GEI Industrial Systems Ltd - Good Long Term Stock
GEI Industrial Systems seems to be a good medium/long term investors who could stay invested in it for 6 to 8 quarters (1 to 2 years). The company’s consistent profit-growth trajectory in FY10 has contributed to its performance on bourses. After reporting a 43% profit growth for FY10, the company continued with its growth momentum for the June 2010 quarter, posting a 50% jump in its net profit to `4.1 crore, as net sales grew 29% to `50.3 crore. Improvement in the operating margin, higher other income and lower interest costs have mainly driven up the company’s performance.
The company is greatly benefiting from the rising demand for its air-based cooling systems from power and petroleum industries, since availability of water recedes. In India, these two industries are highly dependent on water for their cooling needs and have faced operational problems at times, when sufficient water is not available. Gei Industrial Systems dominates the market with a 70% market share in air-based cooling solution.
After successfully converting several captive power plants to this system, GISL has shifted towards commercial power plants, enabling it to obtain orders with large ticket sizes. In February this year, the company for the first time obtained single order worth nearly `100 crore for a 150-MW power plant. The company is well placed to obtain orders from new as well as existing power plants in India.
The company currently carries an order book of `500 crore — which is more than twice its net sales of FY10 — to be executed over the next 12 months. Almost 75% of the order book is represented by the power industry.
The company has embarked upon an `100-crore expansion, which will ultimately quadruple its capacities by the end of 2011. Under the first phase, it invested `20 crore in FY10 and has a planned capex of `35 crore for FY11. This capex programme is set to more than double its gross block within three years from `57 crore in March 2009.
Considering the rising demand for its products and services, the company could offer healthy returns to investors in the coming years.
Source: http://economictimes.indiatimes.com
