The reason why I say KPR mill is still not a bad bet at 130 levels based on my deep dive and the following findings...So, here is an analysts J pick based on the fundamentals… (still a novice who is on a fast paced learning ..)
Financials:
KPR Mill reported sales of Rs 481.62 crore and net profit of Rs 58.42 crore for FY07. The company’s operating profit stood at Rs 120.27 crore and the operating margin was 24.97%. The net profit margin stood at 12.13%. On post issue diluted equity, KPR posted an EPS of Rs 15.5 for the year.
Valuations
At the upper end of the issue price, the stock will discount its FY07 EPS of Rs 15.50 by 17.1x and 14.5x at the lower end.
So, @ the price of 225 the P/E works out to 14.5
@ the price of 130 the P/E works out to 8.3 – So, I believe that the share is trading @ a
comparatively cheaper price.
Look @ how it compares with its peers…( KPR is almost half the size of Gokaldas exports in terms of revenues and better than Gokaldas in terms of profit margins)
Take a look at the overweight stocks in textile listed in ICICI DIRECT.. If I do a comparison of this company with other companies in the same line of business (based on the revenue and the net profit) KPR will definitely be there in the TOP 5 slot…
My take:
Currently this stock is trading at a discounted price. All that is required is a hype in the market about this company…Patience is the name of the game as far as KPR is concerned…This stock definitely deserves more light than what it has got so far…170- 180 levels should bring in a fair P/E for this stock…
PS: take a look at the below links to understand more about the textile sector and why P/E could be an effective metric to evaluate if a stock is trading on an investment or speculative basis.
http://www.equitymaster.com/research-it/sector-info/textiles/
http://beginnersinvest.about.com/cs/valueinvesting1/a/011101a.htm
http://www.equitymaster.com/detail.asp?date=9/2/2004&story=2
