Stock Review: GEI Industrial

This company makes air-cooled heat condenser and air-cooled heat exchangers and this is mainly used by thermal power plants. We have been seeing the kind of growth the thermal power plant is showing because there has been a huge shortage in supply of equipments.

This company is based in Bhopal where BHEL has its plant and if you see the performance of the company, they have been now gradually increasing their bottomline.

They are already out with the results for December quarter and in the first nine months the topline is identical to what they have posted for FY10 i.e. equivalent to 275 crore and in Q3 December quarter, they have posted an EPS of about Rs 5.60 paise and the EPS for nine months ended December '10 has been at about Rs 14 or maybe Rs 13.60.

So it is most likely that FY10-FY11 will be having an EPS of close to about Rs 20 and the kind of growth they are showing in – maybe about 35% in topline and close to about 40% in bottomline and with the pipeline ahead for the product of the company is making it quite reasonably good. Marketcap 320 crore – I don't think that is looking overvalued, even the net debt in the books of the company is close to about 75-80 crore after the net of cash and all that.

So with the EV of about 400 crore and the kind of growth this engineering company can post in the next couple of years, I probably make it a good buy at Rs 192.