| Buy | Hercules Hoists |
| BSE Code | 505720 |
| NSE Code | Not listed |
| Bloomberg | HCH@IN |
| Reuter | NA |
| 52-week High/Low | Rs 2460 / Rs 682 |
| Current Price | Rs 1340 (as on 2nd March 2007) |
A Shekhar Bajaj Group (promoter stake 70%) Company, Hercules Hoists produces chain pulley block, electric hoists, trolleys and cranes with a combined installed capacity to produce 29250 nos per annum, in technical tie up with Heinrich De Fries, GmbH, Germany. It also develops new range of Wire Rope Electric Hoists jointly with M/s Bull S.r.l., Italy. It holds a solid 40% market share in Chain pulley block. 20% market share in Wire Rope Electric Hoists and a massive 90% market share in CEM.
Hercules Hoists’ 'Indef' brand of material handling equipments, such as, Chain Pulley Blocks, Chain and Wire Rope Electric Hoists. Ratchet Hoists, Winches, Light Profile Systems, Pulling and Lifting Machines, H.O.T/E.O.T/Jib Cranes and Storage & Retrieval Cranes are widely used throughout India by small, medium and large industries. Special mention can be made of various steel plants, automobile manufacturers, cement, fertilizer, paper and sugar plants, state electricity boards, irrigation departments, construction projects, etc. wherever unit loads are moved.
Hercules Hoists has an ultra modern manufacturing facility equipped with, CNC machines, gear cutting machines, broaching machines. It has enviable set of customers. In automobile manufacturers its clients are, Tata Motors, Mahindra & Mahindra, Maruti Udyog, New Holland, Escorts, Premier Auto, Bajaj Auto, Kinetic, Ford India, Daewoo Motors, Ashok Leyland and Punjab Tractors. In Steel industry it caters to Tisco, Bokaro Steel Plant, Rourkela Steel Plant, SAIL, Mukund, and Jindal. In the Cement industry, its clients are Ultratech, Ambuja Cements, ACC and Birla Cement and in State Electrcity Boards, it caters to MPEB, RSEB, MSEB and BSES.
The whole range of material handling equipment manufactured by Hercules Hoists was marketed by Indef Marketing Services Limited (IMSL). The company merged ISML with itself in FY 2005. ISML has a network of 45 Authorized Marketing Associates and is an established name in India and internationally. The merger with ISML enabled Hercules Hoists to achieve higher efficiency in operational management and reduced avoidable administrative expenses, which has lead to improvement in overall profitability of the merged company.
In December 2006 quarter, Hercules Hoists registered a solid 24% rise in net sales to Rs 22.31 crore and 61% rise in its net profit to Rs 4.12 crore.
For nine months ended December 2006, while sales rose 40% to Rs 62.32 crore, PAT shot up by 107% to Rs 12.90 crore.
The handsome increase in revenues is due to the introduction of higher capacity hoists range in various models. Another reason for the increase in sales growth was due to increase in market demand, aggressive marketing, wider product range, competitive product price and faster deliveries. Cost cutting and various operational restructuring have helped it to improve the profitability faster.
The company has been able to achieve higher sales in tandem with the buoyancy in the infrastructure development and new investments being made in industries. The sales strategies are continuously tuned to the market situation. The order book is quite good.
Pick up in capital expenditure across various industries has lifted demand for material handling equipment. To cope with the rising demand of its products, the company has planned investment of Rs 5.00 crore in new factory to enhance its capacity. Land of approximately 6 acres has been purchased in Village Dhamani, Khopoli, Taluka Khalapur, District Raigad of Maharashtra to put up a new factory.
Major investment is likely in steel, minimg, power and automobile industries. This will involve substantial investment in material handling. This will ensure sustained growth prospects for companies like Hercules for the next couple of years.
The company had invested last year Rs 12.50 crore in the new business of Wind Energy of 2.5 MW, which has produced 39.51 lakhs units of energy for the year 2005-2006 of value Rs 1.37 crore. The company` has further invested Rs 6.25 crore for one Windmill of 1.25 M.W., which is installed at village Amkhel in Dhule District of Maharashtra during the year 2005-2006 and started producing units on 27th March, 2006. The company had planned for further investment of Rs 6.25 crore for one Wind Mill of 1.25 M.W. by June 2006.
