Birla Power Solutions Ltd. is an India-based company. The Company is engaged in the production of portable gensets, kilovolt-ampere (KVA) generators, and multipurpose engines, pump sets, sprayers, inverters, power tillers and wind energy. The Company is also engaged in trading of imported gensets and electrical items. The Company operates in three business segments: power and allied products, electrical appliances and others. The power and allied products segment is engaged in the manufacturing of portable generators, engines, pumps, inverters and trading of allied products. The electrical appliances segment includes trading of electrical appliances and miscellaneous components. The others segment include the wind mill energy generation.
One year Stock- price history
Market cap/ Price Volume Data
Volume
876,213
Previous Close
`2.35
Day's H/L
`2.37 - 2.31
Week H/L
`2.43 -2.31
Month H/L
`2.84 - 2.31
52 wk H/L
`4.68 - 2.21
Market Cap
(` Cr)167.08
Shares Outstanding
717,138,560
Closely Held Shares
56,884,320
Return on stock for different holding period
30 DAYS RETURN %
-1.69 Loss
90 DAYS RETURN %
-23.61 Loss
180 DAYS RETURN %
-31.67 Loss
365 DAYS RETURN %
-37.70 Loss
Economic Analysis:
2010 has been particularly impressive for the Indian markets. The NIFTY touched a Jan high of 5281.8 on January 6, 2010. Since then, the markets have corrected 8.6% and are currently trading at 5367 on the NIFTY.
The Indian markets have further downside if we look at a 1-2 month time horizon. Therefore, if looking at some long term investment, one should personally wait for some more time before taking any fresh exposure to the markets.
The Indian markets are still trading at a PE of close to 21. This is higher than the average PE the Indian markets have traded in the last 10 years. Also, the Indian markets have gone up over 100% from its March 2009 lows. After such a steep rise, a correction of even 20-25% can't be ruled out. This would be healthy for the markets in terms of attractive more money as valuations again start looking fair.
The Central Bank in China has been making efforts to control the credit growth as there is a high probability of asset bubbles and runaway inflation in China. Infact, one can say that the Chinese property market is already in a bubble stage. Therefore, there is a high probability of aggressive policy action to control credit growth and this can slow down China's growth significantly. Any such event will trigger a sharp sell off by the FII's in the emerging markets. Hence, the Indian economy might do well and the stock markets tank or correct significantly.
There is no doubt that the Indian economy is coming back to a robust growth trajectory. At the same time, inflation is also becoming a greater concern. The food inflation has shown no signs of easing and the WPI inflation is also going up at a robust pace. It would not be surprising to see further action by the RBI relatively soon. This might act as a negative trigger for the markets.
Sectors to Avoid
Industrial Commodities - will be negatively impacted if there is a sharp slowdown in China
Real Estate - Valuations still look expensive and interest rate hardening can negatively impact growth
Crude Oil Exploration - The China slowdown factor might impact exploration Companies as crude corrects
Industry Analysis
India's vibrant economy needs matching improvements in the infrastructure. Power sector will play important role in the economic development and hence need focused attention. But due to global economic crisis India electrical equipment half yearly growth registered in 2008-09 is down to 8.57 percent from 14.6 percent of the previous financial year (2007-08). However, India posted a positive growth compared with global growth where the growth has been negative a fall of 2.2 percent in 2008 compared to 2007.
India has taken number of legislative and policy initiatives to expedite power sector development such as Rajiv Gandhi Gramin Vidyutikaran Yogna (RGGVY). All these initiatives provide loads of investment opportunities to FIIs and other investors. The power sector reforms if implemented as scheduled will create large business for power sector equipment manufacturers and service providers. In India electrical sector export in the past 3 years (2004-05 to 2007-08) has grown with much higher CAGR of 57.28 percent compared to 32.25 percent for the period of 1995-96 to 2007-08. We can expect a continuous handsome growth for this sector for at least next five years and it is expected to cross INR 400 Billion by 2013.
Stocks in Electric Equipment Sector
%RETURN DAYS:
30
90
180
365
INDO ASIAN FUSEGEAR
84.50
84.99
106.02
230.12
JRC INDUSTRIES
40.62
23.18
126.13
182.43
SWITCHING TECHNOLOGIES GUNTHER
29.46
38.53
25.00
36.15
SHILCHAR ELECTRONICS
23.13
25.05
22.56
48.35
HONDA SIEL POWER PRODUCTS
19.31
28.00
58.30
211.19
Due to financial crisis global electrical equipment market has fallen by 2.02 percent in 2008 compared to previous year 2007.
In 2008 Power Cables and Switchgear together controls 60 percent of the market share in global electrical equipment market.
India electrical sector exports have grown with a 40 percent in 2007-08 to compared previous year 2006-07.
Due to economic slowdown India electrical sector has shown a decline of 6.04 percentage points for the half-yearly 2008-09 compared to half-year 2007-08.
Despite India electrical sector negative growth Voltage transformers and Power transformers has shown a growth of 28.6 and 25.7 percent respectively for the year 2008-09 compared to 2007-08.
Company Analysis
The company financials are as below,
Return Ratios
Attribute
Value
Date
PE ratio
129.24
29/07/10
EPS `
0.02
Mar, 10
Sales ( `crore)
56.22
Mar, 10
Face Value (`)
1
Net profit margin (%)
1.78
Mar, 09
Last dividend (%)
3
14/10/08
Return on average equity
2.15
Mar, 09
SWOT
Strength
Strong brand recognition
Internet sales
Growing international presence
Superior research and development department
Strong financial returns
Strong sense of culture in the working environment
Successful experience being competitive
Effective Leadership
Cost leadership
Prestigious Client Base
Customer Loyalty
Diversified Business
Product innovation capabilities
Technological excellence.
Good corporate image
Weakness
Complexity of operation
Lengthy processing chain
Opportunity
Growth of core sector industries
Rapid integration with global economy
Booming construction business in Asia
Growing e-commerce's business.
Increasing urbanization
Threat
Entry of global players
Take over possibilities
Political threats
The impact of foreign currency fluctuation and interest rates.
Loss of sales to substitutes
Porter's five forces
Rivalry amongst competitors
High Rivalry
INDO ASIAN FUSEGEAR,JRC INDUSTRIES,SWITCHING TECHNOLOGIES GUNTHER, SHILCHAR ELECTRONICS,HONDA SIEL POWER PRODUCT
Threat of entrants
FDI policy not favourable for international players,
International players looking to foray in the market
Bargaining power of supplier
The unorganized sector has dominant position
Established players, enjoy brand distinction
Bargaining power of buyers
Consumers are price sensitive , Availability of more choice
Threat of substitutes
Unorganized retail
Dividend
Year
Month
Dividend (%)
2008
Oct
3
2007
Aug
6
2006
Mar
8
2004
Dec
6
2003
Jul
14
2002
Jun
14
2001
Jul
12
2000
Aug
11
1999
Jul
11
Recommendation
START PRICE
2.32
TARGET PRICE
3.00
TARGET DATE
24/08/2010
RISK
LOW
Recommend buying of shares as price correction is expected to till 3.00 by 24th august.
Birla Power Solutions Ltd
Recommendation
Buy
Start Price
2.32
Last Price
2.33
Return%
Gain0.431
References:
http://www.birlapower.com/corporate_profile.html
http://www.cafestocks.com/pickDetails-id-7621-tips-Birla%20Power%20Solutions.htm
http://money.rediff.com/companies/birla-power-solutions-ltd/13120001
