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Thursday, November 20, 2008

XL Telecom & Energy - Multibagger Stock To Buy

This company has transformed itself from a low margin Telecom company by diversifying substantially into the high margin business of Solar Photo Voltaic Modules (SPV).

Buy XL Telecom & Energy at Current Market Price of Rs 60 for a 24 month target of Rs 1800. It has a order book of around 2.2 billion in Solar Photo Voltaic divisions and has secured orders for the supply of Fuel Ethanol from the oil companies.

For the period 2007-2008 barring unforseen circumstances the company should post a PAT of approximately Rs 45 crores on an equity of Rs 14.5 crores. For 2008-2009 barring unforseen circumstances the company should close with a turnover of Rs 1292 crores and PAT of Rs 155 crores. By then the equity would be Rs 26 crores. Thus the expected EPS would be Rs 60 approximately.

It is expected for 2009-2010 that turnover would be approximately Rs 1645 crores yielding a PAT of Rs 222 crores which will result an EPS of 85.This Share therefore has the potential to touch Rs 1800 within the next 24 months.

This stock recommendation is 3 months old. Business outlook at that time okay if not bad.A lot has changed since then. Stock market has lost much during this period and recession has spread it's wings across the world.

Let's have a look at DECEMBER 2008 quarter results of the company.

SALES turnover has come down from around 257 crores in September quarter to 102 croes in december quarter. Drop of more than 60%. Operating gross profit is down more than 50% for the same period. BUT NET profit has come down from 15 crores to mere 84 lacs. a Drop of 1400% EPS stands at 0.44 paise compared to 8 Rs. in earlier quarter.

With 0.44 EPS for this quarter, say annualized EPS st 2 with this kind of number for next 3 more quarters, current P/E stands at 17.

Look at the 52 week high of 334. EPS at that time was around 25 something. so the P/E ratio of 13.

For even the same P/E, at annualised EPS of Rs. 1.76, price of the stock has to be Rs. around 25.

So whenever stock price comes at mentioned price or near, it could be good opportunity to buy stock and keep for long term. Current market conditions would change in furture and if company could perform past performance again, it could be fetch good investment returns for investors.

2 comments:

  1. How this is possible...1800 in next 24 mths in bear market...something fishy is going on..

    XL TELECOM & ENERGY LIMITED is mainly engaged in manufacture of telecom equipments and is increasing its presence in energy segment, under which it manufacture ethanol and solar modules. In Telecom, the company is largely engaged in manufacturing of CDMA Mobile Handsets, CDMA & GSM Fixed Wireless Phones, SMPS Power Systems, fusion splicing machines, cable jointing kits. It is among the dedicated suppliers to TATA, Reliance, BSNL, MTNL, Indian railways, Department of Defense, etc. In Energy Segment, the company is engaged in new emerging products like Ethanol and Solar Photovoltaic Products. The company has technology collaboration with international technology companies including Corning (for cable jointing kits and accessories), Kyocera Wireless Corporation (for CDMA handsets) and Axesstel (for CDMA fixed wireless phones). In FY 08, revenues from Telecom Segment were about 44% and Energy Segment was about 56%. Shareholding Pattern: The promoters hold 28/13% shares of the company while the general public holds 71.87% of the shares of the company. In the public holding FIIs, Mutual Funds, Venture Capital Funds and Financial Institutions together hold 25.16% of the shares of the company.
    Financials: For Q3FY09, the company came out with very good results. The total income of the company for Q2FY09 came out to be Rs.258.13 Cr as against Rs.151.70 Cr in the same period previous year. The PBT of the company for Q2FY09, came out to be Rs.15.04 Cr as against Rs.8.2 Cr in the same period previous year. The net profit of the company more than doubled to Rs.14.99 Cr as against Rs.6.03 Cr in the same period previous year. This gave an EPS of Rs.7.98 in Q2FY09, as against Rs.4.16 in the same period previous year. Also, what is encouraging is that both the net and operating profit margins of the company increased in Q2FY09 as against Q2FY08.

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  2. Be careful of this stock. I had worked for some time in this company. Not sure one should even go near this as this wil burn and burn so severly you cannot even apply cream.

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