Advance Metering Tech Ltd. (AMTL) – Smart Metering India

Background: India is being electrified – quite literally. This year, electricity has reached 100% of our cities and villages and now the next target is to provide electricity to each and every home in the country. This will usher in huge opportunities for the electricity infra providers and smart meters would be one of the biggest beneficiaries of them. Smart cities have already given a big push to smart meters manufacturing but there is huge demand that is also coming from total electrification and replacement markets. Replacement market are the municipalities that are replacing the old age analog meters with smart and prepaid meters. Advanced Metering Technology Ltd. (AMTL) is one such company which is expected to be significant beneficiary of this mega opportunity brewing.

The Company: AMTL was born out of demerger from EON Electric Ltd in 2011-12 when EON Electric (formerly known as Indo Asian Fusegear Ltd.) sold its Switchgear business for more than 600cr. Indo Asian switches was one of the rare electrical fitting brands that was created in india. After selling the switchgear business, the shareholders were given a one time special dividend too. Indo Asian was left with the lightings, wires and cables business and between the two promoter families it was decided the Indo Asian would be rechristened Eon Electric which would continue with lightings business and the other promoter, the Ranade Family, that more interested in Energy management, conservation and metering business would form the other entity called Advanced Metering Technology Ltd (AMTL). AMTL in its true sense was a startup with no existing business but was incubated with very experienced management that had a strong vision.

AMTL’s business has primarily three things 1. Wind power 2, Engery Audits and 3. Meters. AMTL operates 3 wind mill power projects located in Jaisalmer district in Rajasthan with a total capacity of 11.7 MW and has been operational since 2012. These wind mills had been the cash generating vertical of business initially. Energy audits vertical is small relatively but this has immense potential and is probably capable of engrossing maximum margins. Lastly, the Smart Meters is their fastest growing vertical and has humongous potential. Smart meters, which also include pre-paid meters is being used heavily in the smart cities and in the majority of new societies that are being formed. The affordable housing also has a huge component of these smart pre-paid meters. The demand in this sector is huge and india is facing capacity constraints. Therefore, part of the demand had been going to un-organized sector too. But with implementation of GST, this demand is shifting back to organized space and AMTL has been a clear beneficiary. Metering business which is the lion’s share of AMTL’s revenue has been growing at 40% CAGR for last few years and is expected to continue with this pace even on higher base. The reasons for this are multiple. Unlike, others, AMTL has got good spare capacity and in the last few years they have made a good name in the industry for quality and execution. Since, they were new, they were just qualified to do some job works as a sub-sub-contractors and therefore, the volume and margins were low but now they have enough Smart meters manufacturing experience which has made them eligible to become consortium sub-contractors which is bringing significantly higher volumes now. But the biggest kicker is expected to come in the next few quarters , when it would also become eligible to be part of the consortium itself (based on the volume of meters manufactured). So, the script appears to be for strong and sustained growth.

The management quality is good and they are cost conscious. One of the best examples of the management cutting unnecessary cost was its decision to delist from NSE. It decided in favor of BSE as that’s the oldest exchange with widest network and saved itself listing fees of NSE (and this happened when the company was just building itself).

The management has proven credentials and have built huge successful business in the past and has laid a strong foundation in the present one as well. The business is growing at a very fast pace and is available at throwaway valuations. The pace of housing is going stronger by the day and as we approach the housing for all deadline, the pace will only increase in future, paving the way for strong growth for AMTL in the near future. The company has good land bank and they have put on rent part of it in the last FY and in the present FY, another part of it will be put up on rent giving a further fillip to margins.

Valuations: AMTL is available at a market cap of just 28cr which is just 0.25% its netwoth and 0.7 times its sales. The promoter stake is at a strong 63.55%. The company has debt of around 6cr and compared to its balance sheet its minuscule. In the last 5 yrs the revenues have grown from less than 6cr to over 40cr. The operating profits have also turned around from operating loss of more than 6cr in the same period. Last yr, due to accounting changes and partially due to GST effects, last yr was an abberation but the company has indeed turned around with this quarter, i.e. Q1 FY19, company has even given net profits for the first time. In all likelihood we can hope to see profits in this complete FY19 too. A couple of yrs back promoters had increased their stake by buying from the open market at a price that was more than 20-25% high than the current CMP.

