Nitin Fire is one of the largest fire protection service providers in the organized sector in India. The company installs and maintains fire protection and security equipment in facilities such as malls, offices, plants, etc. The nature of this business is sticky.
With projected sales of 243,000 cylinders in FY2009E, the company is set to become one of the largest producers of seamless cylinders
(primarily for CNG) from India. With a global market demand of close to 5 mn cylinders, the company has current capacity of about 0.25 mn and plans to double it by FY2009-end.
Operating margins are sustainable at ~18% underpinned by an evolving business mix towards higher-realization CNG cylinder exports (66% of incremental growth over FY2008-FY2010E).
Goldman Sachs has reiterated BUY on Nitin Fire and a 12-month DCF-based target price of Rs 763.
DalalStreet Analyst View:If you already own the stock, please continue to HOLD. Exposure can be taken on market correction, what we mean is don’t rush to BUY the stock.
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