to register consolidated sales and net profit of Rs 232.33 crore and Rs 41.50 crore respectively. The diluted equity of the company post conversion of FCCBs and preferential allotment would be Rs 30 crore. Thus on fully diluted basis and face value of Rs 10 per share, EPS works out to Rs 13.8. The share price trades at Rs 224. P/E works out to 16.2, which is reasonable for a fast growing company. Read more!

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Bajaj Electricals

Wednsday telefolio-14-nov
Current Price
Rs 366 (as on 14th November 2007)
A part of the Shekhar Bajaj Group (Promoter holding: 67.49%), Bajaj Electricals (BEL) is a 69-year-old Engineering company, with interest in Lighting, Luminaires, Appliances, Fans, and Engineering & Projects.
It has 19 branch offices, a chain of 600 distributors, 3000 authorised dealers, over 1,20,000 retail outlets and over 200 service franchises spread across the country.
PAT more than doubles for the quarter and six months ended September 2007
The company has been focusing on enhancing revenue growth through introduction of new products, expansion of the dealer and retailer network along with good brand building efforts. The various actions that the company had taken for effective cost control, value engineering, competitive sourcing and improving credit discipline including introduction of channel finance continue and are giving good results.
For the quarter ended Sep’07 Bajaj Electricals has reported a 31% growth in net sales to Rs 304.89 crore. Operating profit margins shot up to 9.7% (up by 250 bps), leading the operating profit to increase by 77% to Rs 29.70 crore. Other Income increased by 129% to Rs 0.64 crore. Interest expenses went up 23% to Rs 7.66 crore while provision for depreciation has increased by 8% to Rs 1.82 crore. Thus PBT before EO zoomed by 128% to Rs 20.86 crore. EO was nil as against an expense of Rs 0.15 crore, representing amortization of expenditure in respect of voluntary retirement schemes. Thus, PBT after EO stood at Rs 20.86 crore (up by 132%). The provision for tax (including FBT and deferred tax) for the quarter was Rs 7.67 crore as against Rs 2.96 crore in the corresponding previous quarter. Finally, PAT reported a scintillating growth of 121% at Rs 13.19 crore.
For the half year ended Sep’07, net sales increased by 32% to Rs 557.16 crore. The Net profit recorded a growth of 117% at Rs 20.96 crore.
All business segments are on strong growth path
Lighting division- poised for improved growth in the future:
The Lighting BU markets a wide range of lamps and tube lights, which includes General Lighting Service (GLS) filament lamps, Fluorescent Tube Lights (FTL), Compact Fluorescent Lamps (CFL), miniature lamps and special purpose lamps. A strong distribution network exists for marketing these lamps both in urban and rural areas. The manufacturing of GLS and FTL lamps is undertaken at Hind Lamps, an associate company of BEL, located in U.P. Other lamps such as High Intensity Discharge (HID) lamps like mercury vapour and sodium vapour lamps, metal halide lamps and tungsten halogen lamps are marketed by the luminaires division.
For the quarter ended Sep’07 the lighting division has reported growth in revenue of 22% to Rs 95.93 crore contributing almost 31% to the total revenue and the segment PBIT of the same reported a 39% growth at Rs 5.07 crore (contributing to 17% of total PBIT).
For the six month ended Sep’07 the lighting division reported growth in revenue of 21% to Rs 164.25 crore contributing almost 29% to the total revenue and the segment PBIT of the same reported a 21% growth at Rs 7.01 crore (contributing to 14% of total PBIT).
This BU has successfully introduced new models like Ecospot, Ecofocus and Eline range of energy efficient consumer luminaries and completed Reliance Consumer Project by selling 6 million CFLs. The BU has continued to improve its retail presence by expanding its network and reaching in over 165000 outlets.
Consumer Durables- introducing new products and increasing competitive advantage:
The consumer durables division has reported growth in revenue of 35% to Rs 127.85 crore contributing 42% to the total revenue and the segment PBIT for the quarter stood at Rs 11.80 crore which was 101% higher as compared to the corresponding previous quarter and contributed around 40% to the results.
