Tuesday, March 19, 2013
We would like to inform you that Hidden Gem - Mar'13 issue was released on 11th Mar'13 and research report of the company will be shared with all Hidden Gems members during this week. Recent on going market correction is giving a good opportunity to our members to accumulate this stock at CMP.
Few facts about the Company which make it a great investment opportunity for long term investors:
1. Industry to which this company belongs to is expected to grow at a healthy rate of 15% per annum for next 5 - 7 years. Unorganized sector accounts for nearly 60% of the total industry bearing testimony of the growth potential of this sector.
2. Annual sales turnover of the company is more than 6 times to the market cap of the company, market cap to sales is as low as 0.16 where as competitors in peer group with better operating margins is having market cap to sales ratio of 1.03.
3. Promoters have increased their share holding to almost 75% which indicate the confidence of promoters in future prospects of the company. Management has rewarded share holders by paying regular & uninterrupted dividends.
4. Sales turnover of the company has doubled in last 4 years, operating margin was improved from 11 to 13.5 and net profit margin was improved from 1 to 4 during 2008 - 2011 period but later it got impacted due to acquisition of another company which has impacted bottom line of the company.
5. With more than 30 years of experience, company is the pioneer in the business it operates and recent acquisition of a loss making company and turning it around to profitable business within 15 months indicates the professional approach and ability of management to drive their business effectively.
6. Looking at fundamentals, dividend yield of the stock is above 2% and trailing PE of the company is below 6 with price to book value of 0.5 which indicates that there is limited down side risk at CMP, whereas company offers huge upside potential in future to long term investors.
Only concern is debt on the balance sheet (due to acquisition of another company in past) which is almost 2 times the market cap and is a major reason of muted bottom line. But our equity analysts believe that debt could be a concern for short term investors but long term investors who can hold this company for next 2 to 5 years can have a potential multibagger in their portfolio. With professional management behind the company, we expect that this could be a dark horse giving returns of 500% to 1000% in next 3 to 5 years.
Strange! How this can is possible?
Option 1: If company retires its debt by 20-30% in next 3 years (possible as company is making profit year after year even after paying almost 40% of its gross profits as interest on its debt) with increase in sales realisation and decrease in interest rates, company's operating margins will improve going forward and hence the valuations of the company will improve significantly.
Option 2: If management decides to raise funds to retires it debt by issuing warrants or via issuing prefential shares by diluting its equity will help company to improve its profit margins and finally the bottom line.
But as you are aware, high rewards come with high risk. Now if we assume that Industry does not grow with 15% and there could be intensive pressure on margins due to other factors like cheap import from China or increase in raw material prices etc can change the overall scenario.
We are confident that stock have the potential to be a dark horse giving returns of 500% - 1000% in next 3 to 5 years with limited downside risk at CMP. We have considered various important factors like Industry growth potential, past performance of the company, management views for driving business growth and their past track record. Morover, we are positive on the company growth prospects considering results of our primary research work done while interacting with dealers and distributors of the company and also taking feed back on company's product from end user i.e. customers.
Do you own this multibagger small cap stock? Simply subscribe to Hidden Gems annual subscription @ INR 7,500 (12 Hidden Gems issues) to receive complete research report of this company releasing during this week.
On activation of your subscription, you will receive one Hidden Gem stock research report on monthly basis for period of one year. We suggest our members to invest equal capital every month taking SIP route in Hidden Gems which not only help them to take exposure in fundamentally strong small cap stocks but also help them to enter into stocks at right point of time and at right price.
Under Hidden Gems annual subscrption, you will also receive below freebies:
1. Saral Gyan eBook - How to Grow your Savings?
2. Research reports of past 3 Hidden Gems for long term investment
3. Saral Gyan Hidden Gem - Flash Back report - Dec'12 issue
Do not miss on going market correction, its an opportunity to invest in fundamentally strong small cap stocks to reap decent returns in long term. For payment options & facilities, click here.
Avail attractive discounts with our combo packs, click here for details.
Do write to us in case of any queries, we will be delighted to assist you.
Team - Saral Gyan.
Grab Hidden Gem - Mar'13: Potential Multibagger Small Cap
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