PICK OF THE WEEK

ITL Industries Ltd

BSE Code: 522183

CMP: Rs.29.25

Market Cap: Rs.9.64 Cr

EPS: Rs.4.69

P/E: 6.24

Industry P/E: 17

Dividend yield: 3.42%

Introduction: ITL Industries Ltd. was established in 1986, as a commercial Tool Room to cater to the needs of local industries. Engineering industry in India then, was still in nascent stage and demand for Metal Sawing Machines was growing rapidly. ITL emerged as the sole manufacturer of India's first cent percent indigenously designed and developed High Speed Double Column Band Saw Machine to meet the growing demand.

Today ITL offers 60 different models of Bandsaw machine ranging from 100 mm to 1500 mm cutting capacity with manual, semi automatic, automatic and fourth generation CNC machine. In 1996, ITL joined hands with KASTO Maschinenfabrik GmbH Germany to manufacture state-of-the-art High Speed Power Hacksawing Machines in India, with a buy back arrangement. Today ITL manufacture's three models of Kasto Sawing Machines with cutting capacities 250 mm, 280 mm. and 400 mm. dia. in India as per Kasto Technology.

ITL has been the pioneer in introducing India’s first double column type metal cutting machine in the year 1990 and since then, ITL has supplied more than 2000 machines across the country and global markets.

Products:

Manufacturers, Traders & Exporters of Metal High Speed Sawing Machine. - High Speed Double Column Band Saw Machine - Blades - Bandsaw - Circular Sawing Machine - Tube/Pipe Manufacturing Machine -Power Hacksaw Machines - Special Purpose Machines - Generator Stator Bar Press - Power Packs -Micromist

Shareholding Pattern: The promoters hold 45.15%, while the general public holds 54.87% of the shares of the company.

Financials: For Q2FY10, the total income of the company came out to be Rs.14.35 Cr as against Rs.5.99 Cr in the same period previous year. Even after higher Depreciation, Interest & Finance charges and Provisions for taxation, the net profit of the company for Q2FY10, came out to be Rs.8.76 Cr as against

Rs.4.2 Cr in the same period previous year on a very small equity capital of Rs.3.25 Cr.

The EPS of the company for Q2FY10 came out to be Rs.2.69 as against Rs.1.29 in the same period previous year.

Triggers:

• The engineering industry in India is on an upswing on the back of huge demand from the construction, infrastructure and capital goods sector. This has resulted in an increase in the demand for metal cutting machines.

• ITL Industries Ltd (ITL) is well placed to take advantage of this opportunity as it is a leader in high speed sawing technology and is in the process of establishing itself in the domestic and global markets as an innovative and reliable "Cutting solution provider

• ITL has a wide product range in metal cutting solutions. The company offers 60 different models of brand saw machines ranging from 100 MM TO 1,500 MM cutting capacity with Manual, Semi Automatic, Automatic and fourth generation CNC machines. On the back of its technical tie up with a German company, ITL manufactures 3 models of Kato Sawing machines with cutting capacities of 250 MM and 400 MM diameter in India as per KLasto technology.

• The domestic demand as compared to the last year has improved in the current year. The present level of Turnover & Orders for Machine Manufacturing Division & Hydraulics Division has surpassed last year’s total turnover. The company has a good order book position.

• In some new products for Tube & Pipe Manufacturing Company, High Speed Circular Sawing Machines, ITL has captured a reasonable market size. More and more technological advancement and up-gradation of latest technology will create an opportunity to penetrate into new products liner global market in near future.

• In current year the Company is confident of growing much faster in comparison to economy capital goods industry. Looking to the present level of Orders and Enquires for Manufacturing Division i.e. Bandsaw and Tube & Pipe Manufacturing equipment it is seen that they are showing good signs of recovery. ITL's outlook on over-seas markets and domestic market are positive

on account of its strength o n cutting edge technology, cost and effective after sales services.

• The Company is falling under the capital goods industry, the growth of which is determined by overall growth of the Industry. An overall concern is pertaining to the pressure on the profitability. However, ITL has taken all measures to reduce the Direct and Indirect cost.

During the current year, the Tube and Pipe Manufacturing Division is showing excellent growth in orders and inquiry due the overall growth of Industry. The advancement of technology and strategic positioning of products is expected to give better results in the days to come.

Conclusion: According to the charts, the stock should only be bought above Rs.31, in any upmove. The short term target for the scrip could be Rs.XX.

However, in the medium to long term, the stock could give at least XX% appreciation from the current price.

Note: The stock was recommended to the Paid Groups on this Sunday (1st October, 2009).