HBL Power Systems, an industrial battery major, has reported healthy results for Q1FY09.
Net sales surged 127.9% to Rs316.43 crore as a result of increased capacities of lead acid batteries and nickel cadmium batteries on account of ongoing capex. OPM (%) improved to 20.6% (13%) as a result of better operating leverage on increased sales.
Consequently, PBT witnessed an increase to Rs51.54 crore (Rs.10.08 crore), while PAT spurted to Rs33.42 crore (Rs.6.13 crore).
Besides its core competence in special application batteries that are used as power back-up systems in industries like telecom, power sector, steel and oil refineries, HBL also has a presence in power electronics.
In view of newer business opportunities has been expanding its manufacturing facilities. While Phase I expansion to increase capacities of lead and nickel cadmium batteries has been completed, Phase II expansion would be completed by March 2009.
At the current market price, the stock is trading 5 times FY09 expected EPS of Rs50 on fully diluted equity capital of Rs26.96 crore (post preferential allotment and issue of warrants) and 3.86 times FY 2010 expected EPS of Rs65.
The company is making rights issue at a price of Rs150/share in ratio of 1:25. We recommend a BUY in this scrip.