Kaveri Telecom

Kaveri Telecom is one company, which is my personal favourite. Unless and until something really goes wrong with the sector or the management messes things up, this counter will not find a way out of my portfolio. Like a father, in love with his child, I am in love with this stock. Probably because I have seen this stock grow since 2006, when it was a teenager in puberty. And today the company is a man ready to face the world.

I made my first investment into this counter in 2006, when this stock was trading at 45. I saw this stock grow to 250 levels in 2008(when the bubble was about to burst), and fall down to 35 levels(when the world was busy coming to terms with recession). But somehow I knew that this stock had the potential to beat the markets. Simple case of a positive correlation between risk and return. Today, the counter is trading around 110 levels, and the management has informed BSE that it will raise capital for overseas acquisitions by allotting preferential shares. Another sign that the company is on a growth path.

Kaveri Telecom, which is the parent company primarily manufactures telecom products(RF products and Antennas) and provides infrastructure solutions( through Kaveri Infrastructure Limited) to service providers.

Positives

1. Stock is highly undervalued, compared to its peers(trading at an avg PE of 20), trading at a PE of 3.5.
2. The company didn't buckle under pressure during the recession times, which is a sign of robustness.
3. The operating cash flows have consistently improved over the years.
4. Revenues and profits have consistently grown over the years.
5. Kaveri Infrastructure, which provides solutions to telecom service providers, by maintaining and operating the telecom towers, generates a revenue of one lack per tower per month. When last heard from the chairman the company had 100 towers in its portfolio. According to the company there are more than 4000 towers in the country. Possible upside is huge.
6. The company had started to receive defence orders. The margins on the defence orders tend to be very good.
7. The company claims to have the expertise in rolling out 3G products. With the 3G licences already been rolled out, the company gets an opportunity to leverage its R&D spends on 3G.
8. Some Indian broking houses have started showing interest in this counter. Data can be obtained from bseindia.


Risks & Negatives

1. Very small promoter holding of 15%. But there is always a possibility of a buy back.
2. Promoters will have to stretch the balance sheet to fuel expansions. The debt/equity is already greater than 1.
3. Management should provide more insights on its road map in the Annual Reports.


http://www.kavveritelecominfra.com/ktpl/