Tushar's Stock Tips: Diamond Power Infrastructure Ltd.

Saturday, February 4, 2012

Diamond Power Infrastructure Ltd. – Growth Growth Growth

Overview:

Diamond Power Infrastructure Ltd. is India’s largest integrated manufacturer of Power Transmission equipment and turnkey services provider (EPC). DPIL was founded in 1970 and formally known as Diamond Cables Ltd. In India, transmission and distribution (T&D) space has huge scope vertically and DPIL has wide range of products to fulfill the growing demand in this space. DPIL is engaged in mainly five business, namely Cables (LT,HT and EHV), Conductors, Transformers, TL (Transmission lines) and various EPC projects. Company started its first manufacturing facility in Vadodara and today it has 4 manufacturing locations at Vadodara and Silvassa. Diamond Power Infrastructure ltd. Is one of the most diversified and well managed Power (T&D) transmission and Distribution Company in India

INVESTMENT THESIS

Backward Integrated: Diamond Power Infrastructure Ltd. which is only integrated EPC company has its own manufacturing unit of Cables (LT,HT & EHV), Transformers towers, Conductors and Transformers. 80% of the project cost is completed in its own manufacturing units. This gives big advantage to DPIL. Most of the other EPC Companies like KEC Int., KEI Ind., etc. outsource 60%-80% of the work. Hence, DPIL has a huge and unique competitive advantage (Lower cost of transportation, higher margins and stable supply) with other EPC companies.

Healthy Order Book: Current Order book of the company stands at Rs. 1600 Crore, which provides revenue visibility for next 15-18 months. DPIL has strong order intake in the conductor segment. In Q3FY11, Company received two orders from Power grid and SMO-SPIC in conductor segment. In Cable segment, Order books are more like In-Out way. Company only maintains order intake for next few months. Due to conservative bidding, EPC segment order book was decreased. If Raw material prices remain stable then DPIL which is only integrated EPC Company with strong order book can post good set of numbers in FY12.

Expansion and Joint Ventures: Company is continuously looking for further expansion. Company expanding its business in some high margin segment like Power transformers, EHV and HT Cables. Company has recently entered in transmission lines for power transmission which will enable to increase revenue in next few years. In Addition, DPIL has Joint venture (JV) with Skoda (India) Pvt. Ltd and Schaltech Automation Pvt. Ltd. Earlier, company was only qualified to bid up to 220 KV but with the help of these two JV, company can bid for 440 KV space and going forward it will open and expand revenue for the company in coming quarters.

Robust Growth: With the help of 150 Crore through QIP and warrants, Company has increased the cash level to bid for high volume projects and will also help more in working capital. In Conductor segment, DPIL is expected to grow multifold in FY12 due to increase in capacity and two new order intakes. Recent JV and expansion will help good growth in top line and will further diversify its business. DPIL is expected to start production of EHV cable from Q1FY12 which could translate more than 10% revenue in FY13. Apex Transformers which is DPIL subsidiary is expected to give further advantage to its existing business.

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