Fwd: BUY AMBIKA COTTON MILLS(531978) TARGET 350 BY S P TULSIAN

 

 

INDIA'S ONE THE BEST ANALYST MR. S P TULSIAN HAS GIVEN BUY CALL ON AMBIKA COTTON MILLS FOR TARGET 350.   AGGRESIVELY BUY FOR DECENT GAINS IN VERY SHORT TERM.   By SP Tulsian and Geetanjali Kedia   ·         Ambika Cotton Mills manufactures specialised quality cotton yarn and has manufacturing facilities located in Dindigul district of Tamil Nadu, mainly focussed on compact spinning.   ·         The company enjoys one of the highest profit per spindle of cotton yarn in India. During FY10, it produced 11,270 tonnes of cotton yarn and 110 tonnes of cotton cloth.   ·         Significant quantum of its production is exported to customers in Taiwan, Hong Kong, China, Korea, Singapore, Italy, Germany, Turkey, Israel and Egypt. Exports accounting for 58% of its turnover in H1FY11.   ·         Additionally, as on date, the company has 27.4 MW capacity windmills which meets all the captive power requirement of the spinning division, thereby enabling seamless production. Also, excess power of about 1.5 MW is sold to Tamil Nadu Electricity Board.   ·         The equity of the company is very low at Rs. 5.88 crore (FV Rs. 10 each), on which dividend of Rs. 3 per share was paid in FY10.   ·         Promoters have increased their stake in the company to 40% as of 30th September 2010, from 36.2% a year ago. Presently, institutional investors hold 9.12% while balance 50.88% stake is held by Indian public.   ·         For FY10, the company reported revenue of Rs. 223 crore and earned net profit of Rs. 18 crore, resulting in net profit margin of 7.9%.  On  59 lakh outstanding equity shares, this leads to an EPS of Rs. 31.50. After adjusting for depreciation of Rs. 21 crore, cash EPS is Rs. 67.   ·         During the first six months of FY11, like other textile players, the company also reported excellent financial performance. Sales increased to Rs. 143 crore while net profit for the half year was Rs. 16.4 crore, expanding its net profit margin by 360 bps, to 11.5%. EPS for H1FY11 was Rs. 28 while cash EPS was Rs. 47.   ·         The company's networth, as on 30th September 2010, stood at Rs. 153 crore. At the current share price of Rs. 260, this leads to a market capitalization of Rs. 154 crore. Thus the share is ruling at a PBV ratio of 1:1. Net debt as on 30.09.10 was Rs. 255 crore.   ·         For FY11 the company is expected to report a topline of close to Rs. 320 crore and bottomline of Rs. 37 crore, resulting in an EPS of about Rs. 63 and cash EPS of about Rs. 100. This results in a PE multiple of 4.1 times, based on the current year earnings and 2.6 times based on cash earnings.   ·         Share, at 263, qualifies a safe bet with potential to touch Rs. 350 in the next six months.   BSE Code: 531978 NSE Symbol: AMBIKCO

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