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Wednesday, June 23, 2010

Hot Pick : Shri Lakshmi Cotsyn Ltd. Bse Code: 526049

Shri Lakshmi Cotsyn Ltd. is a USD 250 million company. A premier manufacturer of home furnishing products and enjoys competency in manufacturing denim fabric, terry towels, bed linen, cotton fusible interlining, embroidered fabric, technical textile products and ballistic products.

An armoring division of Shri Lakshmi Cotsyn Ltd. (SLCL) has recently made an entry into India’s growing defence market with the launch of complete 360 degree armored vehicles for Indian armed forces and police. The company has introduced an exclusive range of uniquely designed models of 360 deg. protected Armored Vehicles which includes “DHRUV – ATC” (Armored troop career), “DRONA – MPV” (Blast & Mine protection vehicle) and “VIPER” (Fast Moving Attacking vehicle). The company engaged in processing a very wide range of end-to -end textile products has diversified its portfolio by getting into specialized armored vehicle segment.

The high-end 360 degree protected armored vehicle, which is a first- of its- kind in India with bullet, mine and blast proof capabilities will be showcased in New Delhi in October 2009.

The company has recently renamed Armet Armored Vehicles (India) Ltd. as Shri Lakshmi Defense Solution Limited, a 100% subsidiary of SLCL. It’s new unit near Kanpur, Uttar Pradesh has commenced commercial production and is in the process of delivering its first bullet proof vehicle “DHRUV” (Armor troop carrier) to Special Task Force.

The company imports chassis from reputed international firms like Ford Motor and General Motors and then fabricates indigenously at its plant. SLCL plans to make around 300-400 vehicles a year and expects a turnover of Rs 150 cr in the first year of its operation.

The company currently is in talks with Indian paramilitary forces and also some high-value customers in India, Europe and the Middle-East who want their vehicles to be armored with Level-B7 protection with bullet, mine and bomb-proof accessories. The armoring could cost anywhere between Rs 50 lakh to over Rs 1 crore, depending upon the accessories embedded in the vehicle.

Dr. M. P Agarwal, CMD, Shri Lakshmi Cotsyn Limited said in a recorded interview: “While presenting the Union Budget Finance Minister Pranab Mukherjee allocated $28 billion for defense which is the highest ever allocation for the defense sector. For SLCL it is a logical move to be part of the Indian government's efforts to broad base defense procurement from the private sector. We see significant growth opportunities in the domestic as well as global defense market. Our high-end 360 degree armored vehicle will aid security forces counter threat and enhance combat efficiency.”

“SLCL is an approved vendor with host of Indian defense establishments. The company has been already supplying safety textiles such as bio- chemical, high altitude fabric, bullet-proof jackets and bullet-proof helmets, camouflage fabrics, uniform fabric, IR fabric and carbon fabric to Indian defense establishments. The company post its exhibition in Delhi expects to fetch large orders for its 360 degree protection armored vehicle from Indian defense forces and state police forces. The order flow is expected to give significant boost to our commercial sales.” Dr Agarwal added.

At cmp of 140, the Stock is trading at a mouth-watering PE of just 2.5!! The Book Value of Shri Lakshmi Cotsyn Ltd. in June, 2009 itself was Rs. 175.33 (source: moneycontrol). Add to it the Enterprise Value and the Fair Value of such a high growth company should not be less than 500, giving it a fair PE ratio of 10. The company's business prospects are excellent and it has shown a growth of 63% in the last quarter as compared to the same quarter in the preceding year. The Promoters have increased their shareholding in the company from 43.31% in March, 2009 to 47.91% in March, 2010. To conclude, this stock is an excellent Investment Opportunity.

Company websites: http://www.shrilakshmi.in and http://www.shrilakshmicotsyn.com

Cheers!

14 comments:

Ek Veer said...

I understand and agree that it is available at a very little price multiple but historically, textile companies never commanded larger price multiple.

I also agree that there is value in the company and rerating of the sector and rerating of this company with their entry into defece sector can give very good returns

It can be a good defensive bet given the fact that promoters are buying at 150 and also by increasing their holding percentage.

If one sees the performance of this stock in the recent past, volumes have surged without any surge in price. What does this suggests?

I think this can explode any time.

I have no investment in this stock.

Siddharth said...

