ANG Industries: Investment Rationale- 2/2

In feb 2004, the stock was trading at 1.45rs levels. from may 2005 to may 2006, it had shot up from from 12rs levels to 414rs levels by May 2006, which is almost 285x returns a little over 3 years. ANG Industries scrip as such has a past track record of a proven wealth creator stock.
Since then, the stock has been declining, to reach a low of 26 rs in 2009.
A look at the results over a period of Mar 06 to Mar10 shows up interesting perspectives on why the stock used to command such premium valuations once, and later started getting heavily sold off. The recent recession years had certainly taken a heavy toll on its bottomlines, and toplines going stagnant.
The company also had earlier FCCB outstandings of 12mn USD. ( In the downturn, the company management availed of the opportunity to buy back its shares at a significant discount at 52.31 rs average, and also used the situation to fully buy back its 12mn$ FCCB outstandings, thus strenghtening its balance sheet by retiring the debts.

The company is now reaping the rewards of the strategic business shifts it has been undergoing during the downturn years it was struggling with, and is now poised to take advantage of its niche, vertically integrated business model. As a result of the various measures and growth oriented strategies that the management has been pursuing over the last two years, the company has now emerged as India's Largest Integrated Trailer and Trailer Assembly Manufacturer.
In fact , ANG claims to have pioneered the organised trailer manufacturing in India way back in 2007.

Post restructuring of the erstwhile ANG AUto,  ANG industries is now a diversified engineering and manufacturing company with interest in Heavy Structural Fabrication, Tractor Trailers, Specialised Containers and Automotive Components for Heavy Commercial Vehicles

It has 7 manufacturing and assembly units across northern India which are certified for quality and environmental standards with ISO 9001:2000, QS 9000, ISO 14001:2004 and ISO/TS 16949:2002 norms. ANG's customers include the who’s who of respective segments and are spread across countries in USA, Europe and Asia.

The Sitarganj plant in Uttarkhand is currently manufacturing trailers, containers, and doing general favrication and also executing the heavy metal fabrication jobs for BHEL.



The HCV Components division manufactures a range of Components & Assemblies  to international standards, such as:

Brake Pins & Rollers,Brake Shoe,Brake Assembly,Welded Axle,Mechanical Suspension,Air Brake Kits
Automatic Slack Adjuster,Brake S-Camshafts,Fully Dressed Dummy Axle,Manual Slack Adjuster,Landing Gear
&Transmission Components

Heavy Steel Fabrication Division

ANG AutoOur value chain in this business vertical spans the following:
   Structural Design and Engineering
   Off-site Fabrication
   On-site Fabrication and Erection
   Engineering Procurement and Design
   Our Primary Focus is on following segments :
With its long expertise in several core areas of the automotive sector, ANG Industries is well positioned to diversify and strengthen its presence across a long value chain. Our primary focus is on building facilities and delivery capabilities for the following segments:

    * Power plant structures
    * Boiler support structures
    * Prefabricated Building sectors

ANG currently fabricates 1,000 MT of steel per month, and has plans to augment capacity to over 3,500 MT (comprising star beam fabrication, general fabrication, containers and trailers).  machinery is soon being enhanced to supply 1,500 MT of I-beams per month for L&T Mitsubishi for supercritical boiler support structures.
- Already empanelled with BHEL as a preferred supplier of fabricated star beams.
Also supplies specialized containers to Adani Logistics and Arshiya International, and H-beams to L&T-Mitsubishi.
Strong engineering and design capabilities, and can offer turnkey solutions in E&C services and composite fabrication assignments.
Establishing partnerships with global leaders to gain entry into new business segments through enhanced technology.
Technical tie-ups and joint ventures are also being explored with specialized EPC players to bid for projects involving vertical high-rise structures and steel car parking structures.

Our value chain in this business vertical spans the following:

    * Structural design and engineering
    * Off-site fabrication
    * On-site fabrication and erection
    * Engineering procurement and design


Trailers & Containers Division
ANG Auto Ltd is India's Largest Integrated Trailer Manufacturer
   Nationwide Sales and Service Network
.    Service on call with pan India coverage
   Light-weight design to enable extra payload capacity
 Also supplies specialized containers to Adani Logistics and Arshiya International
We offer 15 variants including skeletal, flatbed, curtain-sider, Z-type, tip trailer, sideboard, tanker trailer, running gear, car carrier, refrigerated trailers, bulker trailers, etc.
ANG is the first trailer brand to offer a nationwide sales and service network, ensuring easy availability of original spare parts at several locations.


ANG Towerworx : TowerWorx – India is a Joint Venture between ANG Auto Limited Largest manufacturer of Trailers, Trailers Axles and its components, based in New Delhi, India and TowerWorx LLC a manufacturer of mobile towers based in Oklahoma, USA. This company has been formulated to deliver mobile communication towers with latest technology to India, the Middle East and Asia.

Facilities are centrally located within India and the United States with access to all of the major transportation facilities via truck, train and ship to ensure a timely delivery! Our combined facilities have over 18,000 square meters of manufacturing floor space, large enough to enable TowerWorx - India to deliver large quantity orders and support inventory for quick turn around delivery.

ANG Industries is committed to deliver quality products and back our products with a one year manufacture’s warranty. TowerWorx India also offers deployment services and short-term leasing of mobile towers

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chronological sequence of significant steps inititated by the management to return to its earlier growth trajectory:-
  ( As reported to bseindia.com)

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1. January, 4 2008
Subject:     

ANG Auto - Result of Postal Ballot

Announcement: 
   

ANG Auto Ltd has informed BSE that the shareholders of the Company have approved the following matters by way of Postal Ballot as a Special Resolution.

1. Alteration of Articles of Association of the Company by inserting the new clause of Buy-back of Shares or other specified Securities of the Company.

2. Buy-back of its own equity shares by the Company through open market purchases at a price not exceeding Rs 215 per Equity Shares upto 24.30% of the Paid up equity shares and free reserves.


2.January, 30 2008
Subject:     

ANG Auto - Hon'ble High Court of Delhi approve Scheme of Amalgamation

Announcement: 
   

ANG Auto Ltd has informed BSE that the Hon'ble High Court of Delhi, New Delhi has approved the Scheme of Amalgamation of ANG Auto Tech (P) Ltd with the Company.
   


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 3. 09 july 2008
 The Aggregate Paid up equity Share capital & Free Reserves of the Company as at March 31, 2007 was Rs 6636.03 lacs. At the Maximum Buyback Price of Rs 215 per Share & for the Buyback Size not exceeding Rs 1612.50 lacs, the maximum number of Shares that can be bought back would be 7,50,000 Shares, representing 6.62% of the outstanding fully paid up Equity Shares of the Company as on March 31, 2007. In the event of the average purchase price being lower than Maximum Buyback Price of Rs 215/-, the maximum number of Equity Shares that can be bought back (i.e 7,50,000 Equity Shares) would not stand altered, resulting in the Maximum Buyback Size of Rs 1612.50 lacs standing reduced proportionately.
The maximum amount required by the Company for the said Buyback aggregating to Rs 1612.50 lacs will be met out of the current reserves & surplus and/or cash balances and/or internal accruals of the Company.
  


 4. completion of buy back

The Buyback of Equity Shares of Target Company closed on December 22, 2008 on account of a total no. of Seven Lac Fifty Thousand Shares being bought back (the total number of shares intended to be bought back under the offer) upto the said date.

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                       08 June 2009
Subject:     ANG Auto - Updates
Announcement:     ANG Auto Ltd has informed BSE that ANG Auto Ltd and TowerWorx USA have entered into a
Joint Venture to produce and market Mobile Towers solutions in India. ANG Auto Ltd and TowerWorx USA have a 50% stake in the new Company known as Towerworx India (P) Ltd.
                   09 September 2009
Subject:     ANG Auto - Updates
Announcement:     ANG Auto Ltd has informed BSE that the Company has taken a strategic initiative to add another vertical in power sector infrastructure space. The Company has set up a state of art a new line for fabrication for Power Plants fabricated boiler structure with an installed capacity of 25000 M Ton per annum.

The company has entered into yearly rate contract with BHEL for heavy duty steel fabricated boiler structure and the first order for 1100 M. Ton has been received against the rate contract.
                   15 October 2009
Subject:     ANG Auto - Outcome of Board Meeting
Announcement:     ANG Auto Ltd has informed BSE that the Board of Directors of the Company at its meeting held on October 15, 2009, inter alia, has considered and approved the Notice for passing the resolution to change the name of the Company through Postal Ballot.
Company:ANG Auto Ltd 

                       24 December 2009
Subject:     ANG Auto - FCCB Buyback
Announcement:     ANG Auto Ltd has informed BSE that the Company has repurchased Zero Coupon Foreign Currency Convertible Bonds (FCCB) worth USD 7.0 million of face value, listed on the Singapore Exchange Securities Trading Ltd., in accordance with the A.P. (DIR Series) Circular dated December 08, 2008 issued by the Reserve Bank of India. The cancellation and extinguishment of the same has been done as per the terms of the Offering Circular.
Scrip Code:530721   Company:ANG Auto Ltd 

                       18 February 2010
Subject:     ANG Auto - Board Meeting on Feb 25, 2010
Announcement:     ANG Auto Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on February 25, 2010, inter alia, to discuss and consider the matter of transfer of Sitarganj unit, to a 100% wholly owned subsidiary Company to ANG Auto Ltd.

Company:ANG Auto Ltd 

                       25 February 2010
Subject:     ANG Auto - Outcome of Board Meeting
Announcement:     ANG Auto Ltd has informed BSE that the Board of Directors of the Company at its meeting held on February 25, 2010, inter alia, has discussed and approved the following matter:-

1. Transfer of Sitarganj unit, to a 100% wholly owned subsidiary company of ANG Auto Ltd:- The Sitarganj plant in Uttrakhand is currently in manufacturing trailers, containers and doing general fabrication and also executing the heavy metal fabrication jobs for BHEL. All these are heavy fabrication jobs for the infrastructure sector and the company sees a lot of opportunities in infrastructure space especially in the power sector. Since the main area of operations of ANG Auto are Auto Components, which have very different manufacturing processes and market dynamics as compared to heavy metal fabrication, the management thinks it is in the best interests of the company to hive of the heavy fabrication plant into a wholly owned subsidiary. This will give it flexibility to build a new organisation Structure suited to the demands of project based work in the infrastructure space, and gives it the option of roping in a strategic technical/financial partners at a later stage to capitalise on the emerging opportunities in the infrastructure domain.

2. Notice for passing resolution through Postal Ballot for transfer of Sitarganj plant in Uttrakhand to a 100% wholly owned subsidiary of ANG Auto Ltd.


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                         29 April 2010
Subject:     ANG Auto - Change of Name of the Company
Announcement:     ANG Auto Ltd has informed BSE that the Registrar of Companies, NCT of Delhi & Haryana has approved the change of name of the Company from "ANG Auto Ltd" to "ANG Industries Ltd" vide their Fresh Certificate of Incorporation dated April 22, 2010 issued consequent to change of name of the Company.
Attachment     Click here for more details


                       30 April 2010
Subject:     ANG Auto - Receipt of Order
Announcement:     ANG Auto Ltd has informed BSE that the Company has received an Order of Rs. 33.37 crores from L & T MHI - Boilers Pvt. Ltd. for manufacture and supply of boiler support structure for Jai Prakash Power Venture Ltd. for their upcoming power plant at Nigrie, Dist. Singrauli, Madhya Pradesh. \

15.06.10 - 11 LAKH WARRANTS TO PROMOTERS(10.5 LAKH)+DIRECTORS(50K)

PRMOTERS STAKE TO GO UP TO 52.18, AT 48RS/WARRANT INC PREMIUM 10RS


                       01 July 2010
Subject:     ANGIND - Updates
Announcement:     ANG Industries Ltd has informed BSE that the Company has repaid all the liability of Foreign Currency Convertible Bonds (FCCB) worth USD 12 millions, issued on May 04, 2007.

The Company had repurchased Foreign Currency Convertible Bonds of face value of USD 7 millions in December, 2009 and has repaid the balance face value of USD 5 millions of FCCB on June 28, 2010, thereby extinguishing all the liabilities on account of FCCB of USD 12 millions.

RESULTS ANALYSIS

FY10 RESULTS:
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FY10 (cons)        : Toplines: 124.45 Cr, PAT 5.05Cr, EPS : 4.03
FY10  (standalone) : Toplines: 110.64 Cr, PAT 7.25Cr, EPS : 5.78


Q1FY11 RESULTS:
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Q1Fy11 :  Toplines: 40.23 Cr, PAT 3.53Cr, EPS : 2.81   (cons)- *Heavy steel fab: topline: 8.85 cr, pat: 1.51cr.
Annualized EPS: 11.25

Q1Fy11 :  Toplines: 38.92 Cr, PAT 2.61Cr, EPS : 2.08 (standalone) [Annualized EPS: 8.33]
v/s q1fy10 : Toplines 16.13cr, pat: -1.99cr. eps -ve.    ( no consolidated income)



Q2FY11 RESULTS:
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Q2Fy11 ( cons) : Toplines: 39.85 Cr, PAT 2.45Cr, EPS : 1.95     (cons)- *Heavy steel fab: topline: 8.6 cr, pat: 1.59cr.
( for q2 fy 10, there was no separate consolidated reporting. Annualized EPS :  7.8

v/s q2 fy10 : topline : 24.92 cr, PAT : 1.37cr
Q2FY11 (standalone) : 38.65cr, PAT: 1.73cr, 1.38 standalone q2 fy11 eps. Annualized EPS: 5.51





H1FY11 V/S H1FY10 :-

For H1FY11, the turnover was at 80.08 cr, v/s 41.04 cr for H1FY10, registering a   95% increase.
For H1FY11, the PAT was at 5.98 cr, v/s -0.62 cr for H1FY10, registering a   10.64x  increase.

 H1FY11 EPS at 4.77 rs share capital : 1.254 cr fv 10 shares.  Annualized EPS : 9.54

  ie, 9.54 EPS for fy11e.
 At 11.5x FY11e PE, the target price for FY11e works out to 109rs on the higher side, and at a conservative PE of 9, we arrive at lower price target of 90.63 based on annualized H1FY11 results.
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Outlook for fy12:
As trailer manufacturing, containers manufacturing, and heavy steel fabrication works gain traction, the management has given revenue projection of 50% growth in toplines for FY12.
Further, the towerworx JV as it gains traction could lead to better topline and bottomline earnings. For the present however, these have not been taken into account for revenue projections.
          7.46% NPM for q1fy11.
   Assuming 40% growth in topline for fy12, we see ANG industries capable of gorwing its topline to around 173 cr for fy12, and bottomline of 12.95 cr at 7.46% OPM , EPS projection for fy12e comes to 10.3,
this leads to an FY12e target price of   103 at a conservative PE estimate of 10, which could be achieved over a timeframe of 18 months.
Any significant upsides in toplines and bottomlines could lead to a significant rerating in the stock, as the company has a significant first mover advantage in the trailer chassis manufacturing segment, and is a premier supplier to reputed container logistics companies like adani ports, arshiya logistics etc.

Conclusion:
As such, one can hold on to the stock of ANG industries for a target price of 103+ over 18-24M perspective.
At the present market cap of 55cr, the scrip is trading at very cheap prices. It's debt-free position, and free standing reserves and assets imply limited downsides, at cmp of 44.35rs , and as such is a true value pick at these levels.
In view of present market conditions, one can add ANG industries to the portfolio, and further increase positions at around 42.5 levels, where it has long term support. Any price below this is only a value add.

The company follows good corporate disclosure policies as well, as can be seen from its disclosures to the exchanges as well as its informative annual reports.