Eastern Silks - Rs175.00

Incorporated in 1946, Eastern Silks is the flagship company of Kolkatta based Eastern Group and is a leading manufacturer and exporter of silk goods. It exports high end value added products like Silk Fabrics & Made-ups, Silk yarn, scarves, Belts & other accessories. It also exports premium fashion fabrics and knitted garments. The company is recognized as a ‘Golden Star’ Trading House by the Government of India. It exports 40 per cent of its total production to the US and about 54 per cent to Europe and the CIS countries. It has won various prestigious awards from The Silk Promotion Council, the Central Silk Board etc.

The company has two weaving and processing plants in Karnataka and a twisting plant at the Falta export processing zone in West Bengal with a total production capacity of about 300 tonnes of silk fabric. It also has a modern processing unit in Noida near Delhi and another unit for leather products in Calcutta. Recently, the company has set up Rs60 cr. state-of-the-art silk fabric weaving unit at Anekal near Bangalore. It plans to add hi-tech Printing & Embroidery unit as well. Going forward, it intends to invest Rs100 cr. for further expansion and upgradation of existing facilities. Moreover, it has formed a joint venture with Chinese companies in Honkong to put up a silk yarn spinning unit in the Quanshi province in Central China. The entire 100 tonnes production of this venture will be consumed by Eastern Silks for its weaving operations in India thereby ensuring itself of good quality, economical & regular supply of raw material. As a move towards consolidation, the company has approved the Scheme of Amalgamation of Eastern Jingying Ltd. and Sstella Silk Ltd. with itself.

Currently, the company is concentrating to increase its exports and has bagged good export orders through exhibitions and creating new clients in Europe. For the six months ending 30th Sept. 2004 its sales increased by 21 per cent to Rs156 cr. and NP jumped 41 per cent to Rs12.85 cr. It has huge reserves on its small equity of Rs7.15 cr. and the book value of the share stands around Rs150. Given its expansion, it can register a turnover of Rs330 cr. and NP of Rs25 cr. posting an EPS of Rs35 for FY05. At CMP, the scrip is discounts this earning only 5 times and is available reasonably cheap. Investors are advised to accumulate it at every dip with a price target of Rs280 i.e. 65 per cent appreciation over the next 12~15 months.