GEI Industrial Systems

Background

GEI Industrial Systems Ltd is a leader in Heat Transfer Technology . GEI is currently engaged in design engineering and specialized manufacture of Air‐cooled heat exchangers and Air‐cooled heat condensers in which it has a monopoly. The products manufactured by GEl find application in Power Generations, Oil‐Gas Production, Gas Processing, Oil Petroleum Refining and Petrochemicals.The Company has also moved into design, engineering, manufacturing, installation and commissioning of extended surface heat transfer equipment and systems.

  • Air cooled steam condenser [52%]
  • Air cooled heat exchanger [48%]
  • Finned Tubes
  • EPC projects

Main Products/Segments

  • Air cooled steam condenser [52%]
  • Air cooled heat exchanger [48%]
  • Finned Tubes
  • EPC projects

Main Markets/Customers

The company is the market leader in Air Cooled Heat Exchangers with more than 45% market share in the Oil & Gas sector and more than 70% in Power sector. Exports to over 20 countries, comprising of 6% of the topline.

GEI’s client list includes BHEL, Tata Electric Company, HPCL, ONGC, Bharat Pumps and Compressors, IPCL (Baroda), Reliance Industries, Toyo Engineering, UHDE KTI, Mangalore Refineries, Davy Power Gas, Chemtex, etc.


Bullish Viewpoints

  • GEI is the market leader in air cooled heat  exchangers and condensers. With the scarcity of water in India and the world, more and more power plants are moving to air cooling as opposed to water cooled plants.
  • Huge investments slated in India in the power and oil & gas sector
  • Maintenance cost of Air Cooled units is 25% of those of Water Cooled Systems
  • Very strong order book (stood at Rs.3.5 bn as on March31,2010)
  • In house finned tube manufacturing to reduce operating expenses

Bearish Viewpoints

  • Raw material is aluminium and steel – prices vary sharply and GEI has no control over the raw material
  • Focused mainly on the power sector – any delays or problems in power plant setup may adversely impact the company’s prospects
  • Capital intensive industry – High working capital cycle.
  • No clear idea on GEI Power – GEO Power is a 100% subsidiary of the company. Valuations and financials are not available for GEI Power.

Barriers to entry

  • Industry Contacts and execution experience
  • Capital Intensive business

Interesting Viewpoints

GEI has entered into the EPC business which is a lower margin but higher volume business. With long term investments inevitable in the Indian power sector and seeing the scarcity of water, it is reasonable to expect decent growth in GEI’s business over the next 3-5 years.


Disclosure(s)

Abhishek Basumallick: No Holdings in the Company;