Exit The Counter - Patels Airtemp (India)

Patels Airtemp (India) (PAIL) formed a part of our recommendation column low price in the issue dated April 26 - May 9, 2010. The scrip was recommended at a price of Rs 96 and since our recommendation, it immediately gave some brisk returns and touched a high of Rs 129.85 within a month’s time, giving an overall appreciation of 35 per cent. Since then, the scrip has corrected from its peak and is currently trading at a CMP of Rs 88.25, down by about 7 per cent from its recommendation level.

The company is into manufacturing of engineering components and products. Its products list includes heat exchangers, air-cooled heat exchangers, columns and pressure vessels, refrigeration etc. Factors such as consistent topline and bottomline performance, dividend-paying track record, strong clientele that includes the likes of IOC, RCF, National Fertilisers, Reliance, Essar, NTPC, Nuclear Corporation of India, BHEL, diverse industrial application of company’s products, decent order book and last but not the list low valuations of PE of 5x and EV/EBIDTA of 3x its FY10 numbers made us recommend this scrip. However, one should note that the company’s performance in H1FY11 has not been up to the mark. It’s revenues have remained stagnant at Rs 35.14 crore compared to Rs 35.63 crore during the same period last year, while the 10 per cent profit growth to Rs 4.40 crore (Rs 4.01 crore) has come on the back of lower input costs. Looking at the first half performance and the fact that even on annualised numbers the upside for the scrip looks capped, it is better if investors exit the scrip in momentum.