For the six month ended the consumer durables division has reported revenue growth of 36% to Rs 257.90 crore contributing 46% to the total revenue and the segment PBIT for the quarter stood at Rs 23.98 crore which was 87% higher and contributed around 50% to the results.
This division continues to remain a celebrant leader in small appliances and Mixer category with sales of over 4,00,000 number in the Mixer category. The BU continues to dominate the Iron category by achieving a record sale of over 1 million Irons in a financial year. This BU has entered the Modern Retail format in a big way with a sale of over Rs 12 crore in 2006-07.
The company’s Morphy Richard brand products like Ovens, Mixers, Irons, Toasters, etc. introduced in the premium segment continued to receive a good consumer acceptance across 100 cities in the country where it has been introduced. The contribution from this product range is expected to grow significantly in the coming years.
The company has continued to introduce new products and different models in the existing Bajaj range of products and improve the technology and quality, wherever possible, in order to have a competitive advantage. Recent new product categories include inverters and UPS, both of which have excellent growth potential.
Engineering & Project division-ever increasing demands from the Infrastructure, & Power Transmission offers significant opportunity:
During the quarter ended September 2007, this division registered net sales of Rs 80.50 crore compared to Rs 59.20 crore and a segment PBIT of Rs 11.66 crore as against Rs 5.58 crore. This division contributed 26% to total revenue and 40% to total PBIT of the company.
During the six month quarter ended September 2007, this division reported net sales of Rs 134.26 crore, up 37%. It contributed to 24% of the total sales for the six months. This division registered segment PBIT of Rs 17.43 crore, up 74% and contributed 36% of the total PBIT.
The E & P BU has maintained its capacity utilisation of 100%. In FY 2007, this division produced 2,970 nos. of Highmasts and 17,181 nos. of Poles as against 1,760 nos. and 14,951 nos. respectively in the previous year. The Unit also manufactured 25,223 MT of transmission line towers as against 22,822 MT in the previous year.
The Unit continues to enjoy dominance in Highmast business with over 65% market share. The continued focus of the government on infrastructure offers a good opportunity to this BU's various business portfolios viz. Power Transmission, Highmast Street Lighting and Special Projects, to improve its growth and profitability in the future too.
This BU has received prestigious orders from BHEL for power plant illumination and the work at 14 different power station sites is under execution.
On track for achieving targeted revenue of Rs 2000 crore by 2010
The company had targeted Rs 1000 crore of sales in FY 2007. Against this, it has achieved sales of Rs 1079 crore.
For the six month of FY 2008 ended September 2007, its sales have improved by 32% to Rs 557.16 crore.
Through both organic and inorganic growth strategies, the company aims to reach the targeted turnover of Rs 2,000 crore in 2010.
By acquiring Starlite Lighting the company will grow its lightning business in a big way
The company has acquired 32% stake in Starlite Lighting Limited. This Equity participation in Starlite Lighting Ltd., a CFL manufacturer, is one of the major events that took place during FY 2007, which is expected to help the BU in a big way both in terms of quality and volumes. The proposed star ratings for energy efficient products being introduced from April 2007 will provide a good thrust to the FTL segments in 2007-08 as against a sluggish market situation in 2006-07.
Starlite has a production capacity of 10 million CFLs per annum, of which more than half is consumed by Bajaj Electricals. It exports more than 50% of its production and supplies lighting equipment to Sweden-based furniture retailer IKEA and other supermarket chains in Europe.
Has secured orders for 2007 and 2008 national games to provide impetus to the financials; frontrunner for 2010 Commonwealth Games
The company has bagged orders to provide lights for the 2007 National Games in Guwahati and the 2008 National Games in Ranchi. These orders will provide the company with steady growth for the next two years.
