Kulkarni Power Tools
sarv...@gmail.com
Kulkarni Power Tools
Deven Choksey, KR Choksey Securities
Kulkarni Power Tools is engaged in the manufacture of power tools.
The demand for these have increased manifold with applications in
infrastructure, ship building, auto manufacturers and virtually most
of the manufacturing businesses. The company is a critical supplier
to all major auto and 2 wheeler players such as Bajaj , Maruti,
Telco and to the Bombay Port, other ship building and breaking yards
and most major construction and infrastructure companies. Kulkarni
Power Tools and Bosch are the only two major players , after
RalliWolf closed operations. In addition Kirloskar Brothers owns
3.50%, Hinduja Finance 3% and Asia Investors 2.45% of its equity
capital.
The turnover for 2005 was 33.75 crores, out of which exports
comprised of Rs.5 crores. For the year ended 2006 the turnover is
expected to be Rs.55 crores, with exports of Rs.10 crores.
Currently, the company exports its power tools to the Middle east,
Far East, South Africa and Europe through distributors. They plan
now to set up their own offices beginning with Middle East thereby
moving closer to the customer and developing support services for
the end user. The management runs a very tight receivables book, not
exceeding 40 days outstanding. It registered a PAT in 2005 of
Rs.0.95 crores.
The company's EPS in FY04 was Rs.5.90, in FY05 it was Rs.5.60 and
its estimated earnings in FY06 are Rs.11.00 which therefore shows a
big jump in earnings (+96.4%) for FY06 over FY05. At a price of Rs
114 the stock trades at 20.35 times its 2005 earnings and at 10.36
times its 2006 estimated earnings. We recommend a buy on the stock
with a price target of Rs.180 in 12 months time frame.