Apr. 29, 2010 - According to Paras Adenwala, MD & Principal Portfolio Manager, Capital Portfolio Advisors, the balance sheet quality is very good but the biggest trigger for the stock is its right segment. It manufactures aluminium greens for abrasive manufacturers like Norton and Carborundum. It also manufacturers refractories for all the metal players and at a time when we are seeing an uptick happening as far as capital expenditure is concerned and engineering companies are likely to do well, there is no reason for me to believe that the abrasive manufacturers will also not do well and the numbers that have been declared by all these guys support what I am saying.
As far as refractories are concerned, we are seeing an uptick happening in the commodity prices and we are also seeing large capital expenditure happening by all the metals manufactures and therefore the need for refractories and mind you, refractories are not fixed asset, it is a consumable and therefore, most of these metal manufacturers, they need to replace refractories over a period of time and the margins in both of these businesses, they are ranged between 18% to 20% at the operating level.
A stock which can again give you at least a 20% business growth year after year for the next three to five years at least if not more and a bottom line growth which should match the top line growth if not better. The valuation is just about 6-6.5 times on FY11 basis and to my mind, it is going very cheap. The dividend distribution policy has also been very prudent and the management while being conservative, it is conservative on financials but not on business. So the stock does merit a very strong look and we can expect at least a 50% return over a one-year period.
