Solitaire Machine Tools Ltd – SMTL manufactures Precision Centerless Grinders in different ranges of 100 mm, 200 mm, 250 mm & 500 mm wheel width accounting for 93% of the total revenues.SMTL has two facilities located at Baroda with a total installed capacity of 56 machines p.a. Plant 1 manufactures No. 2 grinders (200 mm & 250 mm wheel width), while Plant 2 manufactures & assembles the grinders of 100 mm & 500 mm wheel width.
Auto Ancillary industries are the major clients of SMTL which account for more than 50% of the business. bearings companies account for another 30% of the business. The company has Licensing agreement with Bocca & Malandrone Sunebo S.p.A., Italy could turn out to be a trigger for growth in future. Capacity expansion, better utilisation & healthy order backlog to boost the turnover & improve the margins.
Valuation and Recommendation:
At the CMP, SMTL trades at 6.2xFY08E & 4.2xFY09E earnings. SMTL is expected to report a healthy turnover & PAT growth of 33.1% & 59.5% over FY07-09, on the back of capacity expansion, better capacity utlisation & healthy order backlog. SMTL is capable of achieving a topline of Rs. 200 mn to Rs. 225 mn & a PAT of Rs. 40 to Rs. 45 mn by FY10, which gives an EPS of Rs. 8.9 to Rs. 10. HDFC expects the stock to trade at Rs 60 within a year.