SHARES of Bhopal-based Gei Industrial Systems (GEIISL) have outpaced the market over the past one year on a consistent basis, rising 176% against benchmark BSE Sensex’s 14% gain. The company’s consistent profit-growth trajectory in FY10 has contributed to its performance on bourses.
After reporting a 43% profit growth for FY10, the company continued with its growth momentum for the June 2010 quarter, posting a 50% jump in its net profit to 4.1 crore, as net sales grew 29% to 50.3 crore. Improvement in the operating margin, higher other income and lower interest costs have mainly driven up the company’s performance.
The company is greatly benefiting from the rising demand for its airbased cooling systems from power and petroleum industries, since availability of water recedes. In India, these two industries are highly dependent on water for their cooling needs and have faced operational problems at times, when sufficient water is not available. Gei Industrial Systems dominates the market with a 70% market share in airbased cooling solutions.
After successfully converting several captive power plants to this system, GISL has shifted towards commercial power plants, enabling it to obtain orders with large ticket sizes. In February this year, the company for the first time obtained single order worth nearly 100 crore for a 150-MW power plant. The company is well placed to obtain orders from new as well as existing power plants in India.
The company currently carries an order book of 500 crore — which is more than twice its net sales of FY10 — to be executed over the next 12 months. Almost 75% of the order book is represented by the power industry. The company has embarked upon an 100-crore expansion, which will ultimately quadruple its capacities by the end of 2011. Under the first phase, it invested 20 crore in FY10 and has a planned capex of 35 crore for FY11. This capex programme is set to more than double its gross block within three years from 57 crore in March 2009.
The company, which had been struggling till FY05 when it had to undergo a debt-restructuring programme, has grown consistently since then. Its profits in the past five years grew at a cumulative annualised growth rate of 50%, as sales grew at 32%. In the process, operating and net profit margins have improved. Considering the rising demand for its products and services, the company could offer healthy returns to investors in the coming years.
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