On the other hand, Bajaj Electricals is one of the front-runners for lighting-up New Delhi for the Commonwealth Games 2010. The Rs 500 crore project includes illumination of streets, stadiums and games villages. The company is planning to decorate the capital with designed lamps of various hues and high masts.
New light and fresh air from Licencing agreements with leading foreign companies
The company announced a tie-up with a UK-based company ‘Helver’ to act as a brand licensee for distributing lighting controls and dimmable ballasts. These include high-tech products that adjust lighting for rooms based on actual lighting situations.
The Luminaire business of the company has successfully launched the Trilux products in India through a distribution arrangement with M/s.Trilux Lenze of Germany, who are a leading Luminaire Company in Europe. The lighting BU with its improved distribution network, wide product range, and efficient sourcing strategies is poised for improved growth in the future.
It markets Morphy Richard-branded products like ovens, mixers, irons and toasters catering to the premium segment.
Major contribution to come from the Engineering and project business to achieve Rs 2000 crore sales mark in FY 2010; others will also contribute significantly
Engineering and projects business unit will play an important role in its plans of being a Rs 2000 crore company by FY 2010. Currently, this segment accounts for just over 28% of the total revenues. Contribution from this business unit will increase along with the rise in the revenues.
Till recently, the company was only into the manufacture of power transmission towers. It has recently also entered in to the erection and commissioning of power transmission towers, which will be the main growth driver for the future. This division also deals with telecom transmission towers were companies like Reliance, Bharti, Tatas are all its customers. BEL is also into wind energy towers.
The BU's strategy of growth with diversification in related areas has been paying rich dividends. The successful launch of India's first 400 KV Transmission Line Monopole for Powergrid Corporation of India has opened new avenues of growth. The highmast and street lighting business has also crossed Rs 100 crore mark, with record dispatch of over 2900 masts and over 17000 street light poles. This BU's Ranjangaon Unit has achieved 100% capacity utilization and dispatched over 30,000 MT of galvanized material.
This BU has received prestigious orders from BHEL for power plant illumination and the work at 14 different power station sites is under execution.
In FY 2007 the BU has ventured into the rural electrification sector and is currently executing a project worth Rs 53 crore in Chattisgarh District, which will provide electricity to nearly 40,000 below poverty line (BPL) homes.
The company plans to invest Rs 30 crore in its Ranjangaon facility to raise the processing capacity from 30,000 tonnes of steel to 50,000 tonnes. The higher capacity of the high mast plant would help in total substitution of imports from the UK and West Asia till now. The plant would also cater to the hot dip galvanising needs of the infrastructure sector, particularly in Maharashtra and neighbouring states.
The company supplies masts of 11-60 m height. It has a market share of over 65% in this business. It had recently supplied complete turnkey solutions comprising high masts and lights to the Chennai Port and Guwahati Stadium
The company sees opportunity in urban projects being undertaken by various municipal corporations. Using of pole-hoisted signages by petrol stations is also a major boost for our business. There is also huge scope in the transmission line towers (TLTs) and other lattice structures business.
Illuminating outlook
The company has a good business portfolio with both consumer facing and industry facing businesses. The higher propensity to spend by the Indian consumer, increasing urbanisation and accelerating growth in organised retail augurs well for the consumer facing businesses of Appliances, Fans and Lighting. Increasing availability of power in the long-run will also benefit its consumer electrical business.
With increasing industrial activity, growing investments, higher capacity creation and greater infrastructure focus, the Luminaires and Engineering & Projects businesses are also likely to enjoy healthy growth rates.
The company’s business strategy is going in the right direction and will contribute to strengthening the organization in the years ahead. The company will emphasize to have a healthy mix of high-end products contributing to the bottom-line along with achieving Rs 2000 crore sales mark in FY 2010.
Attractive valuation
We expect the company to register sales and net profit of Rs 1377.01 crore and Rs 60.69 crore in FY 2008. On equity of Rs 17.29 crore and face value of Rs 10 per share, EPS works out to Rs 35.1. At current price of Rs 366, the scrip is available at a P/E of just 10.4. Read more!

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