Earlier known as DalalStreetBulls

SEBI (Research Analyst) Registration Number: INH200004471

2 February 2015

Chaman Lal Setia Exports - Time for P/E expansion?


The company is in the business of Basmati rice under the brand name MAHARANI and is in business since 1973.

Highlights:
- Sales have grown from Rs 166 Crores in FY 10-11 to Rs 416 Crores in FY 13-14
- Net Profit in the same period has grown from Rs 6 Crores to Rs 18 Crores
- EPS has grown from 6 to 19 in the same period
- Company has been maintaining a regular dividend payout
- The company has a debt of Rs 61 Crores and reserves of Rs 57 Crores
- ROE has been consistently above 25% since the last 5 years
- Promoter holding stands at 74.39%

- Rice industry is expected to grow at 15% annually for coming years

Valuation:

- Currently trading at 74 levels
- The company is trading at a P/E of 3.5
- The dividend yield is 2.3%
- Price to BV ratio is 0.96

- With sales of Rs 416 Crores, the company is available at a market cap of Rs 72 Crores

Concerns:
- Operating margin and Net Profit margin are at 7% and 4.3% respectively.
-  Sector heavily dependent on monsoons and other climatic conditions.
- Debt has been increasing consistently though it is still within a decent ratio when compared to reserves and of the total debt Rs 17.22 Crores is from 3 non executive directors

The stock has seen some accumulation in the recent weeks and in the current market condition it is fairly undervalued. Being a cyclical, one cannot really assign a high P/E to this stock especially as the margins are pretty low. But assigning a P/E of 6 and EPS of 20 for the current year, one can expect levels of 120 in this stock which is approximately a healthy 60% return in this stock in the coming months. Also, the M-cap to sales ratio is quite low. The stock has seen a rise in EPS and the same has driven the stock price higher for the past few months. Rising EPS paired with a little expansion in P/E could drive the stock price higher in coming times. Invest as per your risk capacity and better to allocate only a small portion of your capital in this counter. This is a bull market investment.

2 comments:

  1. I am surprised to see how come this website is overlooked by many and I dont see many people commenting on these blogs, I am very new to stock market just 3 - 4 months but somehow have managed to understand the valuations of good business. I had picked and invested in chaman lal setia this month I am happy to see someone else holds the same view too.

    good work bro!! keep it up. sooner or later your effort will be recognized.

    ReplyDelete
  2. Check Chaman lal setia facebook page : https://www.facebook.com/pages/Maharani-Rice/440226142746134?fref=ts

    They are working to build Maharani Rice Brand...

    I am holding it for a target of Rs 120 in 6 Months and In long term its going to give multibagger returns

    ReplyDelete