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Sowmya Sundar

EXPOSURES can be considered in the stock of Numeric Power Systems (Numeric) at Rs 103. Trading at four times trailing 12-month per share earnings, the stock has potential for appreciation in the medium term.

Numeric makes uninterrupted power systems (UPS) for office and residential use. The UPS is essential in a computerised environment or for any application that requires uninterrupted power supply.

In IT, BPO and critical machining applications, power failure, for even a minute, could lead to substantial business loss.

Given the frequent power failure and voltage fluctuations, the demand for UPS could increase as India transforms itself into a manufacturing and outsourcing hub.

The target customers can be divided into five segments — IT, software, health care, BPO; finance and insurance; government, small office home office (SOHO) and small and medium enterprises (SME). It has a wide range of products from 500 VA to 4,800 kVA catering to these segments.

Numeric is a leading player with a 16 per cent overall market share.

A leader in the fast-growing BPO, IT and call centre segment with a 65 per cent market share in these segments, Numeric is well-placed to take advantage of the opportunity.

The vast scope for computerisation and modernisation of public sector banks and the booming insurance business could also aid revenue growth for Numeric. Its customers include Infosys, Wipro, Citibank and ICICI.

The second growth area is the SOHO and SME segment that constitutes 40 per cent of the total UPS market (estimated at Rs 1,200 crore).

This segment is dominated by the unorganised sector and Numeric has a small presence (3-4 per cent) here. It is aggressively penetrating this segment. It has set up 1,000 channel partners to target this segment.

The third growth area is exports. Numeric has set up a manufacturing plant in Sri Lanka and plans to expand operations in Africa and the Asia-Pacific countries.

It is expanding its product range and sources high-end products from its French partner, Merlin Gerin. Merlin also sources some products from Numeric for sales abroad. This could open up fresh avenues for growth.

The recently set up joint venture with Merlin could enhance the scope of operations and synergy between the two partners.

Potential for gains exist, given the consistent dividend payment record and the scope for revenue and profit growth.

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