Technicals: Small cap index has been butchered, but there a few stocks which have weathered the storm quite well and are refusing to budge and AMTL is one of those few. As with every stock that has its own cycle, AMTL had turned downwards much before the small cap index started correcting and it has now completed its correction. In the process it has made a higher high on its lifetime charts. The trend and momentum has already turned around. Despite the fact, that small caps are crashing, AMTL has not gone down even a bit and on the contrary is strengthening and is near its multi-weeks and quarter highs. These kind of stocks which show strength during such market crashes normally give way better returns and at times even become the leaders of the next upmove. Its also worth noting that in the last few months the volumes have dried up and whatever little volume is generated its quickly absorbed clear sign of accumulation by smart hands.

I think its no secret that I like turnaround stocks and mostly focus on them. I love the fact that these stocks are oblivious to general investor fraternity and therefore, available on attractive valuations. Since, these stocks are out of the radar of all, we get to accumulate on our own terms and as the growth continues, it comes out of oblivion and eventually gets top billing. These stocks also have their own technical script which is mostly indifferent to the broader indices. I believe that AMTL is sitting on a golden business opportunity and this is also evident with the pace of growth. AMTL is backed by a good and ethical management who has experience in building big business. I am extremely hopeful that this sub 30cr market cap company can also become and big wealth creator in times to come. This is surely a story to keep on radar.

 

Disclaimer: It is safe to assume that I have some vested interests in the stock. Also, the above stock story is my personal view in individual capacity and I am not a SEBI Registered Research Analyst. For rest, please look at the About page.

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83 Responses to Advance Metering Tech Ltd. (AMTL) – Smart Metering India

  1. ravverma says:

    hi ace how u see hpl electric which is also in metering

    • hpl electric is not strictly comparable to AMTL as HPL has other significant business verticals. moreover, the growth in HPL’s metering business is hardly there especially as compared to AMTL and we know how markets value growth. Not to suggest HPL is bad or anything but my clear preference is towards AMTL given its strong focus on smart meters and espcially its energy audit business which when scaled could add very significantly to OPMs. As an analogy, energy audit is something similar to what software consulting is to software services. anyways, AMTL is my preference for reasons given.

  2. Harry says:

    Thanks Aceji 😉

  3. Gautham says:

    Thank you dear ace once again but do you hold this.. Can you please disclose…

  4. vivian says:

    truly hidden gem.

  5. johnsjm says:

    Aceji, whats your opinion about TD Power systems?

  6. Suneetha says:

    Thanks Aceji for sharing this Gem! Thanks a lot!

  7. Prem says:

    Ace “RIL in talks with Hathway Cable for acquisitions”. Do you think its worth to look at Hathway cale…….Thank you

  8. RAVISH says:

    My only concern for this company would the receivables from the Govt. tenders or orders. We have seen very good companies going bad due to these issues like Sintex Plastics, fertilizer companies and many more. What is your view about this uncertainty?

    • not this company specific but in general, the receivables from govt. is more secure than anywhere else. sometimes there could be minor delay but thats it…and mostly these delays are in subsidies not in such market orders.

  9. Hanuman says:

    Hi Ace,

    Thank you for the gem. Just a quick question. You have mentioned debt to be 6 crore. But when I see the financials it is 63240 + 621838 (in thousand), which is around 68 crores. Kindly correct me if I am wrong.

  10. Anish says:

    Could I ever get a good fortune of meeting you once ACEji?

  11. Ajay says:

    Hi Ace
    JHS is down significantly. Is there any change of view from earlier view.
    Thanks

    • i think i had given a view for investors when there was a political tweet from the company’s handle. I did not appreciate that. I think the punishment to this stock was warranted.

      • Value Investor says:

        Hi Ace,
        I have searched the blog for your view regarding JHS political view. It is not available.
        Can you please let us know what was your view.

        Thanks,

      • Harshit Agarwal says:

        ace, I am not able to find your comment/post regarding this. Can you please help me to find it out?
        Also I am not able to understand “the punishment to this stock was warranted”, what do you mean by this ?

        • you should google the blog, but basic crux of my point is that business and politics should not be mixed or else their fortunes get tied up with the fortunes of the political party they support. with elections coming up this has brought some uncertainty for JHS.

  12. Gautham says:

    Its your hardwork aceji I just want to appreciate it thats all.. If there is any more question i will definitely ask.. Thank you again

  13. Govind says:

    do u know why the expenses of the company are so high?
    if i see TTM figures, of the 46.1 cr revenue 45.9 cr are expenses!
    this leaves a minuscule operating margin of 0.48%
    how will the company ever make profits with such a small OPM?

    • if you look at the expenses in detail you can easily understand why the expenses are high and what will happen if the company continues to grow. this is the reason why the margins have improved continuously in the last five yrs. also pls read the stock story in detail along with the AR. Their AR is pretty good and detailed.

  14. aluwalia says:

    Thank you Aceji for your post.
    But how this small company can cope with Smart MNCs in providing smart meters?
    Nowadays, wireless smart meters being used to connect to smart grids.

