Limited dowside in Indo Asian Fusegear: Chugh

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Limited dowside in Indo Asian Fusegear: Chugh

Investment Analyst, Ashish Chugh is of the view that one can expect reasonable returns in Indo Asian Fusegear in the next few years. This company is catering to both the power sector, which is registering a good growth and also to the construction sector.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Ashish Chugh See what other Experts & Brokerages are saying about Eon Electric See messages about Eon Electric Eon Electric BSE | NSE 07/05/12 Are Mutual Funds betting on Eon Electric?

Investment Analyst, Ashish Chugh is of the view that one can expect reasonable returns in Indo Asian Fusegear in the next few years.

Chugh told CNBC-TV18, "I would not call Indo Asian Fusegear a multibagger but at these levels it looks very attractive. This again is a company, which is catering to both the power sector, which is registering a good growth and also to the construction sector, we are seeing so many malls and residential complexes coming up. Now this company has got a product portfolio, which caters both to the power and construction sector, which are high growth sectors. This company manufactures switchgears, various electricity products starting from switchgears distribution boards, changeover switches, modular switches. They have got a variety of lighting products also, they manufacture CFL, fluorescent tube lamps, HID lamps and also manufacture wires and cables."

He further added, "This company has got about 8 plants, which are located mainly in the states of Punjab, Haryana, UP, Himachal and Uttarakhand. They have started a new plant recently at Haridwar for manufacturing of switchgears and CFL lamps. They have a distribution network comprising of 30 offices of their own. They have 800 distributors and their products are sold through over 35,000 retail outlets. Besides this company has got overseas offices in Dubai and Germany also."

"The company is ramping up the capacities of its various products at their existing locations and also setting up new plants. This company is setting up plant for the manufacturing of home and building automation products in joint venture with a Spanish company. This plant is coming up near Haridwar. Again they are setting up a plant in Saudi Arabia along with Saudi National Glass Company for manufacturing of CFLs and HID lamps."

"Last year the revenues were about 214 crore, PAT was about 17.5 crore. In the first nine months of the current financial year we have seen revenues go up by about 30% to 195 crore and however the PAT has come down by about 17% to 10.5 crore. So this stock currently trades at a price to earnings ratio of 11."

"Now the fortunes of this company are linked to the fortunes of the power sector and as well as the construction sector. So in the near-term we are not seeing any slowdown in both these sectors. In fact we are seeing hectic activity in both the sectors and both these sectors are touted as growth sectors. So company firstly is available at a price to earning ratio about 10-11, which is quite reasonable for a growth sector. Secondly, it is ramping up production of various products at its existing locations and also setting up new plants, which is a positive as far as the scalability of the business is concerned. Thirdly, it is catering to high growth sectors and available at reasonable valuations. I think at Rs 120 the downside from these levels looks restricted and one can expect a reasonable return from the stock in the next few years."

Disclosure: Analyst and his family may have some small quantities of investment in the above stock.