The Reserve Bank of India (RBI) governor Raghuram Rajan widely disappointed markets by cutting repo rate by just 25 basis points to 7.25%. Most analysts termed the rate cut a non-event, with the broader consenus being that 50 basis points cut was warranted. Lead by fall in Bank Index today, Sensex and Nifty are down by more than 1% each.
1. Company has posted excellent set of numbers in its last quarter compared to peer group companies. It has substantially gained market share in the industry with growing popularity of its brand.
2. The company has a strong dealer network and the management has guided that company would be expanding its dealer network in rural India by adding more dealers in future. In addition, the company is also looking for opportunities to expand in new geographies in south.
3. Company has doubled its capacity in last couple of years and company’s manufacturing plants are strategically located, this provides logistic advantage and helps company to cover more customers and ease the logistics problems by reducing transit time and ensuring regular supply of its products to its dealers.
4. Management has taken various initiative (capacity expansion, entry into new geographies, launch of new products in different categories) to drive growth and is capable enough to deploy the capital efficiently to achieve higher rate of returns.
5. Company has paid regular dividends to its share holders and dividend payouts have increased every year since last 7 years. Moreover, company is a debt free company, hence fundamentals are strong and financial risk is not a concern.
6. Recent initiatives taken by management is expected to augur well for company's growth during next 4 to 6 quarters. Company has delivered healthy top line and bottom line growth in past and expected to grow its revenue above 20% CAGR in coming years with operating margins of 18%.
7. On valuations front, stock is reasonably priced considering FY-16 earning estimates and currently trading at forward PE multiple of 19 which looks discounted compared to peer group companies. As per our views, company offers good investment opportunity with upside potential of 40% - 55% in period of 12 to 18 months.
We keep on updating our subscribers on our past recommendation suggesting them whether to hold / buy or sell stocks on the basis of company's performance and future outlook.
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Team - Saral Gyan.