How do you rate the management of the company? The promoters are allotting themselves at less than book price of Rs 150. This price has been lowered from 200 declared earlier and the reason management gives is the poor recent stock performance. This makes me wonder that either the management is trying to short change the minority share holders (by cheap warrants)or the fair value is close to 150. If this stock is really worth 500 Rs then why are the shareholders allowing the promoters to benefit at their expense?

Superstar said...

Hi Ek Veer,

I agree with your reading. I think this stock is being accumulated at the current cheap levels by those in the know. It can indeed explode any time.

Hi Siddharth,

The glass can be half empty or half full, depending on the way you look at it. This is India. Every Promoter of a publicly listed company wants to buy their shares cheap. Many times stock prices are manipulated to facilitate this. So very often it happens that whenever a Promoter wants to up his/her stake in their company, the stock price is invariably beaten down. If the Promoters changed their earlier decision of buying @200 per share to buying @150 per share, then the point we can take from this is that the Promoters had at least seriously thought about buying it @200. The current Book Value is somewhere close to that. So the Investors should get confidence from this fact that their investment is safe. This is a stock where the downside is very limited (if any) and the potential upside is HUGE! So you can take your own decision.

Cheers!

VickySoneja said...

Hi superstar...please update on prithvi solutions. its been hovering around 45-47...i bought this at 61.

Superstar said...

Hi Vicky, you can Hold it with a SL of 45. It's at 50+ today. If you like safer plays in the market then you can switch from it on another 10-15% rise and buy Shri Lakshmi Cotsyn instead of that.

Cheers!

Niranjan said...

Hi Superstar,
Could you please let us know about Micro Technologies..
can we hold it or sell it for short term...

Thanks,
Niranjan

Superstar said...

Hi Niranjan,

Microtech can be held for the long term. For the short term you can hold with a Profit Lock at 185. And every dip in Shri Lakshmi Cotsyn should be bought.

Cheers!

Mitzzzzzz said...

Dear Superstar,

Do you track ramsarup industries or paramount communication ???
And any views on why PSL has been underperforming for the last one year ??

Vivek said...

Hi Navin,

My question is related to 2 of your earlier picks - Micro Tech and SEL. Micro Tech has been struggling to move past 190-200 levels for a very long time. And SEL - it went to over 70 but is back to 55 levels. What do you suggest one should do? Should we stick with them?

Thanks,
Vivek

Superstar said...

Folks, I would appreciate if you would read my replies posted here to others before asking me fresh questions about the same topics. It is possible that I have already answered your question in response to somebody else's query. It will save me the trouble of repeating myself. I cannot give advice about what to do on a daily basis.

Vivek,
The entire market is uncertain about the next move of the index. That's why many good stocks are trading at more or less the same levels. Microtech at 190 is still very much in profit since my recommended price band of 140-150 after having touched levels of 216 several times. SEL Manufacturing also went to a high of 86 just about a week back.

Mitzz,

I do not track Ramsarup or Paramount. PSL has performed in line with most other metals & pipe stocks. It is a good company and the stock can be bought on dips for long term investment horizon. But there is no reason for buying it aggressively at the moment.

If you want to make a fresh investment, then SHRI LAKSHMI COTSYN is the best stock to pick.

Cheers!

Victor said...

Hi Superstar

Do you have a view on UB Engineering. I have 500 @ 113.
Victor

amol said...

hi please suggest about stock Mavens biotech

amit golchha said...

dear sir
it seems u r very busy now a days. we are waiting for ur comments and new stocks. sir whats ur view on Resurgere Mines & Minerals India Ltd. (BSE Code: 533017). please suggest.

Superstar said...

Hi Amit,
About Resurgere, a meeting of the Board of Directors of the Company is to be held on August 26, 2010, to consider and approve the conversion of 6500000 warrants into equity shares of the Company. So the stock will see some interest. The June qtr earnings have jumped substantially compared to previous year. So the stock is a buy currently.

Hi Victor,

Ub engineering is a good stock to hold in one's investment portfolio and at current price of 207 it is not very expensive also for fresh buying.

Hi Amol,

Mavens Biotech is a very small stock and fundamentals of the company are not too good. But there has been a recent news that it has formed a JV with Bangalore based Garuda Group for infrastructure projects, so it may see some interest. But I would avoid such small and dicey stocks. There are so many better quality stocks available in the market.

Current view on SHRI LAKSHMI COTSYN : ACCUMULATE!

Cheers!