Sanghvi Forging Has A Good Brand Image Of Its Products

Changing The Product Mix

Sanghvi Forging - share price movement
Sanghvi Forging - share price movement | Source

Sanghvi Forging - share price movement

 
 
 
Weekly H/L
77.35
68.05
Monthly H/L
77.35
45.5
52 Weeks H/L
144.9
22
 
( 30 May 11 )
( 20 Dec 11 )
Delivery / Var+ELM %
71.72
42.01
 
 
 
Sanghvi Forging - share price movement

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Sanghvi Forging - Latest financial results

(in Cr.)
Dec-11
Sep-11
FY10-11
Revenue
13.81
12.34
39.88
Net Profit
1.06
1.25
3.94
EPS
0.84
1.02
5.09
Cash EPS
0.98
1.13
5.74
OPM %
16.71
18.93
20.73
NPM %
7.69
10.15
9.87
Sanghvi Forging - Latest financial results

Changing The Product Mix


Average Results

Sanghvi Forging & Engineering Ltd has reported average results for the quarter ended 31.12.11 (see tables). Both revenue and net profit are stagnating when compared to the quarter ended 30.09.11. The shares of Sanghvi Forging are traded in the bourses at Rs.70 now (BSE 20.04.12). The face value of the company’s shares is Rs.10. The highest and the lowest prices recorded by the shares of the company in the last one year are Rs.145 and Rs.22 respectively.

Changing The Product Mix

Sanghvi Forging produces forging products for non-automotive sector. The company is now changing its product mix to target high-margin, low-volume, big products finding use in some critical components in nuclear power plants, aerospace, defence and oil & gas sectors. In order to effect this switchover, Sanghvi Forging is commissioning its new production facility at Vadodara in Gujarat State at an investment cost of Rs.125 crore. The company was expecting the major equipment like forging manipulator and 1200-tonnes forging press from Germany and Italy respectively by last month. The plan is to start production in the new unit by next month.

Larger Forging Products

Jayanti Sanghvi is the Managing Director of Sanghvi Forging. The new plant will have a capacity of 15000 tonnes per annum. The present capacity of the company is 3600 tonnes per annum. Larger forging products upto forty tonnes each will be manufactured here. At present the company produces forging products upto a maximum of four tonnes each. Last year the company came out with an IPO for Rs.37 crore. It also garnered Rs.6 crore through private placement and Rs.78 crore through loans.

Heavy Competition In The Industry

The forging industry is witnessing heavy competition in India. Midhani of Hyderabad is setting up a unit to produce forging products upto 20 tonnes each. Nuclear Power Corporation of India and L&T are jointly setting up a plant at Hazira at an investment cost of Rs.1700 crore to produce forging products upto 100 tonnes each at a cost of Rs.1700 crore. Sanghvi Forging is anticipating revenue of Rs.50 crore in the first year and Rs.200 crore from the third year per annum. The existing facilities produce a business of Rs.50 crore. After the stabilisation of the new facility, Sanghvi Forging will be going for further expansion in another two years time. Sanghvi Forging is also weighing its options as to whether to go for forward integration or to get into the business of electro slag re-melting of the products.

Listing At A Premium In Stock Exchanges

The company’s Registered Office is located at 244/6-7, GIDC Industrial Estate, Waghodia 391760 in Gujarat. The paid-up capital of the company is at Rs.12.69 crore. Free reserves amount to Rs.10.68 crore at the end of last financial year. The company’s book value is not high and this is a disadvantage. The company’s share price jumped to Rs.113 on the day of listing in the NSE as against the issue price of Rs.85. As the automotive sector is crowded, the company has conscientiously stayed out of the sector. Sanghvi Forging regularly exports its products to Europe, Middle East and Canada.

Invest At Below Rs.50

One can invest in the shares of Sanghvi Forging at declines of below Rs.50 to get decent gains in the medium term. But the problem with the company is that it does not have a high book value and it has to face acute competition in the non-automotive sector also. Once the Hazira plant of L&T is commissioned, forging products of large weight will come to the market. The 40 tonnes products of Sanghvi Forging are nothing compared to the still bigger 100 tonnes products of L&T. But the advantage is that the company has established a strong brand image and has an export market.

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