Techtran Polylenses

 Fundamental Report Apr. 27th 2006

Techtran Polylenses


BSE Code: 523455

CMP=37
Recommendation: Strong Buy
Price Targets:
Medium Term: 52+
Med-Long Term: 80+

Introduction

TPL is engaged in the business of Manufacture & Sale of Hard Resin Plastic Ophthalmic Lenses. It is the largest producer of plastic lenses in India and is the only ISO 9002 certified, ophthalmic lens manufacturing unit in the country, offering full range of lenses. The company has won Top Exporter Awards in its product class, year after year consistently from the Plastics Export Promotion Council and VSEZ (Visakhapatnam Special Economic Zone). Techtran's Technology is imported from Italy and U.S.A. and the quality and yields of lenses of it are comparable to the World Leaders in the Industry.

TPL is mainly in exports with installed capacity of 5 million pieces p.a... Promoters hold 43.10% equity. Around 40% equity is in Demat
Company achieved turnover of Rs. 23.77 Cr. After providing 1.99 Cr. for depreciation, net profit was 2.02 Cr. On equity of 10.97 Cr., EPS was 1.84 and cash EPS was 3.80. Company has produced 3.60 million lenses during the year and sold 3.78 million lenses as compared to a production of 4.08 million lenses and sales of 4.60 million lenses in 2003-2004.

The Export Turnover has come down by Rs. 14.94 million and Domestic Sales have gone up by Rs. 16.95 million over the last year. The net sales have gone up by about 1.11% only over the previous year. This is however due to emphasis on better profitability rather than volumes during the year under review.

The net profitability of the company has improved reasonably in view of higher sales of value added products as compared to the previous year. The number of lenses sold has come down by 17.74% over the previous year and the net turnover had gone up by 1.11% indicating a higher realization of value added, new products. The prices of single vision lenses, which constitute majority of sales, continue to erode due to over supply situation in the world markets and more specifically from dumping by China and South East Asia. Several value added, Niche Products introduced by the company in the past few years are helping to maintain the present performance.

Anticipating certain liquidity problems in future your company has approached Financial Institutions for restructuring of Term Loans. The high interest cost burden, which was dragging down the company, was relieved to some extent by the financial restructuring allowed by Industrial Development Bank of India (IDBI). Company paid a sum of Rs. 410 lakh to IDBI without any prepayment premium and could also bring down the rate of interest on its Term Loans with IDBI from 15% to 11% on payment 50% discounted interest differential.

Company invested Rs. 20.80 Million for purchase of 134000 shares of Andhra Pradesh Gas Power Corporation Limited, which entitle company to purchase 0.50 MW of power at a concessional price as compared to Andhra Pradesh Central Power Distribution Corporation Limited, during later part of 2003-2004 and accordingly Power & Fuel costs have come down to Rs. 111.18 lakh during 2004-2005 as compared to Rs. 154.91 lakh during 2003-2004.





Future Prospects:

Techtran is continuing to develop new value added products in order to change the product mix towards a stronger, more profitable position and in this direction it has already introduced value added products such as Bi-Focal, High-Index' 'VARTEK' Progressives, sun sensor Photo chromatic lenses, Tinted lenses, Short-corer progressive lenses and 'Compu-lenses' for reducing eye strain to computer users and 'NOUV' lenses for filtering harmful UV rays completely to normal, clear spectacle lens users.

Techtran is giving a great thrust to exports. The company is entering into new territories with specific focus on value added Vartek Progressive and Sun sensor; and is further planning to pursue Niche markets for value added and engineered products. The company is continuously giving huge Efforts to expand the market of it into Russia, Europe and Middle East.

The prospects for the company look very bright. The backward integration (IPP production) and forward integration (surfacing laboratories) taken up by the company should help to reduce costs and expand domestic market respectively. Indian market is still predominantly glass - almost 90% of the market, would continue to decline and lose for plastic lenses as it happened in the developed World, like United States, Western Europe etc., where Plastic Lens enjoy a market share of 90% and mineral glass less than 10%. Out of a Billion population of India, it is estimated that at least 200 Million people have buying power as that of North America. The market potential of 200 Million people is approximately 100 Million lenses per year, which is a huge market.

Several new surfacing laboratories are coming up to increase the demand for remunerative semi-finish and value added products of the company. Techtran's prices are very competitive for these products and preferred over imports due to service and local availability. The company is focusing more and is aggressively pursuing this growing domestic market. Plastic Lenses acceptability/awareness is increasing day by day in India and it should be a good opportunity for growth in the coming years for the company.

Company is performing extremely well in current year. Techtran Polylenses should achieve turnover of Rs. 30-32 Cr. and NP of 5.5 Cr. For FY06 which will give EPS of above 5 and Cash EPS of 7.20. Stock is trading at just under 7.4 times of FY06E EPS.

TPL may further achieve turnover of Rs. 40 Crs.and NP of Rs. 7 Cr. for FY07.













Valuations:

Considering E.O.U. status, high technology, only manufacturer in India, TPL is going cheap at P.E. Ratio of 7.4.With greater thrust in export market and huge potential of domestic market, company will continue to do well. Altogether scrip to own for sweet returns in the long run.

INVESTORS CAN BUY TECHTRAN POLY FOR MEDIUM TO LONG TERM.

Source: guli_market



Important Disclaimer: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.