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Stock Pick From The Engineering Sector

| 6/28/2012 9:00 PM Thursday

Low Priced Scrip is hidden gem, today's underdog, a stock with future potential that is expected to fetch returns within 1 year. This is a stock picked carefully based on a fundamental analysis of the company.

The company recommended as the Low Priced Scrip for this issue is a leading manufacturer of carbon black, which is majorly used in tyre manufacturing.

Phillips Carbon Black - A Dark Horse

HERE IS WHY

  • It is a high dividend yielding stock available at an attractive valuation.
  • Elaborate capex plans have been drawn up to expand the capacity, which in turn will help in meeting the higher demand going forward.
  • Its presence in the power sector adds strength to its overall business model.

There are certain counters that are good investment bets but don’t manage to catch the fancy of investors. Phillips Carbon Black (PCBL), which belongs to the RP Goenka Group, is one such counter. There are various compelling factors that back our recommendation of PCBL.

The company’s consistent dividend payment history with a dividend yield of 4.16 per cent and the capacity expansion scheduled in the first two quarters of FY13 are among the primary factors that add strength to our conviction in this stock. The best part is that not a single share among those held by the promoters is pledged. On the valuations front too, the scrip is placed well, with its FY12 earnings discounting the CMP of Rs 96 by just 3.80x. Even the EV/EBITDA stands at less than 4x, making it a good value buy at the current levels.

BEST OF LAST ONE YEAR

Name of Company

Reco.

CMP(Rs)

 Gain%

PTC India

45

61

35.56

Omkar Specialty Chem.

58.5

72

23.08

Dena Bank

80.5

96

19.25

Power Grid Corp. of India

96

110

14.58

IDBI Bank

81

91

12.35

GIC Housing Finance

84

93.5

11.31

Manjushree Technopak

80

88

10

Syndicate Bank

99.1

104

4.94

CMP as on June 26, 2012

PCBL manufactures carbon black, which is majorly used in tyre manufacturing, with its current capacity standing at 360000 metric tonnes per annum (mtpa). It also has a 58 MW power generation capacity. The carbon black segment contributes to about 96 per cent of its revenues and the remaining is contributed by power. However, at the PBIT levels, the contribution from carbon black stands at 59 per cent, while 41 per cent comes from the power segment.



 

Find More Articles on: Stock Recommendations, Fundamental Picks, DSIJ Magazine, Low Priced Scrip, Product, Small Cap

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