Gandhi Special Tubes (GANSPE) Rs. 262
Outlook turns positive, bullishness reloaded…
Lean balance sheet, high dividend payout to continue!
GST has a lean balance sheet with net cash & investments of Rs. 85 crore (FY16). With minimal capex requirements, GST has a robust dividend payout (~60%) with FY16 dividend per share at Rs. 7.5/share. Going forward, we expect the trend to continue with GST providing a dividend yield of ~4%. Working capital cycle has significantly improved with net working capital days coming in at 120 days in FY16 (155 days in FY15). We expect sales and PAT to grow at a CAGR of 17.5% and 21.2%, respectively, in FY16-18E. We have valued GST at Rs. 315, i.e. 17x P/E (0.8x PEG) on FY18E EPS of Rs. 18.5/share and upgrade GST to BUY rating.
Emmbi Industries (EMMPOL) Rs. 105
Growth momentum to sustain…
Return ratios to improve, healthy growth over FY16-18E, maintain Buy!!
With major capex behind it and increasing share of high margin VAP along with improving working capital cycle; we expect Emmbi to witness greater profitability going forward. The return ratios also expected to improve with FY18 RoE & RoCE expected at 18% & 19% respectively. We expect sales, PAT at Emmbi to grow at a CAGR of 18.2%, 31.5%, respectively, in FY16-18E. We value Emmbi at Rs. 145, i.e. 14x P/E on FY18E EPS of Rs. 10.4 /share and maintain BUY rating on the stock.