Sanghvi Movers has a fleet of 300 medium-sized, heavy-duty hydraulic and crawler cranes with capacities ranging between 20-800 tonnes which it hires to customers that include Reliance Industries, Tata Power, NTPC, ONGC, L&T and BHEL. Since its customer base comes from a wide variety of sectors, risk of downturn in any sector is low. As Sanghvi leases out its cranes on a fixed monthly contract, it is relatively de-risked from the erratic earnings which characterise infrastructure companies. Also, it is in a capital-intensive industry which imposes high entry barriers leading to lower competition.It is estimated that crane hiring by power, petrochemicals, metals and mining companies would rise sharply to Rs2,600 crore—from Rs1,700 crore at the beginning of 2007; the largest contribution will be from the power sector. Indian power companies plan to add 75,000MW power capacity in the 11th Five Year Plan period which will cost Rs245,000 crore. As crane rental is about 0.5% to 0.6% of the cost of setting up a power plant, and assuming a 50% market share for Sanghvi, this translates to revenues of Rs1,250 crore up to FY11-12.
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A concerted effort has been made by Sanghvi in the past few years to increase its revenue from the power sector. This is visible in its performance in the nine months of FY09-10. The power sector contributed 41% of the total revenues and wind power, cement and refinery & gas contributed 19%, 18% and 10%, respectively. A slowdown in the capex of industries other than the power sector has affected its performance in recent quarters. Sales declined in the September and December 2009 quarters to 16% and 7%, respectively, while operating profit declined 17% and 7% for the same period. However, it is planning a capital expenditure of Rs360 crore in FY10-11 on the expectation of continued economic recovery.
Market Cap 872.25
EPS (TTM) 20.89
* P/E 9.65
* P/C 5.16
* Book Value 111.99
* Price/Book 1.80
Div(%) 100.00%
* Div Yield(%) 0.99
Market Lot 1.00
Face Value 2.00
Industry P/E 25.37
Sanghvi has a fantastic operating margin of 77% and RoE of 26%. Its market-cap is 2.8 and 3.7 times its sales and operating profit, respectively. It is definitely a reasonably priced stock to buy for long term investment.
