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[Lavanay]

CMP: 813
Buy for a target of 1200 in 9 months

Alphageo India Ltd is India’s only seismic company in private sector engaged in 3D and 2D seismics.

Over the last three years, India has witnessed strong GDP growth and the trend is
expected to continue over the next few years. Strong economic growth is followed
by a robust growth in demand for energy. India derives almost 30% of its primary
energy requirement from crude oil. However, the maximum available crude oil
reserves in India are estimated to be around 5.7bn barrels, comprising 0.5% of the
global reserves. This is extremely low considering India shelters around 16% of the
world population.

At the current rate of production, crude oil reserves could last only for 19.5 years
as against 40 years globally. The current per capita consumption of the Indian
population stands at 180kgs, which is less than of the world average of 550kgs.
Currently, India imports more than 75% of its annual crude oil demand. With
growing energy needs, investment in search for new oil reserves is a must.
Through NELP rounds the government has made conscious efforts to draw
investments from the private sector in the Indian E&P space. In the first six
rounds, commitments of US$12bn were made and the seventh round is due in
April 2008. These investments will spur up demand for both 2-D and 3-D seismic
surveys. The biggest beneficiary would be AGIL, since it is the largest private
sector player in onshore seismic survey.


Capacity expansion to meet increased demand

The channel count for AGIL is pegged at 7,500 currently, which the company plans
to increase to 10,000 over one year. The outlay for the expansion would be about
Rs150mn. If needed the company might add another crew, which would involve a
capex of Rs120mn-250mn depending on the nature of the survey (2-D or 3-D).
The company expects to source the capex through a mix of debt and internal
accruals.

Robust financial performance
Over the last five years, AGIL has witnessed a CAGR of 53.2% in revenues and
58.5% in profits. With increasing realisations for seismic survey and the rising
contribution of 3-D seismic survey to the revenues, EBIDTA margins have
expanded from 28.6% in FY05 to 46.9% in FY07. We expect the contribution of the
3-D segment in revenues to increase from 43.7% in FY06 to 91.6% in FY07. ROCE
has improved from 15.8% in FY06 to 27.4% in FY07. We expect it to improve
further to 48.3% in FY09. With debt-equity ratio at 1.0x, the company can expand
further if the strong demand persists.

[dudette]

On Dec 19, 2007, India Infoline has given a call on Alphageo with a target of 916..  Great going!

Here are few lines from their report:

AGIL’s order book was at Rs1.1bn as on April 30, 2007 and is currently at Rs850mn, 1.6x FY07 revenues. Almost 100% of the current order book is for 3-D seismic survey. With huge investments planned in the E&P space, the order book is expected to swell. Hence, we expect AGIL’s revenues to register 52.1% CAGR between FY07 and FY09.