APM Industries - Rs.36.00

Established in 1974, APM Industries Ltd. (APM) belongs to the Rajgarhia Group with diverse interests in textiles, refractories, papers, finance, alumina products etc. The company is led by Mr. R K Rajgarhia, chairman & managing director and the promoters have proved their mettle by making Orient Abrasives, a group company, as India’s largest manufacturer of Calcined and Fused Alumina products. APM, too, grown constantly since inception and is today a well-known name in the textile yarn industry. It is mainly engaged in manufacturing and marketing of synthetic and blended yarn like polyester/viscose, acrylic yarn etc. It sells its yarn under the brand ‘Orient Syntex’. APM’s manufacturing facility is located at Bhiwadi in Alwar district of Rajasthan with its head office in Kolkata and corporate office in Delhi. Thus it has presence in North, West and the East.

From a modest beginning with few spindles and limited capacity, APM today has an installed capacity of over 40,000 spindles. Due to its constant modernisation and increased productivity, its capacity was raised from 37952 to 41984 spindles in FY04, to 43136 spindles in FY05. Currently, APM is implementing a capex plan under the Technology Upgradation Fund Scheme (TUFS), wherein the spindlage will stand enhanced to 48320 spindles within this fiscal. The company also has a captive power plant of around 5 MW but due to the rise in fuel oil price it alternatively buys power from Rajasthan State Electricity Board. Recently, the company entered the export market in a small way but intends to increase its presence in coming years. For the domestic market, it has been regularly developing new products for exporters of fabrics, furnishings and fancy yarn.

Fundamentally, the company is quite strong and has not diluted equity since more than a decade. On a tiny equity of Rs.4.32 cr., it has huge reserves of Rs.28 cr. leading to a whopping book value of Rs.75. Its gross block stands at Rs.92 cr. against which it provides depreciation of Rs.5.50 cr. As on 31st March’06, its total debt was Rs.45 cr. whereas it had an inventory of Rs.20 cr. For so many years, the promoters have maintained their stake above 66%, which is a good indication. For the six months ending 30th September’06, sales grew marginally by 6% to Rs.76 cr. but net profit zoomed 90% to Rs.2.90 cr. on the back of lower interest cost. This means it already clocked an EPS of Rs.7 for the first half. However on a conservative note, APM may end FY07 with a turnover of Rs.155 cr. and net profit of Rs.4.25 cr. Hence with an expected EPS of Rs.10 and CEPS of Rs.23, the scrip is trading extremely cheap even in this all time high market. Although the dividend payout is low, the company has been paying uninterrupted dividend since the last 12 years. A pure bargain hunt, this scrip is bound to double in a 12-15 months.