Tuesday, 5 October 2010

Sensex @ 20k and beyond: What stocks should you buy now? - Get the expert opinion

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Multi Bagger
Nilkamal Limited
Recommended Price: Rs 246.85
Trading at Rs 415.65
Growth 68%
 
S.P.Tulsian, Investment Advisor
Nilkamal Limited, a Mumbai-based company, is mainly engaged in the business of plastics and home furniture retailing.
Under its plastics segment, the company offers:
1. Material handling solutions - crates, containers,bins
2. Moulded furniture - chairs, tables and cabinets
3. Custom mouldings and OEM supplies for specific customers
It has exclusive tie-ups with key global players, such as:
1. Hanel Buro-Und Lagersystems, Germany, for
    automatic storage and retrieval systems.
2. ConTEyor Multibag Systems, Belgium, for
    manufacture of textile partitions for crates and metal racks.
3. Plastic Omnium Systems Urbains, France, for
    supply of waste bins of all sizes conforming to EN/DIN standards.
Report Dated: May 29, 2010
Past Multi Baggers Recommendations
Stock
 
Reco
Price
Preak after
Reco
%
Gain
Balasore
Alloys
Hawkins Cooker
Rel Ind Infra
Coromandel Int
Polyplex Corp
Zydus Wellness
Ahluwalia
Mundra Port
6
119
330
71
92
81
32
110
78.15
1266.00
3202.25
615.95
773.90
639.35
245.95
831.85
1,202.50
961.64
870.38
767.54
741.20
689.32
666.20
658.99
Click for all Multi Bagger recommendations
4. CAMBRO Manufacturing Company, US, for hospitality products for large restaurants and hotels.
It has 7 manufacturing plants in India - 2 in Silvassa and 1 each in J&K, Noida, Pondicherry, Barjora (West Bengal) and Nashik (Maharashtra). All plants are ISO 9001/2000 certified and practice 6 sigma manufacturing process. It also has a manufacturing facility in Sri Lanka.
The company has interest in property development through JV with Bhoomi Realty under Starshine Land Developers Private Limited, since May 2008. Besides, it has invested Rs. 22 crores in a joint venture with Bito Lagertechnik Bittman GmbH, Germany, for manufacture of metallic material handling and storage systems.
Nilkamal Limited has a wide sales network operating through 45 regional offices and 33 warehouses across India, besides an office in UAE. It also exports to Europe and Americas. Exports accounted for 7% of net sales.
For the home furniture retailing segment, the company operates 16 mega home retail stores in 12 Indian cities under the brand '@home'. Each store, having an area between 10,000 to 28,000 sq.ft, retails home furniture, soft furnishings and home accessories.
As on 31st March, 2010, the Parekh family owned 71.3% stake in the company, in promoter capacity, while domestic mutual funds held 4.2%. The company has declared 50% dividend (Rs. 5 per share) for FY10 including an interim dividend of 20%.
On a consolidated basis, the company's revenues for FY10 were Rs. 1,098 crores and EBITDA of Rs. 134 crores, resulting in an EBITDA margin of 12.3%. EBITDA has been growing steadily from Rs. 106 crores in FY09 and Rs. 86 crores in FY08. The net profit of the company increased nearly five-fold in FY10 to Rs. 51.5 crores from Rs. 10.7 crores in the previous year, mainly on account of reduced interest expense of Rs. 26 crores in FY10 from Rs. 53 crores in the previous year.
The company recorded an EPS of Rs. 40.3 vis-a`-vis Rs. 8.4 in FY09. It is expected to report an EPS of nearly Rs. 48 for FY11 and close to Rs. 55 for FY12. All this, on an equity base of just Rs. 12.8 crores! The networth of the company as on 31st March, 2010 was Rs. 254 crores and book value per share was Rs. 198.
The company, during FY10, resorted to better working capital management, thereby improving inventory turnover ratio to 5.1 in FY10 from 4.4 in FY09.
During FY10, the company de-leveraged its balance sheet by Rs. 100 crores, thereby reducing outstanding debt as on 31st March, 2010 to Rs. 285 crores from Rs. 386 crores, a year ago. Thus, the company's interest coverage ratio (EBIT divided by interest expense) improved to 3.8 times in FY10 from 1.4 in FY09.
The share currently ruling at 247, is available at a PE of 6 times historic earnings and less than 5 times its forward earnings. The price-to-book of the company is quite low at 1.2 times. The share qualifies as a safe bet for investors with medium term investment horizon, as the stock price can surpass the 300 mark in next 6 months.
 
Disclosure: No interest or holding in the stock.
 

 
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