We are pleased to inform you that our Hidden Gem stock of February 2016 - Zenith Fibres Ltd (BSE Code: 514266) which was released on 13th Mar'16 is giving as on date returns of 100% to our Hidden Gems members in period of 7 months. Our team suggested Buy on Zenith Fibres Ltd at price of Rs. 103.60 on 13 Mar'16 with a target price of Rs. 210. We are glad to inform our readers that stock has almost achieved our target price within 7 months, Zenith Fibres stock made its 52 week high of Rs. 209.85 today and currently trading at Rs. 206 giving absolute returns of 99% to our Hidden Gems members in period of 7 months.
In June 2016 quarter, net profit of Zenith Fibres rose 69.57% to Rs 2.34 crore as against Rs 1.38 crore during the previous quarter ended June 2015. Sales rose 11.70% to Rs 16.23 crore in the quarter ended June 2016 as against Rs 14.53 crore during the previous quarter ended June 2015. We suggest our members to continue to hold the stock.
Below is the summary of Zenith Fibres Ltd shared by our team under Hidden Gem stock of Feb'16 released on 13th March 2016.
Note: This report is shared only for the purpose of information and not an investment advice. Kindly carry out your own due diligence in case of investment in Zenith Fibres Ltd.
Zenith Fibres Limited incorporated in the year 1989 and promoted by Aaekay Rungta Group of Kolkata, is the only company in India manufacturing virtually the entire range of Polypropylene Staple Fibre (PPSF) from very fine to coarse Denier.
2. Recent Developments:
Unlike Europe and USA, the technical textiles industry in India is still at a nascent stage and is widely fragmented. This leads to lower production and high cost. Product knowledge and expertise too are available to a limited extent.
Investment in latest technology for production of nonwoven products is essential for the sector to chart its own course. Till that time, the industry will have to follow the model set up by European and US producers.
The use of geo textiles in major infrastructure projects need policy guidelines, regulations and standardization, which makes use of polypropylene fibres mandatory in applications where sturdy and tough fabrics are needed for particular applications in railways, roads, etc.
i) Man-made fibre industry is well poised for reasonable growth despite slow down in European and certain other markets. Polypropylene (PP) fibre industry was not growing at the same rate as Polyester fibre because many sectors where PP should be used is replaced by Polyester because of lower prices. However, certain novel uses have been found in some sectors where use of PP fibre cannot be replaced and this augurs well for PP fibre industry and hence expected to show similar growth as other fibres.
ii) The general outlook for the industry is good, several sectors have been identified where use of PP fibre will be essential. Besides traditional need in various infrastructure sector its use has started in fabrics used for soil erosion and collection of ashes from power plants.
vii) Management has rewarded shareholders by paying regular dividend since 13 years. For last financial year, company has paid dividend of Rs. 2.50 per share and dividend yield at current market price is 2.42%. Company has been maintaining healthy dividend payout of 19.27% of its profits. With expected increase in revenue and profitability in coming years, we expect dividend payout to gradually increase
viii) As per our estimates, Zenith Fibres can deliver PAT of 8.95 crores for full financial year 2016-17, annualized EPS of Rs 20.25 with forward P/E ratio of 5.1X for FY16-17. Company’s valuation looks attractive with high margin of safety and offer good investment opportunity for long term investors.
ix) On equity of Rs. 4.42 crore, the estimated annualized EPS for FY 16-17 works out to Rs. 20.25 and the Book Value per share is Rs. 89.19. At current market price of Rs. 103.60, stock price to book value is 1.16.
Considering company’s increased focus on developing new grades of Polypropylene fibres for critical and new applications which cannot be replaced by polyester or other man-made fibre, attractive valuations of the company at current levels and debt free status with surplus cash reserves, Saral Gyan team recommends “Buy” on Zenith Fibres Ltd at current market price of Rs. 103.60 for target of Rs. 210 over a period of 12 to 24 months.
- 70% at current market price of 103.60
- 30% at price range of 90 - 95 (in case of correction in stock price in near term)
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