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.
Emmbi’s EPS from FY13, FY14, FY15, FY16 are as follows : 1.9, 2.45, 3.37, and 6. The growth from FY13 to FY 14 comes to 28.3%. The growth from FY14 to FY15 comes to 37.6, the growth from FY15 to FY16 comes to 77.8%. The company in their concall made it clear they will be making more of the higher value added products, especially the patented ones from now on, it is difficult to understand how ICICI Direct estimates FY18 EPS to be only 10.4, from 6, that too two years hence, when their historical growth rate is much higher. I wish someone of ICICI Direct replies to this post.
#Multibagger Stock Ideass::
Emmbi Industries operates in packaging material products such as Jumbo bags, woven sacks, woven polyethylene, Bulk cargo handling systems, Anti Corrosive packaging. The company is into exports as well. From last 3 years, the revenues and Net profits have grown at CAGR of 20-25%. The company has recently got approval for its R&D centre as well. The next 2-3 years also, the company is targeting around 20% top line and slightly more than that in bottom line. The stock is available at TTM PE of 16 at the moment. Looking at its innovating products and growth momentum, it is a good buy for next 2-3 years. So on every dip, the stock can be bought for a long term.
Multibagger Stock idea