The Telecom service providers are engaged in a savage tariff war, with the bigger players hoping for a consolidation. There's another jolt to their hopes with the Government postponing spectrum auction for third-generation mobile-phone services to the next fiscal year. While everyone is focusing on the fate of telecom service provides, I thought why not concentrate on companies that might benefit from the entry of new players. The entry of new players in the telecom industry is going to be marked with the enhancement of the infrastructure, and this shall help both upstream and downstream companies. Taking note of the same, the company that came to my notice is APW President Systems ltd.
APW President Systems Limited, is a designer, manufacturer and supplier of standard and customized enclosure systems in India. The Company caters to three major business segments: enclosure systems, contract manufacturing and trading activities – all with a focus on the IT/Networking and ITES, Telecom, General and Industrial Electronics sectors. Cabinets or enclosures are the main product offering of the company. These enclosures are basically used for server housing for networking purpose. Company has a focused approach towards the design and manufacturing of such products, and has introduced many variants of the same.
APW President Systems has a total of 1,65,500 sq ft of fully-equipped modern manufacturing space in India, and the capacity to manufacture up to 60,000 enclosures, 70,000 card frames and 30,000 instrument cases each year. As per the expansion plans, the company is coming up with another 45,000 sq ft facility at Bangalore.
The business of the company is such, that it did not get affected to the extent the other industries suffered. The slowdown did lead to to postponement of purchase decisions and deferred projects, but it also had a positive effect that it initiated cost control measures. So, cost control measures coupled with surge in demand, seems to be a good story unfolding for APW President Systems. Even the management seems to have taken cognizance of the same, else they would not have embarked on capacity expansion. With all the new entries, especially the larger players like Telenor-Unitech, investment into infrastructure is bound to take place, and players like APW President Systems would directly benefit.
As mentioned earlier, that Cabinet division is the main segment and more than 95% of the revenues come from the same. Cabinets or enclosures recorded Rs 130 crore of sales, out of a total of Rs 136 crore for FY 2008-09. The good thing about the performance of the company is that they have been steadily growing for the last many years. From Rs 54 crores in 2005, their turnover has crossed a mark of Rs 135 crore. A similar jump has been witnessed in net profit from Rs 3.6 crore to Rs 9.2 crore over the same period. While their NPM is not exactly great at 6-7%, and not much improvement as well during the mentioned period, the interest coverage ratio is fairly high at 14-15. This definitely gives some breathing space, especially when the margins are not high (the products are such, that one cannot command very high margins).
The board has approved a rights issue, although the modalities of the same are yet to be defined, but considering the performance and future prospects, the shareholders might get a good chance of consolidating their holding, if the issue price comes at a good discount.
APW President Systems Limited, is a designer, manufacturer and supplier of standard and customized enclosure systems in India. The Company caters to three major business segments: enclosure systems, contract manufacturing and trading activities – all with a focus on the IT/Networking and ITES, Telecom, General and Industrial Electronics sectors. Cabinets or enclosures are the main product offering of the company. These enclosures are basically used for server housing for networking purpose. Company has a focused approach towards the design and manufacturing of such products, and has introduced many variants of the same.
APW President Systems has a total of 1,65,500 sq ft of fully-equipped modern manufacturing space in India, and the capacity to manufacture up to 60,000 enclosures, 70,000 card frames and 30,000 instrument cases each year. As per the expansion plans, the company is coming up with another 45,000 sq ft facility at Bangalore.
The business of the company is such, that it did not get affected to the extent the other industries suffered. The slowdown did lead to to postponement of purchase decisions and deferred projects, but it also had a positive effect that it initiated cost control measures. So, cost control measures coupled with surge in demand, seems to be a good story unfolding for APW President Systems. Even the management seems to have taken cognizance of the same, else they would not have embarked on capacity expansion. With all the new entries, especially the larger players like Telenor-Unitech, investment into infrastructure is bound to take place, and players like APW President Systems would directly benefit.
As mentioned earlier, that Cabinet division is the main segment and more than 95% of the revenues come from the same. Cabinets or enclosures recorded Rs 130 crore of sales, out of a total of Rs 136 crore for FY 2008-09. The good thing about the performance of the company is that they have been steadily growing for the last many years. From Rs 54 crores in 2005, their turnover has crossed a mark of Rs 135 crore. A similar jump has been witnessed in net profit from Rs 3.6 crore to Rs 9.2 crore over the same period. While their NPM is not exactly great at 6-7%, and not much improvement as well during the mentioned period, the interest coverage ratio is fairly high at 14-15. This definitely gives some breathing space, especially when the margins are not high (the products are such, that one cannot command very high margins).
The board has approved a rights issue, although the modalities of the same are yet to be defined, but considering the performance and future prospects, the shareholders might get a good chance of consolidating their holding, if the issue price comes at a good discount.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the Lead Associate on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
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