Buy Fairfield Atlas; target of Rs 120: Sunidhi Securities

“Fairfield Atlas is a subsidiary of Fairfield Manufacturing Co. Inc., USA and is a part of SAURER Group of Switzerland (Oerlikon Group of Switzerland). In addition to the production of Transmission Gears it also produces “Custom Gearing” and their propriety item of “Torque Hubs”. Fairfield Atlas manufacturer Gears and Gear System for India and overseas market.  In the year 2000 Fairfield acquired Atlas Gear in India. The newly formed Fairfield Atlas expanded from 75,000 square feet to over 170,000 square feet and added the manufacture, assembly and painting of complete gear assemblies to the company’s capabilities. In the year 2006, it was purchased by Saurer AG, the world’s leading textile machinery manufacturer. As part of this acquisition Fairfield joins the Graziano Trasmissioni Group, expanding the footprint and capabilities throughout the world.”

“During FY11, sales advanced by 76.8% to `163.7 crore but net profit rose by 16.7% to `17.6 crore. OP and NP margin stood at 16.7% and 10.8% against 17.9% and 16.3% respectively in the corresponding period last year. EPS stood at `6.4. A dividend of 20% was paid.  The debt-equity ratio as on FY11 stood at 0.7:1 whereas the value of the gross block, stood at `133 crore.  During Q3FY12, sales advanced 63.3% to `66.8 crore and net profit rose 160.3% to `10.4 crore. (YoY). OPM and NPM stood at 24.4% and 15.6% compared to 16.9% and 9.8% respectively in Q3FY11.”

“The demand for FAL’s product is a derived demand and hence is dependent upon growth rate of its OEM customers. In the recent past the automobile industry has shown a positive growth rate, the tractor industry has also witnessed growth owing to a strong rural demand and liquidity.  With the government thrust on infrastructure development the construction industry is poised to reap the benefits of the Government's policy. There is also a revival in the export business of FAL due to a gradual decline in the recessionary conditions prevailing in the company's export markets. As the Indian economy is projected to grow it will drive greater demand for the FAL's products in the domestic market as well as exports globally. The outlook of FAL as regards to the new business proposed to be commenced in the field of engineering and consulting is encouraging and in the long could be a potential revenue earner for FAL. With that development the outlook for the company's business continues to be positive. With the growth of economy & various efforts and initiatives taken by the Government, sectors such as Infrastructure and power have picked up. With this, off-highway & construction vehicles sales also grew up by about 10% last year and are expected to maintain the momentum in coming years.”

“Fairfield Atlas has clarified to BSE that the promoters had sought permission from the Exchange to reduce their holding to 75 % of the paid up capital of the Company by sale in the secondary market so as to comply with the limit prescribed In Clause 40A of the Listing Agreement.  FAL is consistently strengthening its market position in existing and certain niche segments which offer good contribution and where competition is minimal. It is committed to deliver quality engineered products on time, fully satisfying its customer requirements through a process of continuous improvement. Fairfield Atlas is an ISO/TS-16949:2002 certified,” says Sunidhi Securities research report.      

Non-Institutions holding more than 90% in Indian cos

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