[Ed. Note – This article does not meet our new editorial guidelines, nor does the company profiled meet our investment criteria. It will be removed from the site in the future.]

Hind Rectifiers Limited (BSE:504036, NSE:HIRECT) is a midcap (market cap Rs729 million) India-based company, promoted in technical and financial collaboration of WestingHouse Brakes & Signals Holdings limited, UK (15.9% stakeholder). It is a company driven by technical innovation and expertise. It is competing with Honeywell Automation (BSE: 517174) and Zicom Electronics (BSE: 541404) and many others.

It is engaged in the business of design and development, manufacture and marketing of power semiconductors, thyristors, power electronic equipment, railway, metro transportation power control equipment, and latest versions of remote controlled electrostatic precipitators for pollution control, reactors, convertors, locomotive transformers and AC coach inverters.

The company has its main facility in 20,000 square meters campus at Bhandup, Mumbai and two plants in Dehradoon, Uttarakhand and one facility at Nashik, Maharashtra. The company designs and manufactures power silicon diodes, battery chargers, high voltage and high current power rectifiers,  locomotive transformers, AC coach inverters for railways, and electrostatic precipitators. The company’s product portfolio includes power equipment, semiconductor devices, transportation power modules, trading and service.

Its products from Dehradoon facility are expected to boost revenue from FY 2013-14 onwards, as it has obtained RDSO clearance. Apart from preferred supplier status from Indian Railways, it has exported its products to South Africa and Malaysia. As a measure of diversification, strengthening and synergizing  the after sales and technical services, it has set up a trading division to trade in international brands such as BUSSMANN Denmark and ICAR, Italy.

Design, Manufacture and Service Solutions

The company offers a complete range of  innovative solutions in design, development, manufacturing and service in the domain of power electronic  devices as well as  the equipment for aviation, power, transportation, telecom and various other industries. A wealth of expertise has also been gathered in the design of control systems. The control systems play a key role in monitoring and control of power electronic equipment in their network. The company has done pioneering work in the development of power semiconductor devices and heat sink assemblies using IEC circuit configuration.

To ensure  high reliability and  to serve the sophisticated markets, Hind Rectifiers has invested in  quality testing systems to ensure international quality & reliability. The test facility is also used for developing and rating of device performance.

A reliable and efficient transport system is essential for economic growth. Both semiconductor and equipment divisions teams work together to offer custom-built solutions to industries. The company expertise has grown with the absorption of new technology and innovative development of solutions and involvement in the  latest mass transit projects and metropolitan transport systems.

Trading and  Service

Apart from providing excellent service, the company also trades in the following brands:

• Semiconductor Fuses from BUSSMANN, Denmark.  Bussmann offers a large range of high speed fuse links, designed for the protection of semiconductor devices. They come in current rating up to 4000A follow international standards. Bussmann offers wide range of Fuse Bases (Blocks), Microswitches and fuses of critical applications like DC drives, UPS, Induction Furnaces, high Current Rectifiers.

• Capacitors from ICAR, Italy.  ICAR capacitors work in AC as well as DC circuits like snubber capacitors, in load p.f. Improvement, Induction Furnaces etc.

Company Background

Hind Rectifiers Ltd was  founded in 1958, in technical and financial collaboration with Westinghouse, Brake & Signal, U.K. initially as Hind Rectifiers Private Limited. It began its production activities in one of the Bombay Port Trust godowns at Sassoon dock, Colaba. The first Board of Directors constituted in 1958-1959 consisted of  Shri R. P. Nevatia, Chairman, Shri. Ramkrishna J. Bajaj, Shri. Navalmal K. Firodia and Shri Sushil Kumar Nevatia, Managing Director

Later in 1959-60, the company shifted the manufacturing activities to the present location at Bhandup, Mumbai. The plant with new technology for power silicon diodes manufactur was imported from Westinghouse Brake & signal Co. Ltd. UK in 1966. In early 70’s it started design and manufacture of battery chargers, High Voltage and High Current Rectifiers for Indian Railways.

Supreme Powertronics Pvt. Ltd., Nashik , a sister concern, was amalgamated with Hind Rectifiers Ltd in 1995. In 2001, additional manufacturing facilities were created in Bhandup, for the design and manufacture of 25 KVA – 180 KVA range of converters for Indian Railways. During its Golden Jubilee year 2007 the company inaugurated two more plants at Dehradun, Uttarakhand, to manufacture power equipments for railways. New products such as ESPs and locomotive transformers were developed.

Financial Results

The Company has a record of good revenue growth and regular dividend payment.  Recent data is given in the table below:

Period	FY2012-13	FY2011-12	FY2010-11
Net Revenue in million rupees	1362	1179	1016
Raw material cost in million rupees,  and as a percentage of net revenue	973.4 (71.54%)	763  (64.72%)	635.9 (62.58%)
Interest cost (Rs millions)	9.5	15.8
Net Profit(Rupees millions)	101.2	106.8	101.4
Earnings per share in rupees                                 (Face value of share is Rs 2)	6.73	7.09	6.74
Dividend %	80	80	75

Revenue  was around 15% CAGR. Company has reduced interest costs significantly.

Dividend %(Unbroken dividend record)

FY2012-13:80%, FY2011-12:80%, FY2010-11:75%., FY2009-10:70%, FY2008-09:100%
Revenue CAGR was around 15%. Company has reduced interest costs significantly.

Dividend %(Unbroken dividend record)
FY2012-13:80%, FY2011-12:80%, FY2010-11:75%., FY2009-10:70%, FY2008-09:100%
Bonus history: bonus shares:1:1 in 2008-09
Book value: Rs 41.98(FY11-12), Equity Rs.30.11 million
Current market price: Rs 48.4, P E ratio 5.09, Industry PE: 12, (market price range :52 week high 70, low 40)
PE of competitors: Zicom electronics( BSE code 541404): 23.2,
Honey well automation (BSE Code 517174):25.7

Investor Perspective

Even though significant revenue growth has occured, an increase in material cost has dented the profits. Because of competition and nature of the market, it is not able to pass on the higher cost of material to the customers. Market has reacted to this news and share price came down from 58 to 48 and is available at a cheap price. Downward risk appears to be low at this level.

However, it is a well managed company, with good dividend and bonus record. The promoter group holds 44.5% shares and WestingHouse Brake and Signal Holdings of UK has 15.9% stake. The company’s balance sheet shows that it owns land bought at 16.1 million rupees bought before 2007. The company has maintained good return on net worth and present return is around 16%.

Considering the industry PE of 12, and expected benefits of higher revenue from Dehradoon plants, good demand for the company’s products, particularly electrostatic precipitators for pollution control, the projected EPS for FY2014-15 of 8.5 – 9.5, a price of 75 -95 can be projected on a conservative estimate. Hence this scrip is a good buy and can be accumulated during dips.
(Sources: www.bseindia.com, and www.hirect.com)