Sturdy Industries ( BSE code - 530611)

The investment idea for February is a company called Sturdy Industries Limited. A stock with market cap of around 20 crores. Its part of the Chemiplast group of companies which deals in Plastics, Aluminium and building materials. From the look of it the businesses that it is into looks very unexciting and you are actually right if you think so. So let me lead you what I found interesting.

I am sure all of you must have heard of micro irrigation and the only company in India which is into micro irrigation, which is Jain irrigation. All of you will agree that micro irrigation is a great idea and you would like to hold shares in Jain irrigation. However, you do not do so because of the fact that its shares are overpriced. The PE of jain irrigation is at around 33.

Sturdy industries is in the same business or is going to be in it. We dont know much about it because this business is with its sgroup companies whereas what we see results for is platics, aluminium etc. However, the company now seems to be taking serious attempt at expansion of its micro irrigation business alongwith other businesses. Along with merger of the businesses it is also planning to expand its micro irrigation capacity from 13,000 TPA in 2008-09 to 43,000 TPA in 2011 by setting up a plant capacity of 30,000 MTPA in Baddi.

This is apart from the other expansions that the company is envisaging. Since there is no pint in copying what is already there on the internet I am putting in links for couple of pages which you should read to understand what we are talking about.

Website - Sturdy Industries
Chairman's speech - FY200809

And to top it the various announcements on BSE could also be an interesting read. I am sure once you have done all of this you will be convinced about the power of this idea.

There is really no point in looking at what the financial position except the fact that during the 9 months ended 31st December 2009 the company made a PAT of Rs 4.45 crores translating into an EPS of 1.1. That means a PE of around 4.5. Yes, thats how undervalued this stock is. And mind you that the EPS is still to be annualised.

The other good thing about the investment is that the promoter's holding as on 31st December 2009 is 43% and it is only likely to go up with the merger of the group companies which are private limited companies.

Its a multimulti bagger and hence no targets. And if you do make money remember you heard it first on my blog because surprisingly nobody seems to be tracking this one. Do let me know if I am wrong in what I am thinking.

NB: My work keeps me very busy these days and hence I might not be able to reply to you messages promptly but would still appreciate all of you commenting on my posts.

Happy investing.