Dear Sir,

One of the mental models we use for identifying potential investment opportunities is “Companies that have completed major Expansion”.

The idea behind the above is that most of the time earnings get depressed during the Expansion period and the stocks become available at cheaper valuations. So, while the current earnings might be depressed, with the completion of the Expansion, the earnings 2-3 years down the line could improve substantially. Thus, giving an opportunity for earnings and valuations re-rating.

A few days back we released our New Stock Recommendation for medium term investment for our Premium Members and it is based on the same logic as described above.

We come out with only 5-6 new stock ideas for long-medium term investment every year and would like to share with you details on the latest one –

Basic Details:

  • Industry – Chemicals
  • Market Cap – Less than 400 crore
  • Enterprise Value – Less than 400 crore
  • Promoter Holding – Greater than 55%
  • FY 14 – FY 19 Sales Growth – 17% CAGR
  • FY 14 – FY 19 Operating Profit Growth – 18% CAGR
  • FY 14 – FY 19 PBT Growth – 32% CAGR
  • Debt – Company is debt free on net basis

Key Reasons as to why we like the company:

  • Company is debt free on net basis and this is despite carrying out a major expansion of Rs 100 crore + in the last 2 years
  • Promoters have been continuously increasing their stake in the company through market purchases
  • As per our research, on the back of Rs 100 crore + expansion carried out by the company, we believe the Sales and PAT can double in the next 2-3 years
  • 300% growth in exports since FY 17 and if at all the China + 1 hypothesis becomes true the opportunity landscape will open up further
  • Despite the expected doubling of profits, good track record and net debt-free balance sheet, the stock is trading around 12-13 times earnings only

Thus, considering reasonable valuations at present and a strong probability of doubling of PBT to 80-90 crore in the next 2-3 years, we believe the stock is offering a good investment opportunity around current level.

 

New/Returning Member

If you are struggling to find good Stock ideas for investment, you are reading just the right stuff and can access latest Stock Reports, Special situations and Model Sheet in Premium Memberships HERE

 

Best Regards,

Ekansh Mittal
Research Analyst 
Web: https://www.katalystwealth.com/
Ph: +91-727-5050062, Mob: +91-9818866676
Email: [email protected]

 

SEBI Research Analyst Registration No. INH100001690

Research Analyst Details

Name: Ekansh Mittal     Email Id: [email protected]    Ph: +91 727 5050062

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Disclaimer: www.katalystwealth.com (here in referred to as Katalyst Wealth) is the domain owned by Ekansh Mittal. Mr. Ekansh Mittal is the sole proprietor of Mittal Consulting and offers independent equity research services to investors on subscription basis. SEBI (Research Analyst) Regulations 2014, Registration No. INH100001690

The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision

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