Business:
Trading in stainless steel kitchenware and house ware items. As it is a trading business, net margins are low.
Recently it started manufacturing stainless steel kitchenware and house ware at its new plant at Vasai, Maharashtra and stainless sheet re-rolling mill in Jodhpur, Rajasthan.
Financials:
FY2006-07
Total income: Rs 740.03 crore
Operating profit: Rs 39.33 crore
Net profit: Rs 19.58 crore
Objectives:
Brand building exercise: Rs 10 crore
Working capital requirements: Rs 40 crore
Both these things are not linked with any new expansion plan. So the investors are not really going to get anything substantial in the near term.
Valuation:
The company commands a P/E of 4.13(x). This looks attractive.
Recommendation:
Apparently it looks like a value bargain. However there are certain factors investors must note. The export incentive and earnings from wind power if removed from the profit and loss account the company will land into losses. Simply put, if the policy reverses or the overseas market turns more competitive or the dollar depreciates against rupee in the long run, there is a fear that the company will be out of the business.
In short, investors with huge appetite for risks should consider this issue.
Disclosure: We are not bidding in this initial public offer.
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