Our team believe that company has limited downside risk and can reward investors by giving 35-40% returns in time frame of 12-18 months.
Below are some facts and figures which make this company our Value Pick stock for the month of Oct'12.
1. Leadership in Business: Company enjoys its leadership position in the business it operates, recently commissioned new capacity has widened the product basket towards value added products opening new windows of opportunity for the company.
2. Increase in Promoters Share Holding: Promoters of the company are hiking their stake aggressively through open market purchases. In last 1 year, promoters have increased their stake by 1.5% which shows confidence of management to achieve decent revenue and profitability in coming quarters.
3. Better Earning visibility: Company has delivered excellent numbers in top line and bottom line during first half of FY 2012-13, with increase in capacity utilization by almost 15% during recent quarter and steadily firming up order book, we expect company to deliver strong growth in coming quarters.
4. Increase in Dividend Payout: At stock CMP, dividend yield is above 2%, dividend payout for FY 2011-12 was reduced to half compared to previous 2 financial years. Less dividend payout was on account of capacity expansion and increase in raw material prices. We are sure that company dividend payout for current financial year will get doubled bringing dividend yield above 4% in next 12 months. This adds further scope of price appreciation in stock at CMP.
5. Attractive Valuations: At current market price, price to book value is 1.1. Currently, the scrip is trading at 5.3x FY 2012-13 and 3.7x FY 2013-14 estimated earnings which make it an attractive and safe bet. Moreover, increase in operating and profit margins of the company makes it an excellent investment opportunity.
Our equity analysts believe that the company is all set to deliver strong numbers in terms of growth and profitability in FY 2012-13. Stock is trading at attractive valuations and can give decent gains on investments over a period of 12 to 18 months.
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Note: Hidden Gem - Oct 2012 will be out in next 48 hours. Be ready to grab it!