Dear investors, I am giving buy call on gremach infra for a medium to long term (2 to 3 years). We can see multifold returns in this counter. I am writing this article with all me consensus
Gremach’s foray into the oil rig business and the robust demand prospects suggest strong growth. GIEPL’s foray into oil rigs holds immense potential
Sources:
www.bseindia.com , www.money.rediff.com , www.gremach.com
CMP: 80
Year High: 504
Year Low: 72
PE: 3.28
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:
Gremach’s foray into the oil rig business and the robust demand prospects suggest strong growth. GIEPL’s foray into oil rigs holds immense potential
Sources:
www.bseindia.com , www.money.rediff.com , www.gremach.com
CMP: 80
Year High: 504
Year Low: 72
PE: 3.28
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 add36 more in three-four years, 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 rose exponentially due to 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 investment 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 has 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 500
Current CMP ~80
See its Client List…….. Hmmm it’s quite 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. In my views its really impressive clientele list.
Shareholding pattern --- Good Holding by Promoters and MFs / Banks
Promoters: 55.68%
FII/MF/Banks: 16.36%
Public: 44.32%
Risks:
Delay in Delivery of rigs or drilling projects
Downfall in rigs rental
I would like to play on this counter for long term… remember it takes years to have multifold returns….
If rigs are so cheaply and easily available why ril etc do not buy it? Secondly since co has said it will go slow on hiring equipment business and or shut it down and income from coal mines atleast one year away do u think your reco still stands. the cmp too has come down.
ReplyDeleteril is not purely into business of rigs and mines. if reliance could have been in this business then it may already have acuired many rigs...
ReplyDeleteas fas as RPL is concerned you may have read that RIL has hit a oil basin in hind-sea.. so that rig will give enormous profit to RPL...
if you see the fundamental and future vision of gremach u will come to know about its potential. just hold and if possible add some more in your pocket. right now there is global crisis in world financial economy. But one thing i want to tell you all readers that indian economy growth is not totally dependent on US dow jones fall/rise, it depends on its domestic growth.. the domestic outflow/inflow of money... sooner or later we will decouple from US market mayhem...
what shit man
ReplyDeletejust came to ur blog by chance and saw u braggin about ur gold call..
if one call got rite on target u brag ..look at ur gremach call citing verious factors that it will become a money machine...
u recommended at 80 and its now 29 rs...
now u will say u meant 2-3 years..but wats the point in taking it at 80 if anyhow market week and things going fucking south
Target for gremach 5 years from now?
ReplyDeleteHold 1500 can i add 3500 more at cmp.
Hi Jyotindra,
ReplyDeleteno one can predict the exact target of any stock however keeping in mind the business model and the expansion plans and financials this stock is all set to rock in next bull run... this is my fav stock and will give multibagger return over a period of 3 to 5 years.. may be it will reach Rs 400.... take ur own call before buy
Hi John,
ReplyDeleteyes i agree that my call was at Rs 80 and now it is avaliable at dirt cheap price Rs30.... i am not regretting my decision to buy gremach and to be true i am adding more and more of it in my portfolio. This time market has proved all pundits wrong, and you must agree to it. not only my calls but all gurus have grounded on their analysis that they did last year...
pls add as many as you can at this level of Rs30.
Hi Deepak,
ReplyDeleteWhen r the dec qtr results of Gremach infra ?
Regards.