Investors can take this as Buy Call. We can see multifold returns in this counter. GIEPL's foray into oil rigs holds immense potential.
CMP: 81
Year High: 504
Year Low: 72
PE: 3.2
EPS: 24.43 (March 08)
Expected EPS: 30 (FY 09)
Sales: 102.36 Crores (June 08)
Equity MCAP: 127.76
Return on average equity: 35%
Debt/equity: 0.6
Net Operating Income per share: Rs 135 (March 07)… amazing
Some Key factors that are favoring gremach to become a money machine:
Drilling rigs - Addition of four onshore drilling rigs with plans to add 36 more in three-four years.
Coal Mines & Equiment Rentals - Acquisition of controlling stake in coal mines in Mozambique and the booming market for equipment rentals suggest good earnings prospects. There is a global shortage and crisis of hard coking coal and this will add huge value to the profitability of the Company.
Demand-supply mismatch - A demand-supply mismatches resulting in rising oil rig rentals. Rising rentals and better utilization levels have shrunk the average payback period for oil rigs.
NEPL - The increasing number of onshore blocks in each and every phase of the New Exploration License Program (NEPL) points to strong demand prospects. Drilling costs account for 20-25 per cent of the cost of developing an oil well and are showing an increasing trend in the earnings of company.
Great factor to consider:
MOU - Gremach has signed a MOU (memorandum of understanding) with Baoji Oilfield Machinery (BOMCO), subsidiary of China National Petroleum Corp for the delivery of 40 rigs, which includes 36 onshore and four offshore rigs.
Infra-Equipment business - Rose exponentially! The rental business of infra equipment has risen exponentially on the back of firm demand.
Entering into Coal Business - Gremach has taken a 75 per cent controlling stake in 11 coal mines in Mozambique. This region falls in the Karoo basin, which is recognized as a prime hard coking coal area in Africa. Gremach has incorporated a Singapore based SPV named Petrogrema Energy Pte Ltd. Gremach shall be making an investment of up to USD One Billion considering the vast global market potential in oil drilling business (subject to requisite RBI approval). This business proposal is considered highly profitable, with projected IRR 35% in the light of huge market demand for on shore and off shore drilling rigs considering unprecedented rise in crude prices. Infact, rig rental day rates for Off-Shore Rigs have risen by 13%, averaging to around $ 3 to 5 lacs per day. In the case of on shore rigs the payback period is estimated at 3 years. Several reputed Banks and other financial institutions have evinced keen interest to fund the above business Proposal / Acquisition.
The Financial Data - Impressive! Net Sales of gremach have grown from 347.38 million in quarter June,07 to 1023.62 million in quarter June, 08. Net profit has risen from 40.55 million in quarter June,07 to 121.31 million in quarter June,08. EPS for the same period has jumped from Rs. 2.66 to Rs. 7.97 in the current quarter. Sequentially, the EPS has grown from Rs. 6.16 in quarter March, 08 to Rs. 7.97 in quarter June,08. Net Profit margin has also gone up both sequentially as well as quarter on quarter.
Year High: Rs 504
Current CMP: 86
See its Client List…….. Very impressive
Larsen and Toubro Ltd.
VRCL Infrastructure & Projects Ltd
Gammon
JMC Projects Ltd.
Punj Lyod
LG E & CD – NCC JV
ACC Ltd.
Reliance Eng. Assoc. Pvt.
Madhucon Projects
Nagarjuna Constructions Ltd
Hindustan Cons. Co. Ltd.
Simplex Infrastructure Ltd.
Grasim
UP State Bridge Corp. Ltd.
IRCON International Ltd. (Govt.)
Afcons
The most esteemed infra players are the clients of Gremach. Really impressive clientele list.
Shareholding pattern : Good
A. Promoters: 55.68%
B. FII/MF/Banks: 16.36%
C. Total Public (including B): 44.32%
Risks: Delay in delivery of rigs or drilling projects. Downfall in rigs rental.
Conclusion: This counter can be bought for long term for multifold returns.
