Sejal Architectural likely to offer decent upside potential

Sejal Architectural Glass received an encouraging response from investors, providing a listing gain of 13% on July 1. However, the weak market conditions have led to profit-booking in the stock. After reaching a high of Rs 139.80, it closed at Rs 81.5. The Mumbai-based glass processor posted sales (unaudited numbers) of Rs 56 crore and profit of Rs 6 crore for the financial year ended March ´08.

Going forward, the company expects acceleration in its revenue and profit growth, as it continues to book new orders. Its float glass facility will be completed by FY09. Its perday capacity at 100% utilisation is 550 tonnes per day. For the first year, capacity utilisation will be around 65% and by FY11, it will be fully operational.

Currently, the company has orders worth Rs 30 crore, to be completed within the next three months. During FY10, the company expects to clock revenues of Rs 350 crore and its net profit margin is expected to rise to around 15% of its net sales, according to Amrut S Gada, chairman & managing director, Sejal Architectural Glass. Though margins are currently in the range of 10%, the float glass facility will contribute to higher margins. The incremental growth will be contributed by the new float glass facility, for which the company has raised funds.

Recently, the company ventured into retailing and has opened a 30,000-square feet showroom to sell high-end glass articles used in house interiors.

At the current price-to-earnings (P/E) multiple of 29.4 (based on FY08 financials), the company´s stock is attractively valued. With confirmed orders from Amritsar Airport, Reliance Industries, L&T and Brigade Enterprises among others, the company´s growth in the next few quarters seems certain. The stock is currently trading at 15 times its estimated FY09 EPS and is likely to offer decent upside potential for investors at the current price.