The Hindu Business Line : Gujarat Apollo on road to steady growth

GUJARAT Apollo Equipment is moving on the growth avenue on increasing demand for road construction and maintenance machinery such as indirect heating equipment, asphalt batch mix and drum mix plants, sensor paver finishers, bitumen pressure distributors and kerb pavers.

The stock has moved up from a level of Rs 120 on November 1, 2005 to Rs 143 today. The traded quantity in the stock also improved in the counter through December last year. Currently, it is averaging over 50,000 shares a day on the BSE.

According to analysts, a demand worth $10 billion (Rs 45,000 crore) of construction machinery is anticipated in the next 15 years because of planned activity and investments in the road and construction sector.

The company, which has a technical collaboration with Wheelaborator Clean Water Systems of the US, controls 60 per cent of the market segment in which it operates, with a base of over 1,400 customers and an equipment population of around 3,500 units, said Mr Rajesh Agarwal of CD Equisearch. "The outlook for the company is bright not only for the current year, but also for many years ahead," he added.

The company caters to all the three categories: government and semi-government agencies, private corporate customers and small contractors. While the first two categories account for 70 per cent of the sales, the balance is brought in by small contractors, analysts pointed out. "The enquiries from the export markets continue to show a healthy trend," they added.

In the half-year ended September 2005, GAEL registered a sales growth of 57.3 per cent to Rs 41.77 crore. The profit after tax was up by 185.8 per cent to Rs 3.83 crore. "We expect GAEL to register sales and net profit of Rs 90 crore and Rs 8.5 crore, respectively in 2005-06. On the equity of Rs 7 crore and face value of Rs 10 per share, EPS works out to Rs 12.15. "Considering the future growth potential it appears undervalued," Mr Agarwal mentioned.

According to Mr V.K. Sharma of Anagram Stockbroking, "We expect company to register sales of Rs 85 crore and net profit of Rs 7.9 crore in FY06. At today's closing price, the stock traded at an attractive level of 13 times its expected FY'06 earnings of Rs 11 per share," he added.