Ashish Chugh of Hidden Gems fame is known to be an expert in fishing out micro and small-cap stocks which are not known to the public eye but which are fundamentally sound.
By homing in on such stocks in their infancy and putting them in the public spotlight, Ashish Chugh has been able to harness enormous wealth for himself and his band of devoted followers.
Eimco Elecon is a textbook example of Ashish Chugh’s mastery at work. He recommended the stock in March 2013 and also in April 2014 when it was languishing in anonymity and was available at a throwaway valuation of Rs. 90 crore.
Ashish’s analysis was brilliant. He explained that the Sandvik group (a MNC) held 25% of the equity, the Company has never diluted its equity, it has an uninterrupted track record of paying dividends over the past 20 years, it is debt-free and has a captive source of income by way of sale of spare parts for the machinery that it supplies to mining companies. He also emphasized that the stock was available at such cheap valuations that the downside risk was low.
Today, Eimco Elecon stands tall at a market capitalisation of Rs. 254 crore. This means that Ashish Chugh and his followers have pocketed magnificent gains of 185%.
Unfortunately, the slowdown in the mining sector has taken its toll over the Company. After reaching a high of Rs. 693 in July 2015, the stock is on a downward trajectory. It has lost 35% on a YoY basis.
However, Ashish Chugh rightly advised that such powerhouse stocks deserve to be accumulated aggressively during their periods of downturn.
Daljeet Kohli is a believer in the same philosophy. He has rushed out an initiating coverage report in which he has crisply analyzed Eimco Elecon’s prospects and recommended a buy:
“Eimco Elecon (India) Ltd is in the business of Manufacturing, Marketing and Servicing Equipment for Mining and Construction. It is one of the leading suppliers of underground coal mining equipments in India. It was first to introduce the intermediate technology of Side Dump Loaders (SDLs), Load Haul Dumpers (LHDs) and Rocker Shovel Loaders in India to partially mechanize the underground Coal and metalliferrous mines and continue to be market leader since then. In addition the spares business which is a high margin business provides a stable cashflow and contributes around 50% in overall sales. Introduction of new products and entry into open cast mining products to act as a key catalyst for the stock. Further the company has strong balance sheet with liquid investment of Rs.198/share. We initiate coverage on Eimco Elecon (India) Ltd and recommend BUY on the stock with SOTP based target price of Rs 678.”
Daljeet articulated further on the merits of Eimco Elecon in his ET interview where he emphasized that the Government’s thrust to increase mining production by Coal India would mean greater business for Eimco Elecon.
“We feel the future is very bright because they are going to double their production. So many of these mines will also require a lot of equipment. Eimco will be beneficiary of that. So delta will be very big because their numbers can go back to their peak level of 2007-09 then the margins can go back up by almost 300-400 bps. Their revenue can grow almost 20 per cent kind of CAGR. Net profit can also grow by a similar number” Daljeet said with his customary soft-spoken tone.
Daljeet has projected a target price off Rs. 678 for Eimco Elecon which means that magnificent gains of 72% are waiting in the wings for the lucky shareholders!