I T L - Good value buy in a market that seems to defy gravity!

I T L - KEY DATA

BSE Code	522183	Face Value	Rs.10	CMP	Rs.86
NSE Code	N.A.	Market Cap	Rs.28 cr	EPS	Rs.15.98
Book Value	Rs.49	P -Stake	45.19 %	PE Ratio	5.38

ITL is a global leader in the high speed Sawing Technology business. Since 1999, ITL has been manufacturing Tube and Pipe Mills, Section Mills, Straightening Machines, Draw Benches, Auto Cutt Off, Special Purpose Machines, Accumulators etc. Besides, ITL also fabricates Traction Locomotive Superstructures at its works in Indore – this could be a real money spinner if the Gulf states decide to get inter-connected by rail and this could be for real any time soon. Just read on.

A 1500 km railway network estimated at US Dollars 11 billion is scheduled to roll out in the next 7-8 years. The GCC network will include two rail lines : one that will connect all GCC countries and Qatar via a bridge and another that will stretch between Kuwait, Saudi Arabia, the UAE and end in Oman. For more information just get onto this link - http://gulfnews.com/business/general/gcc-countries-to-get-connected

“No force on earth can stop an idea whose time has come.” This adage of the French writer Victor Hugo symbolizes the ideal of ITL which took up the challenge of manufacturing the stated machines in our country which were being hitherto imported.

The company has got representatives spread across U.S., Europe and all across India, Being a pioneer in our home country, the company’s products have won acceptability across continents.

The Equity base is Rs.3.25 crores and the promoters stake is 45.19 per cent. Market Capitilization is Rs.28 crores only. Face Value of shares is Rs.10/= and the CMP is Rs.86/= and the 52 week range was Rs.99.65 / Rs.25 per share.

And now lets take a quick look at the not too distant financial performance of the company which is provided herein below:

Figs in Rs.crores

	Q – 1 30/6/10	Q – 2 30/6/09	FY 2009-10	FY 2008-09
Net Sales	10.90	8.08	62.97	31.33
PAT	1.01	0.53	5.19	1.36
PAT Margins %	9.26	6.55	8.24	4.34

So, one quick glance at the above table will reveal that on a q-o-q basis as well as on a y-o-y basis, Sales, Profits and corresponding PAT margins have increased significantly despite slow down in the global economy. The overall performance for fiscal 2009-10 has been really good with Net Sales increasing by 100 per cent plus and PAT increasing by 281.61 per cent and mind you that this has been achieved without the aid of any extraordinary or exceptional items. [ read income ]

ITL does annual business of close to .Rs.63 crores on an Equity base of .Rs.3.2 crores and it has Rs..5 crores in the form of cash/near cash. Yes, it does have Debt Equity Ratio of 0.95 which is well backed up by Interest Cover of 2.78 times. So not much to worry about.

Considering the good business model of the company, decent financial performance and a low valuation in terms of the stock being available at a PE of just 5.38, one can consider taking a call on this scrip at current market price or on corrections in order to get 25-50 per cent returns or perhaps even more and that too within 6-12 months.

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd