SUJANA TOWERS LTD

SUJANA TOWERS LTD which was formed by the de-merger of tower division of Sujana Metal Products Ltd looks attractive at current level of around Rs.25 (Face Value 5).

Sujana Towers Ltd is in manufacturing of Power Transmission towers as well as Telecom Towers. In Power transmission segment it mostly sells towers to project engg companies or in some cases, forms JV for such projects where in its role remains as tower supplier and JV partner undertakes installations. Post its massive expansion, 80 per cent of the structural steel requirement of the lower division is being met through in-house production. The company currently utilizes 85 per cent of its galvanized tower capacity.

In order to meet the rising demand, it is further increasing its gavanised tower capacity by 75 per cent to 2,28,125 mtpa in Chennai, which is expected to be commissioned from January 2009. The additional capacity will be directed at meeting export demand for power and transmission towers from East and West Africa.
Sujana Towers Ltd is looking put up a new plant in Gujarat to produce galvanized steel parts with a capacity of 75,000 MTPA. Company is also contemplating to acquire a company in China for manufacturing of tower parts and set up a subsidiary in Hong Kong for sourcing cheaper raw material. Recently, it acquired 51% shareholding in Telesuprecon Ltd (Mauritius), undertaking Telecom infrastructure contracts in various cast / central African countries.

In this business, the delivery schedule adherence is most important and critical, so most of the companies won't carry large order
books, the order are taken for shorter periods of 1-3 months and cycle of execution and order intake continues. Almost all the telecom companies are clients of company, similarly all major turnkey players in power transmission business procures towers from Sujana Towers.
Fortunately, in the second half of CY09 almost all key inputs like Steel, Zinc, Welding Electrodes have become cheaper making Sujana more viable on the cost front.

The management sees huge demand for towers, both from the power and telecom sectors. In the power transmission business, the relationship with Deepak Cable continues Sujana Towers executing orders up to 400kVA. The company is making additional investment for 756kVA capacity, government board approval for which is awaited.

Looking to the expansion in capacities and growth potential in Power transmission, Telecom and Railway electrification, the
company is likely to post significant growth in coming couple of years. Going by management's estimates, company is likely to post good growth in top line and bottomline in coming years. Stock is available at 2X expected '09 earnings, which is quite attractive compared to other companies in the same Sector.
FIIs had a Steep Holding of nearly 48% in the company and seems to have Dumped this stock alongwith BlueChips and so it is no surprise that Sujana Towers fell from a massive 240 to a ridiculous 24 now. The expected EPS for the year is 12, which gives it a PE of only 2. The Stock looks attractive in view of its strong order pipeline, expansion program and sound market strategy. Most risks are priced in and stock seems to be building a base for the next rally.

Best of luck,
Srikanth Shankar Matrubai




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