Reviews
In this edition, we have reviewed ISGEC Heavy Engineering Ltd. and Astral Ltd. We suggest our reader-investors to HOLD ISGEC Heavy Engineering Ltd.and Astral Ltd.
We had recommended ISGEC Heavy Engineering in Volume 36, Issue No. 19 dated August 16-29, 2021 under the ‘Analysis’ segment. The recommended price for the stock was ₹ 725.45. We had recommended the stock on account of multiple new orders, diversified market risks and positive growth prospects. The company is a much diversified heavy engineering company engaged in manufacturing and project businesses with an extensive global presence across 91 countries.
It caters to the wants of a wide spectrum of industries comprising power, defence, fertiliser, sugar, oil and gas, petrochemicals, automobile components, railways, space, steel, cement, chemicals and shipping ports. In terms of quarterly trends, on a consolidated basis, for Q3FY22 the company posted net sales of ₹ 1,395.58 crore, which has increased as compared to net sales of ₹ 1,392.46 crore for Q3FY21. For Q3FY22 the company gained an operating profit of ₹ 114.07 crore as against operating profit of ₹ 131.60 crore in Q3FY21, exhibiting a decline of 13.32 per cent. The net profit of the company decreased 19.97 per cent to ₹ 51.93 crore in Q3FY22 as compared to ₹ 64.89 crore in Q3FY21.
Looking at the annual financial trend, for FY21 the net sales of the company fell by 7.76 per cent to ₹ 5,425.57 crore from ₹ 5,882.06 crore for FY20. The operating profit increased by 42.07 per cent and stood at ₹ 506.73 crore for FY21 as compared to ₹ 356.68 crore for FY20. The annual net profit jumped by a staggering 69.69 per cent to ₹ 252.89 crore in FY21 from ₹ 149.03 crore in FY20. The company has many new projects under its portfolio from sectors such as railways, power water, process industry, construction, fertiliser, cement, refinery, steel, automotive, aeronautics, sugar, ash, paper, ethanol plants.
Order booking during the year was 27 per cent higher than in the preceding year. Despite the lower turnover, the profitability is greater due to savings in various costs such as employee benefits, travel expenses, legal expenses as well as increased efficiency, including the use of technological solutions. The company also received a patent for a self-sharpening shredder hammer tip as well as design registration for leak-proof economical valve with taper wedge safety lock for sugar plants machinery business. It has acquired technology for manufacturing 250 and 500 litres per minute medical oxygen plants with original technology from DRDO. The company has also invested in new software to enable remote working and to improve efficiency of products. Hence, we recommend HOLD.
We had recommended Astral Limited in Volume 36, Issue No. 19 dated August 16-29, 2021 under the ‘Choice Scrip’ segment. The recommended price for the stock was ₹ 1,966.85. We had recommended the stock on the basis of delivered phenomenal results and huge growth potential. Astral Pipes was established in 1996 with the purpose of manufacturing plumbing and drainage systems and products in India. Today, they cover the needs of millions of households, while adding extra mileage to India’s developing real estate fraternity with the hallmark of unbeaten quality. The company’s objective is to be a truly global, high-performing organisation delivering quality products and attain leadership position in its sector. On the quarterly consolidated financial front, the company posted net sales of ₹ 1,098.90 crore for Q3FY22, up by 22.44 per cent from ₹ 897.50 crore in Q3FY21, driven mainly by growth in its product and platform business.
The operating profit was ₹ 203.80 crore, an increase of 1.95 per cent in Q3FY22 from ₹ 199.90 crore posted in Q3FY21. The company gained a net profit of ₹ 127.90 crore in Q3FY22, increasing 2.24 per cent from ₹ 125.10 crore in Q3FY21. On the annual front, the net sales came in at ₹ 3,176.30 crore in FY21, up by 23.21 per cent from ₹ 2,577.90 crore in FY20. In FY21, the operating profit increased by a whopping 52.99 per cent to ₹ 668.10 crore from ₹ 436.70 crore in FY20. The company’s net profit soared in FY21 to ₹ 415.20 crore, up by astounding 65.29 per cent from ₹ 251.20 crore gained in FY20. Astral expects pipes’ demand to fast-track FY23 onwards, taking advantage of new real estate project launches and the government’s focus on housing and piping infrastructure.
Astral outperformed other major players as its volume declined only 4 per cent YoY. As real estate launches are picking up, Q2FY23 onwards the demand should be strong and the company expects to close FY22 with approximately ₹ 10 billion in revenue in the adhesive segment. Astral maintains normal inventory of PVC as Reliance supplies material at regular intervals. The expansion project in Bhubaneswar that entails installation of machines has been completed and is undergoing trial production. The company will start commercial production in Q1FY23. The valves plant at Dholka has started. A few sizes are already launched and more are under production trial. Also, the company is working on an adhesive plant in the chemical zone of Dahej in Gujarat, which will be completed by FY23. Hence, we recommend HOLD.
(Closing price as of Mar 04, 2022)