Sunday, June 24, 2012
Our equity analysts have explored one of the engineering company engaged in the business of manufacturing Vacuum Systems, Evaporator Systems and Air Pollution control equipments. This company offers value for money and is all set to be recommended as Hidden Gem stock of the month.
The company specializes in supplying equipments to various industries like Power, Fertilizers, Chemicals and Bulk Drugs Industries. They also cater to the needs of Refineries, Sugar and Food industries, Pulp and Paper and others.
In an effort to provide its customers with world class systems, company has installed one of the world’s largest state of the art research and test facility at its plant in Ahmedabad. With this test facility, company has the ability to simulate operating conditions and analyze all anticipated variables that may be encountered during actual operating conditions. It helps the company in optimizing the performance of its vacuum and evaporator systems.
In the long run, the company can grow only as fast as it delivers return on equity and in the case of this company, it has consistently been able to generate more than 20% return on shareholders wealth, without resorting to excessive debt.
The most striking feature of the company is its valuations. We find the valuations extremely low at 3 times FY 12 (E) earnings, 4 times average earnings for the past 5 years, 0.62 times the book value and a dividend yield of 3.8%.
The legendary Walter Schloss checked the stock on the following 4 criteria to determine if the stock merits a place in the portfolio:
• Zero or very low debt equity ratio
• High Promoter holding
• Dividend yield of at least 3%
• Stock purchase price lower than book value
This company satisfies 3 criteria, except for high promoter holding. However, the promoters have been increasing their stake with open market purchases which demonstrates their confidence in future prospects and low valuations of the company at current market price.
Hidden Gems - June 2012 research report will be released shortly and will be shared with all Hidden Gems subscribers.
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Releasing Soon: Hidden Gem - June 2012