Pacific Costspin - Rs.10.50

Established in 1994, Pacific Cotspin Ltd (PCL) was promoted by the Mehras of Kolkata who have proven track record of more than 30 years in the field. It is a 100% Export Oriented Unit (EOU) manufacturing 100% cotton combed and carded waxed yarn. The group’s other activities include manufacturing of quality mercerized tubular knit fabrics, narrow woven elastic trimmings etc. This govt. recognized star export house enjoys leadership position in exports of coarse and medium yarn i.e. ranging from 20’s to 60’s count. It also produces contamination free yarns, organic cotton yarn, compact yarn, fancy yarns etc which are well accepted in international market. Its products are mainly exported to South Korea, Bangladesh, Srilanka, Tunisia etc.

PCL’s strength lies in its ultra modern state-of-the-art manufacturing facility in West Bengal. It is centrally air-conditioned and equipped with a fully automatic and computerized spinning system. The latest generation hi-tech machineries have been imported from global manufacturers from Switzerland, Germany and Japan. It has also installed Uster Lab Equipments to monitor quality at each stage of production. Presently, the installed capacity of the plant is 30,000 spindles with a daily production capacity of 13 tonnes of yarn. But to encash on the growing opportunities due to the dismantling of quotas for Indian textile exports to USA and EU, the company is implementing a huge capex plan of Rs.80 cr. to increase its capacity by 25,200 spindles. This will almost double its production capacity.

To fund its aggressive expansion, the promoters are bringing in Rs.10 cr. by a preferential allotment of Rs.58 lakh shares @ Rs.17 per share to themselves. Another Rs.15 cr. is to be raised via 1:2 right issue later. Notably, the company is continuously improving its operational efficiency, productivity and cost control, which alone can improve its bottom- line in a highly competitive environment. For FY06, it is estimated to clock a turnover of Rs.150 cr. and NP of Rs.6 cr. which translates into EPS of Rs.2.60 on its current equity of Rs.23.15 cr. assuming a 20% growth for FY07, the company can register sales of Rs.180 cr. and NP of Rs.7.50. This works out to an EPS of Rs.2 on its fully-diluted equity of Rs.39.40 cr. Hence investors are strongly recommended to buy it at current levels with a price target of Rs.16~18 (i.e. 60% appreciation) in 15~18 months.