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Winsome Textile Inds. Ltd. (Code No: 514470, CMP Rs. 49/-):
Financial Performance:
Quarter Ended 9 Month Ended
31.12.06 31.12.05 31.12.06 31.12.05
(crs.) (crs.) (crs.) (crs.)
Sales 31.87 35.65 102.50 97.22
Depreciation 1.35 1.35 4.04 3.96
Net Profit 3.75 0.95 9.76 2.94
Equity 5.87 5.87 5.87 5.87
EPS (Rs.) 6.39 1.62 16.63 5.01
Cash EPS (Rs.) 8.70 3.92 23.50 11.75
This Chandigarh based textile company with 50,000 spindles has reported bumper results.
1) For Q3FY07, its NP has zoomed to 3.75 crs. up by nearly 300% Y-O-Y basis. EPS for Q3 alone is 6.39.
2) NP for 9MFY07 is 9.76 crs. up by 294% Y-O-Y basis. EPS for 9M itself is 16.63.
3) Company is likely to report EPS of 20.70 and Cash EPS of 29.86 for 06-07. Stock is trading at 2.37 x FY07E EPS.
Future Outlook:
Company is implementing modernization-cum-expansion project to add 13,000 spindles, increased dyeing capacity by 3650 tons, 2.50 MW power plant and replacement of existing ring frames at cost of Rs. 117 crs. 13,000 spindles will be installed by March '07 which means, in 07-08, company will be working on 63,000 spindles. Replacement of existing ring frames and power plant will be completed in 07-06.
Valuation:
Y E A R E N D E D
31.03.07E 31.03.08E
(crs.) (crs.)
Sales 138.00 165.00
Net Profit 12.15 17.75
Equity 5.87 5.87
EPS 20.70 30.24
Cash EPS 29.86 41.30
Once existing capex is completed, company is likely to embark on an ambitious expansion programme involving capex of Rs. 400 crs. in 08-09. For this purpose, equity may be placed with some FII (small equity dilution) as company will also avail of TUF loans and internal accruals.
A) Stock is trading at 2.37 x FY0E EPS. Cash EPS is discounted just 2.08 times.
B) Stock is available at 1.62 x FY08E EPS. Cash EPS is discounted unbelievably low 1.19 times.
Considering expansion under way and under planning, Winsome will emerge as a big textile player 2009 onwards. Current valuations of Winsome are extremely compelling and perhaps, one of the most underpriced scrips at BSE. If, Winsome has a very modest P.E. Ratio of 8, it share price should be based upon FY07 EPS, Rs. 166/-.
Based upon FY08 Projections, it share price should be Rs. 242/-. Promoters have already increased their stake through Open Market Purchase from 53% to 58.29%. Expect minimum 100% appreciation in next 3-6 months. Grab immediately.
Stock has already corrected 30% from its 52 week high of Rs. 70/- and has bottomed out. A good pick which will take U turn once market sentiment improves and will race ahead much faster than sensex recovers.
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