By: Uttam Saraf
Disclaimer: Brokers report is not responsible for recommendations posted on this site, its just for information
CMP: 81
Year High: 504
Year Low: 72
PE: 3.2
EPS: 24.43 (March 08)
Expected EPS: 30 (FY 09)
Sales: 102.36 Crores (June 08)
Equity MCAP: 127.76
Return on average equity: 35%
Debt/equity: 0.6
Net Operating Income per share: Rs 135 (March 07)… amazing
Some Key factors that are favoring gremach to become a money machine:
Drilling rigs - Addition of four onshore drilling rigs with plans to add 36 more in three-four years.
Coal Mines & Equiment Rentals - Acquisition of controlling stake in coal mines in Mozambique and the booming market for equipment rentals suggest good earnings prospects. There is a global shortage and crisis of hard coking coal and this will add huge value to the profitability of the Company.
Demand-supply mismatch - A demand-supply mismatches resulting in rising oil rig rentals. Rising rentals and better utilization levels have shrunk the average payback period for oil rigs.
NEPL - The increasing number of onshore blocks in each and every phase of the New Exploration License Program (NEPL) points to strong demand prospects. Drilling costs account for 20-25 per cent of the cost of developing an oil well and are showing an increasing trend in the earnings of company.
Great factor to consider:
MOU - Gremach has signed a MOU (memorandum of understanding) with Baoji Oilfield Machinery (BOMCO), subsidiary of China National Petroleum Corp for the delivery of 40 rigs, which includes 36 onshore and four offshore rigs.
Infra-Equipment business - Rose exponentially! The rental business of infra equipment has risen exponentially on the back of firm demand.
Entering into Coal Business - Gremach has taken a 75 per cent controlling stake in 11 coal mines in Mozambique. This region falls in the Karoo basin, which is recognized as a prime hard coking coal area in Africa. Gremach has incorporated a Singapore based SPV named Petrogrema Energy Pte Ltd. Gremach shall be making an investment of up to USD One Billion considering the vast global market potential in oil drilling business (subject to requisite RBI approval). This business proposal is considered highly profitable, with projected IRR 35% in the light of huge market demand for on shore and off shore drilling rigs considering unprecedented rise in crude prices. Infact, rig rental day rates for Off-Shore Rigs have risen by 13%, averaging to around $ 3 to 5 lacs per day. In the case of on shore rigs the payback period is estimated at 3 years. Several reputed Banks and other financial institutions have evinced keen interest to fund the above business Proposal / Acquisition.
The Financial Data - Impressive! Net Sales of gremach have grown from 347.38 million in quarter June,07 to 1023.62 million in quarter June, 08. Net profit has risen from 40.55 million in quarter June,07 to 121.31 million in quarter June,08. EPS for the same period has jumped from Rs. 2.66 to Rs. 7.97 in the current quarter. Sequentially, the EPS has grown from Rs. 6.16 in quarter March, 08 to Rs. 7.97 in quarter June,08. Net Profit margin has also gone up both sequentially as well as quarter on quarter.
Year High: Rs 504
Current CMP: 86
See its Client List…….. Very impressive
Larsen and Toubro Ltd.
VRCL Infrastructure & Projects Ltd
Gammon
JMC Projects Ltd.
Punj Lyod
LG E & CD – NCC JV
ACC Ltd.
Reliance Eng. Assoc. Pvt.
Madhucon Projects
Nagarjuna Constructions Ltd
Hindustan Cons. Co. Ltd.
Simplex Infrastructure Ltd.
Grasim
UP State Bridge Corp. Ltd.
IRCON International Ltd. (Govt.)
Afcons
The most esteemed infra players are the clients of Gremach. Really impressive clientele list.
Shareholding pattern : Good
A. Promoters: 55.68%
B. FII/MF/Banks: 16.36%
C. Total Public (including B): 44.32%
Risks: Delay in delivery of rigs or drilling projects. Downfall in rigs rental.
Conclusion: This counter can be bought for long term for multifold returns.
By: Uttam Saraf
Disclaimer: Brokers report is not responsible for recommendations posted on this site, its just for information
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