>SANGHVI MOVERS LIMITED (IDBI CAPITAL)

SUMMARY

Sanghvi Movers Ltd. (SML), the fastest growing equipment company in the country has been adversely impacted by the economic slowdown. The negative global sentiment has led to core sectors going slow on fresh capital investments. Most companies have either delayed their projects or have cancelled them. However, we believe that the factors favoring SML far outweigh the concerns we have regarding the market.

We have revised our revenue and earning estimates to factor in lower rental yields due to the slowdown in demand, reduction in capacity additions, and contractions in margins from lower utilization.

We continue to maintain the rating as Outperformer as we believe that the factors favoring SML far outweigh the concerns we have regarding the market. At the reigning market price of Rs.178, the stock is trading at 10.3x its FY10E EPS of Rs.17.3 and 9.4x its FY11E EPS of Rs.19.0. We recommend 'Accumulate' with a target price of Rs.197.

INVESTMENT HIGHLIGHTS

■ Capex pruned due to slowdown in core sector activities
SML's fortunes are directly related to the infrastructure and industrial growth. It provides infrastructure support services to the core sectors, which include power, refining and petrochemicals, windmills, cement, steel, metro rail and many more.

The current global financial crisis has resulted in companies going slow on fresh capital investments. Many projects in the core sectors have either been delayed or have been cancelled. This has translated into lower utilization rates of cranes for SML. The company has accordingly curtailed its Capex plan from Rs.1,340m to Rs.600m in FY10.

■ Impressive clientele
SML’s services find applications in core and Infrastructure sector projects like Windmills, Refineries, Cement, Steel and Power sectors. Its top five customers list includes Suzlon, Reliance, Enercon, BHEL and Aditya Birla Group.

Currently Suzlon and BHEL source 70% of their total requirement from SML. The company has also remained a key partner of Enercon for the last 5 years.

Going forward, we believe that Capex planed by these organizations shall translate into strong demand for cranes.

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