  15. viping says:

    ace ji, markets have given a big thumbs up to the stock with 20% UC.. .especially in this kind of markets.

  16. Fundamentally looks an attractive buy and thanks for the detailed report on this company.

  17. saurabh says:

    hi ace what do u make of the current market correction?do u think it will end soon or are we in bear market ?

    • if one focuses too much on broader markets then one can never make winning choices. we invest in stocks and not indicies and till the markets are not crashing in a hurry, the quality stocks keep growing. I have always maintained this view and we have seen far too may evidences that corroborate this theory.

      • Saurabh says:

        U say markets not crashing in a hurry ..if this is not in an hurry then can u tell me what is ?small cap index down almost 42% ..if I’m right and what ever little understanding I have of technicals it has broken a strong support already ..and now nifty it self in corrective mode

        • i said that in a context…. i dont bother about broader indices no matter what as the kind of stock i invest in have their own trajectory…also generically speaking(not sure for how long you have been in markets but…), 40% so-called-crash is normal in small cap especially over a period of 7-8 months. infact there has been many instances when small cap indices have dropped 30-40% in just 2-3 months too…

          • Saurabh says:

            The last correction of 40%+ correction happened in 2011 and before that it was in 2008 …

            • and also before it and let’s not forget numerous 30% corrections that happened in 2-4 month’s timeframe…..but as i said before, i am least interested in broader correction and its normally immaterial until and unless its crashing.

  18. ravverma says:

    hi ace ur view on ethanol sector and view on stock of gulshan poly and bcl industries

  19. johnsjm says:

    Ace ji, whats your view on sequent scientific?

  20. akshay says:

    sir, 35% move in two days for AMTL, especially with 20% move in a day when markets were tanking and there was massive negative sentiment, speaks volume of the confidence followers have in your stocks.

    • cannot comment on price but one should always research and build conviction….also these stock stories are my personal opinion of a company and that should not matter much to anyone else other than me.

  21. ravverma says:

    is pressman more attractive after fall.
    thanks

  22. PK says:

    Hello Ace,
    Any View on Emmessar Bio

  23. Saurabh says:

    Hi sir one doubt I’m having ..I’m a newbie to trading /investing ..can u tell me how u used to analyse charts 2-3 decades ago ..before internet ??

    • does not matter now..does it. also try to stay in fundamentals while on this blog. as mentioned in the past several years, i do not like to emphasize on technicals beyond a point on this blog.

  24. jasmine says:

    sir, i have made a lot of money on the stories that you share on your facebook page. thanks for that.

  25. Parikshit rao says:

    Future prospects of Mayur uniquoters and garware techni fibre. Pls advise.

  26. Gagan says:

    ACE,
    Whats your view on Genus Power & Infra which is an established player in metering?

  27. Khan says:

    Hi Ace,
    what is your view on the following stocks
    1) Kingfa
    2) Yuken
    3) ITL industries

  28. Pravin says:

    Hello Sir,

    What’s your current view on Aimco Pesticides & Freshtrop Fruits? Can you please because from last 4-5 month the stock moving down and when market up in that case it goes in steady state.

    Does any future in this stock or story likely to be not interesting now.Please share your view.

    Regards,
    Pravin

    • i think there’s no point in repeating the same thing again and again for every comment and company so kindly search the blog for my view. but most importantly, if, even after all these years one has to ask other about their own investments then that means, no research has been done and this borrowed conviction syndrome is always dangerous.

  29. Niraj says:

    Hi Sir,

    If you look at the SHP declared by Sankhya infotech the pledge share holding has increased from .76 CR to 4.11 CR .

    Is this correct?
    Or the correct figures were not displayed earlier due to technical errors ?
    Please advice

  30. Saurabh says:

    Hi sir ..I’m planning to make solid portfolio for the next 3-4 years from the stocks mentioned here ..following are my choices
    Prima plastics vidhi dye rajoo engineers sankhya and aimco..any change in views regarding these

  31. Suneetha says:

    Please share your view on Meera Industries. Thank you

  32. Manoj says:

    Hi Ace
    Kindly provide your views on Piramal enterprises and HDFC AMC.
    Thanks

  33. prpu2810 says:

    Dear Ace, any views on VARDHMAN ACRYLICS please. Thank you.,

  34. dishankk says:

    Hello Mr.Ace, would love to know your view on Kellton Tech solutions & Sree Rayalaseema hi-strength hypo.

  35. ravverma says:

    hi ace ur view on archit organosys

  36. Kannu says:

    Ur view on Ballarpur Industries.

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