SEL Manufacturing. That’s the name of the company which I think is a wonderful investment opportunity at the current price levels.
Current price: Rs 72.55
Price target: Rs 350
Time period: 2 years
This one was a very easy pick. A screaming buy. Lets look at the financials so that we have an idea as to what the company is performing like
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 CAGR
Net Sales 64.31 121.56 188.84 366.83 606.53 75%
Profit after tax 3.33 14.64 23.60 44.85 54.78 101%
No of shares (cr) 0.02 0.98 0.98 1.52 1.72
EPS (Rs) 168.72 14.92 24.04 29.48 31.91
Book value (Rs) 4,682.52 110.86 135 142.81 183.88
Reserves (in cr) 92.33 99.01 122.71 202.08 298.49
During the period FY04 to FY09 sales have grown from Rs 64.31 crores to Rs 606.53 crores which is approximately a ten fold increase or a 75% CAGR. Correspondingly the PAT (Profit after tax) has also grown from Rs 3.33 crores in FY05 to Rs 54.78 crores in FY09 which is again a CAGR of 101%. However the EPS has not increase in that proportion. That is because the equity base has been expanded. And the reason is simple - for expansion.
There is more to it. During current year FY10 sales are Rs 471.91 crores and net profit Rs 38.41 crores. EPS is Rs 20.16. Just look at the FY09 numbers again and you will understand what stupendous growth this company is showing. Assuming the H1 FY10 performance is maintained during H2 FY10 we would be looking at an EPS of close to Rs 40. At current market price of Rs 72.55 this translates into a PE multiple of less than 2.
Still not convinced. Let me give you some more pointers. Exim bank has a 5% stake in the company since July 2007. (Check this link)
So what are the concerns. It has an ever growing debt in its balance sheet. At the end of FY09 the overalll debt stood at Rs 623.71 crores. Interest payment of Rs 37.77 crores. Highly leveraged company but considered the growth rate it seems quite justified.
We have seen a lot of companies with high debt but this one is different. Its a company with phenomenal growth rate. Unless ofcourse the numbers are fudged. Thats a caveat.
However if the growth is true which I believe is the case (remember Exim bank is a 5% stake holder) then we are looking at a phenomenal company at almost throwaway prices. Limited downside and upside on a conservative basis of atleast 5 times.
Think about it.
Thursday, December 17, 2009
Wednesday, December 2, 2009
Sumeet Industries - multibagger
While browing through the results of some companies I came across this interesting company called Sumeet industries. Out of the glare and glitz of the broader market this company is expanding massively. And the good thing is that its expansion is likely to be completed by the end of 3rd quarter. Thus the results for 3rd and 4th quarter of FY10 is going to be substantially higher.
Current price : Rs 14.98
Target price : Rs 75
Period of holding : 1 year
Lets see what the company is trying to do.
Sumeet industries is a manufacturer and exporter of polyester and polypropelene yarn and woven fabric. Key financial data is shown in the table below.
(Amount in crores)
Particulars 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 CAGR
Sales 157.79 128.51 112.49 82.19 34.90 34.24 36%
PAT 3.82 3.67 3.36 0.85 0.90 0.82 36%
PAT % 2% 3% 3% 1% 3% 2%
EPS 0.95 1.82 1.93 0.49 0.78 0.7
No of shares 3.99 2.51 2.24 2.24 1.66 1.66
(in crores)
During the period FY04 to FY09 sales have grown from Rs 34.24 crores to approx Rs 157.79 crores which is approximately a five fold increase or a 36% CAGR. Correspondingly the PAT (Profit after tax) has also grown from Rs 81.56 lacs in FY04 to Rs 3.81 crores in FY09 which is again a CAGR of 36%. However the EPS has not increase in that proportion. That is because the equity base has been expanded. And the reason is simple - for expansion.
It has setup fully imported C.P. PLANT of 100000 Tons per annum capacity and this has started operations from the 1st of July 2009. It is also setting up a 10’ lines of Polyester POY / FDY Spinning Plant with annual installed capacity of 48300 Tons per annum as Expansion Cum Backward Integration Project. This is expected to be operational by the end of 3rd quarter FY10. You must be wondering what do these expansion mean.
a) Using the CP plant pet chips which were earlier bought from the market will be produced within the company which will reduce cost substantially and will also be very much competitive and the company will be in a position to compete in the market in its price strategy with its peer group.
b) The polyester capacity that the company currently has is 12500 Tons per annum. So the expansion means a fourfold increase in capacity.
So atleast a fourfold increase in profits is what we can safely assume only from the capacity expansion. Also as per last financial years accounts raw materials consumed is approx 61% of sales. Thus even if we assume a 10% decrease in cost due to CP plant the net profits are likely to increase quite substantially. Even on a conservative basis its truly a 5 bagger atleast in the next 12 months.
Current price : Rs 14.98
Target price : Rs 75
Period of holding : 1 year
Lets see what the company is trying to do.
Sumeet industries is a manufacturer and exporter of polyester and polypropelene yarn and woven fabric. Key financial data is shown in the table below.
(Amount in crores)
Particulars 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 CAGR
Sales 157.79 128.51 112.49 82.19 34.90 34.24 36%
PAT 3.82 3.67 3.36 0.85 0.90 0.82 36%
PAT % 2% 3% 3% 1% 3% 2%
EPS 0.95 1.82 1.93 0.49 0.78 0.7
No of shares 3.99 2.51 2.24 2.24 1.66 1.66
(in crores)
During the period FY04 to FY09 sales have grown from Rs 34.24 crores to approx Rs 157.79 crores which is approximately a five fold increase or a 36% CAGR. Correspondingly the PAT (Profit after tax) has also grown from Rs 81.56 lacs in FY04 to Rs 3.81 crores in FY09 which is again a CAGR of 36%. However the EPS has not increase in that proportion. That is because the equity base has been expanded. And the reason is simple - for expansion.
It has setup fully imported C.P. PLANT of 100000 Tons per annum capacity and this has started operations from the 1st of July 2009. It is also setting up a 10’ lines of Polyester POY / FDY Spinning Plant with annual installed capacity of 48300 Tons per annum as Expansion Cum Backward Integration Project. This is expected to be operational by the end of 3rd quarter FY10. You must be wondering what do these expansion mean.
a) Using the CP plant pet chips which were earlier bought from the market will be produced within the company which will reduce cost substantially and will also be very much competitive and the company will be in a position to compete in the market in its price strategy with its peer group.
b) The polyester capacity that the company currently has is 12500 Tons per annum. So the expansion means a fourfold increase in capacity.
So atleast a fourfold increase in profits is what we can safely assume only from the capacity expansion. Also as per last financial years accounts raw materials consumed is approx 61% of sales. Thus even if we assume a 10% decrease in cost due to CP plant the net profits are likely to increase quite substantially. Even on a conservative basis its truly a 5 bagger atleast in the next 12 months.
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