STOCK WATCH
On the face of it, results of IFB Agro Industries (60.00) doesn’t look encouraging for the March quarter. But actually it has posted terrific result. The OPM shot up to 19% compare to 4% last year on back of lower raw material and operating cost. Hence its PBIDT increased by 170% to 8.40 cr, but due to extraordinary expense its NP declined by 25% to 1.50 cr. For the entire FY07, if we exclude the extraordinary expense of 11.70 cr (i.e. depreciation charge for earlier years) the NP works out to 14.50 cr on net sales of 176 cr. This translates into EPS of 19 Rs on equity of 7.70 cr. Against this scrip is trading extremely cheap at CMP of 63 Rs with a market cap of less than 50 cr. Assuming a conservative OPM of 8~9% and after making highest tax provisioning for FY08, it may report sales of 200 cr and PAT of 10 cr. i.e. EPS of 13 Rs on current equity. Scrip may hit a century with non stop upper circuits. Catch it if you can.
For FY07 Pitti Laminations (85.00) has reported an all time high sales of 15,447 MT of stamping and laminations. Sales jumped up 75% to 148 cr whereas NP shot up by 50% to 10 cr registering an EPS of 11 Rs on equity of 9.21 cr. Company has recently expanded its capacity to 25,000 MT, so for FY08 it will make sales of more than 20,000 MT i.e. at least 30% growth in volume terms. Besides it is implementing a forward integration project for fabrication of steel stator bodies, machining of stator bodies and dropping of assembled stator core into the stator body which will enhance its margin post completion. Accordingly for FY08 it is expected to clock a turnover of 200 cr and PAT of 13.50 cr. This translates into EPS of 15 Rs on current equity. At a reasonable discounting by 12x times scrip may touch 120/- Rs in medium term. A good bet for short to medium term.
The result of Winsome Textiles (40.00) is not as bad as it appears to be. Yes, for the March quarter, margins have come down due to various factors like lower yarn prices, rupee appreciation, increase in raw material cost etc. Still it reported a decent OPM of 10% against 15~16% in the preceding quarters. But importantly, because of huge deferred tax provisioning, it reported a net loss of 2.95 cr. For the full year sales grew marginally by 5% 140 cr, but on the back of improved margins its PBT zoomed up 125% to 11.25 cr. However company made a huge deferred tax provisioning of 4.40 cr (i.e. 40% of PBT) for which PAT increased by only 50% to 6.80 cr. This led to an EPS of around 12 Rs on equity of 5.90 cr. As high cotton prices and lower yarn prices being temporary phenomena, we expect the situation to improve in future. Moreover company is implementing modernization and expansion project and hence may report sales of 175 cr and NP of 6 cr on a conservative basis. i.e. EPS of 10 Rs on current equity.
Most of the retail investors are selling National Steel (23.50) as it has posted a 50% decline in its net profit for the March quarter. But one shouldnt evaluate the company by just one quarter nos. On the full year basis its topline as well as PBT were flat at 1920 cr and 32.50 cr respectively. However, due to higher tax provisioning NP declined by 10% to 20 cr thereby registering an EPS of more than 6 Rs on equity of 32.60 cr. In near future, company intends to diversify further to manufacture galvalume and other products like aluminium, zinc, alloy coating etc. For this it has an capex plan of 75 cr for FY08 under which it will add new capacity to produce 1,50,000 tonne of galvalume and also increase the pre-painted galvanized steel capacity by 20000 tonne. Ironically, a RUCHI group company having a capacity of 2,10,000 tonnes of galvanized steel, 2,40,000 tonne of cold roll steel and 80,000 tonne of colour coated line is available at an enterprise value of less than 300 cr. Besides, it has reserves of more than 150 cr ie book value of 55 Rs. Despite company having low profit margin and gives no dividend, it’s a value buy.
For FY07 Pitti Laminations (85.00) has reported an all time high sales of 15,447 MT of stamping and laminations. Sales jumped up 75% to 148 cr whereas NP shot up by 50% to 10 cr registering an EPS of 11 Rs on equity of 9.21 cr. Company has recently expanded its capacity to 25,000 MT, so for FY08 it will make sales of more than 20,000 MT i.e. at least 30% growth in volume terms. Besides it is implementing a forward integration project for fabrication of steel stator bodies, machining of stator bodies and dropping of assembled stator core into the stator body which will enhance its margin post completion. Accordingly for FY08 it is expected to clock a turnover of 200 cr and PAT of 13.50 cr. This translates into EPS of 15 Rs on current equity. At a reasonable discounting by 12x times scrip may touch 120/- Rs in medium term. A good bet for short to medium term.
The result of Winsome Textiles (40.00) is not as bad as it appears to be. Yes, for the March quarter, margins have come down due to various factors like lower yarn prices, rupee appreciation, increase in raw material cost etc. Still it reported a decent OPM of 10% against 15~16% in the preceding quarters. But importantly, because of huge deferred tax provisioning, it reported a net loss of 2.95 cr. For the full year sales grew marginally by 5% 140 cr, but on the back of improved margins its PBT zoomed up 125% to 11.25 cr. However company made a huge deferred tax provisioning of 4.40 cr (i.e. 40% of PBT) for which PAT increased by only 50% to 6.80 cr. This led to an EPS of around 12 Rs on equity of 5.90 cr. As high cotton prices and lower yarn prices being temporary phenomena, we expect the situation to improve in future. Moreover company is implementing modernization and expansion project and hence may report sales of 175 cr and NP of 6 cr on a conservative basis. i.e. EPS of 10 Rs on current equity.
Most of the retail investors are selling National Steel (23.50) as it has posted a 50% decline in its net profit for the March quarter. But one shouldnt evaluate the company by just one quarter nos. On the full year basis its topline as well as PBT were flat at 1920 cr and 32.50 cr respectively. However, due to higher tax provisioning NP declined by 10% to 20 cr thereby registering an EPS of more than 6 Rs on equity of 32.60 cr. In near future, company intends to diversify further to manufacture galvalume and other products like aluminium, zinc, alloy coating etc. For this it has an capex plan of 75 cr for FY08 under which it will add new capacity to produce 1,50,000 tonne of galvalume and also increase the pre-painted galvanized steel capacity by 20000 tonne. Ironically, a RUCHI group company having a capacity of 2,10,000 tonnes of galvanized steel, 2,40,000 tonne of cold roll steel and 80,000 tonne of colour coated line is available at an enterprise value of less than 300 cr. Besides, it has reserves of more than 150 cr ie book value of 55 Rs. Despite company having low profit margin and gives no dividend, it’s a value buy.
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