It is really a time for mid-caps and some fortunate & savvy investors are raking in the big bucks. P. N. Vijay, the prolific stock picker, homed in on Kajaria Ceramics and promised a 40% return in 12 months. However, investors were pleasantly surprised to get a 70% gain in just 10 months.
Microsec, which has a stellar reputation for identifying multibagger stocks (its model portfolio has a CAGR return of 34.2%), identified Somany Ceramics as its top pick in its report of 7th September 2012: It said:
“We rate Somany Ceramics Limited a BUY… In the Indian tiles sector, Somany has achieved a clear leadership position by its innovative and futuristic approach.
… Despite slowdown in Real Estate Industry owing to high inflation coupled with high cost of capital, Somany Ceramics has maintained its earnings growth. The company’s total Income stood at ~INR930 crores in FY12, registered a YoY growth of ~22%. CAGR growth of total income over the period of FY08-12 was registered at 27.43%. Moreover, the company has reported a YoY growth of ~11% to ~INR190 crores in the quarter ended June 2012…
Robust Growth in Profitability:
Somany Ceramics’s strong and sustainable business structure coupled with strong brand and distribution network has helped the company to absorb the standing opportunity in the industry, which has boosted its topline and bottomline growth. Operating profit has grown at a CAGR of 18.91% over the period of FY08-12. Whereas, Profit After Tax (PAT) grew at a CAGR of 59.97% over the same period.
At the CMP of INR43.70, stock is trading at FY12 PE of 6x. The current valuation of 4.86x FY13E and 4.08x FY14E P/E look attractive. Hence, we recommend a BUY on the stock.”
Well, investors who acted on the advice and bought Somany Ceramics would have a wide smile on their face because after a 15% jump on Friday, 19th October, when the Q2FY13 results were released, Somany hit the upper circuit of 20% on Monday, 22nd October. At the now prevailing price of 84.65, Somany has given investors an incredible return of 94% over Microsec’s recommended price of Rs. 43.70.
How’s that for a multibagger?
If you haven’t already, you must check out Microsec’s other stock picks. Who knows, maybe there are other multibaggers hidden there!
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