For the FY ending March 2007, we expect the company to register sales of Rs 84.24 crore. Net profit can be projected at Rs 16.77 crore. On equity of Rs 1.60 crore and face value of Rs 10 per share, EPS works out to Rs 104.8. Book Value can touch Rs 280. In FY 2008 it can register EPS of Rs 129.8. The share price trades at Rs 1340. This discounts our FY 2007-08 projected EPS only 10.3 times.
Interestingly, the company has 83694 shares of Bajaj Auto bought at a cost of just 73 lakh. This gives purchase price of just Rs 87 per share. At current rates, this shares are valued at a huge Rs 21.04 crore. This gives potential cash per share of Rs 131.5. Adjusting for this potential cash per share, FY 2008 P/E falls to just 9.3.
| Hercules Hoists: Financials |
| | 0403 (12) | 0503 (12) | 0603 (12) | 0703 (12P) | 0803 (12P) |
| Sales | 29.39 | 47.87 | 62.72 | 84.24 | 105.31 |
| OPM (%) | 13.9 | 16.5 | 24.4 | 30.9 | 31.4 |
| OP | 4.09 | 7.91 | 15.29 | 26.05 | 33.07 |
| Other inc. | 1.34 | 1.19 | 1.68 | 2.70 | 3.30 |
| PBIDT | 5.44 | 9.10 | 16.97 | 28.76 | 36.36 |
| Interest | 0.22 | 0.23 | 1.11 | 1.21 | 1.33 |
| PBDT | 5.22 | 8.87 | 15.86 | 27.55 | 35.04 |
| Dep. | 0.60 | 0.61 | 2.34 | 3.11 | 4.05 |
| PBT | 4.62 | 8.26 | 13.52 | 24.44 | 30.99 |
| EO | 0.23 | 0.23 | 0.23 | 0.01 | 0.00 |
| PBT after EO | 4.39 | 8.03 | 13.29 | 24.43 | 30.99 |
| Tax | 1.51 | 1.35 | 3.65 | 7.66 | 10.23 |
| PAT | 2.88 | 6.68 | 9.64 | 16.77 | 20.76 |
| EPS (Rs)* | 24.0 | 55.7 | 80.3 | 104.8 | 129.8 |
| * Annualised on current equity of Rs 1.60 crore; Face Value: Rs 10 | |||||
| Hercules Hoists: Results |
| | 0612 (3) | 0512 (3) | Var. (%) | 0612 (9) | 0512 (9) | Var. (%) | 0603 (12) | 0503 (12) | Var. (%) |
| Net sales | 22.31 | 18.05 | 24 | 62.32 | 44.45 | 40 | 62.72 | 47.87 | 31 |
| OPM (%) | 28.8 | 18.6 | | 30.7 | 21.8 | | 24.4 | 16.5 | |
| OP | 6.42 | 3.35 | 91 | 19.10 | 9.67 | 98 | 15.29 | 7.91 | 93 |
| Other inc. | 0.56 | 0.35 | 60 | 1.74 | 0.94 | 85 | 1.68 | 1.19 | 41 |
| PBDIT | 6.98 | 3.70 | 88 | 20.84 | 10.61 | 96 | 16.97 | 9.1 | 86 |
| Interest | 0.35 | 0.27 | 30 | 0.93 | 0.89 | 4 | 1.11 | 0.23 | 383 |
| PBDT | 6.63 | 3.43 | 93 | 19.91 | 9.72 | 105 | 15.86 | 8.87 | 79 |
| Depreciation | 0.45 | 0.31 | 43 | 1.25 | 0.94 | 33 | 2.34 | 0.61 | 284 |
| PBT before EO | 6.18 | 3.12 | 98 | 18.66 | 8.78 | 113 | 13.52 | 8.26 | 64 |
| EO | 0.00 | 0.06 | -- | 0.01 | 0.17 | -96 | 0.23 | 0.23 | -2 |
| PBT after EO | 6.17 | 3.06 | 102 | 18.66 | 8.61 | 117 | 13.29 | 8.03 | 66 |
| Tax | 2.05 | 0.50 | 309 | 5.76 | 2.38 | 142 | 3.65 | 1.35 | 170 |
| PAT | 4.12 | 2.56 | 61 | 12.90 | 6.23 | 107 | 9.64 | 6.68 | 44 |
| EPS | 103.0 | 64.0 | | 107.5 | 51.9 | | 80.3 | 55.7 | |
| * Annualised on current equity of Rs 1.60 crore; Face Value: Rs 10 | |||||||||
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