Sunidhi Securities is bullish on Diamond Power Infrastructure (DPIL) and has recommended buy rating on the stock with a target price of Rs 175 in its February 23, 2012 research report.
"Diamond Power Infrastructure (DPIL) introduced the Aerial Bunched Cables (ABC), a combination of Aluminum Conductors, Polyethylene Insulated Conductors and Alloy Conductors. DPIL is engaged in five business verticals-cables (low, high and extra high voltage), conductors, transformers, towers and various EPC projects-where it undertakes planning, designing and commissioning of turnkey transmission and distribution projects. With more than 100 distributors across 16 Indian states, DPIL selling its products under 'Dicabs' brand is one of the fastest growing EPC companies in the country. DPIL had invested Rs 12.5 crore in Apex Electricals (power transformer manufacturer with a capacity of more than 12,500 MV, manufacturing up to 220 KV class) as part of the rehabilitation scheme. Its induction as Apex Electricals' promoters makes DPIL as one of the largest transformer companies in India. DPIL has an installed capacity to manufacture 34,300 km of low voltage cables annually that can transmit power of up to 1.1KV. Similarly, it also has manufacturing capacity of 5,800 km of high voltage cables with a carrying capacity of up to 132KV and extra high voltage cable of 2,000 km which can transmit over 220KV."
"During Q3FY12, standalone net profit surged by 5.3% to Rs 30.8 crore (Rs 29.2 crore) on 42.4% higher sales of Rs 539 crore (Rs 379 crore). OP and NP margin stood at 11.4% and 5.7% as against 13.6% and 7.7% respectively in Q3FY11. (YoY) During 9MFY12, standalone net profit advanced by 6.5% to Rs 93.9 crore on 23% higher sales of Rs 1365.0 crore. OP and NP margin stood at 12.8% and 6.9% Vs 14.1% and 7.9% respectively in 9MFY11. DPIL has acquired 6.3MW Windmills near Kandla, Gujarat from Suzlon Energy. It took this decision as after commencement of the wind power capacity company's power bills will get setoff and will result in large tax break. This is company's green initiative, which is focusing on alternate sources of energy to meet its energy demand."
"DPIL today has emerged from a conductor company to a full circle integrated EPC company, having presence in cables, conductors, transformers and transmission towers. Headquartered in Vadodara, DPIL has manufacturing presence across 9 units, all located in Vadodara. DPIL focused on higher value EPC projects and even forged joint ventures with three highly respected companies in the industry, which will enable it to bid for higher KV EPC contracts. In terms of segmental revenues, Cables division accounts for nearly 31% of the total revenues, followed by EPC division with 28% cent of the share. Owing to the sustained demand for HT and LT cables, the cables division nearly tripled its net revenues in FY11 over FY10. The growth was largely driven by increased demand for HT cables, which also translated into higher margins. With the capacities online, the focus would be to ensure efficient running of operations, across the segments. DPIL's value-added products, coupled with larger capacities and improved realisations will enable it transcend the next level of sustained growth. On the industry front, DPIL expects robust demand for all its products on account of better economic sentiment and government's ongoing thrust on the power sector. DPIL will steadily consolidate its presence in EPC space to cater to higher KV contracts; thereby improving further on the company's order book which also reflects optimism. At the CMP of Rs 127, the share is trading at a P/E of 3.6x on FY12E. We maintain BUY with a target of Rs 175 in the medium term," says Sunidhi Securities research report.
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