We received an overwhelming positive response to our article on “How to find better investments using Accounting Ratios” and few of our readers asked to share few stocks which met those criteria. These are some interesting mid/small cap stock ideas, which have been doing well yet go un-noticed. They have good accounting ratios and seem to be trading at very compelling valuations.
1. Mazda Ltd (BSE Code – 523792): Mazda is an engineering company, specializing in steam jet vacuum systems and condensers and they find application in process and power industry. The interesting part is the balance sheet and the valuations at which the stock is trading. At CMP of 92, the company is available at a market capitalization of 40 Cr while it has cash of close to 15-20 Cr on Balance Sheet. Company is generating annual sales of 100 Cr & net profits of 10 Cr and is available at an Enterprise Value of just 20-25 Cr. Stock is trading at a PE of just 4 and Price to BV of just 0.60. Company has also started a new factory at the end of March, 12 and may help in growth.
A good detailed post was recently done by Dhwanil, do go through that for details.
2. Kakatiya Cement (BSE Code – 500234, NSE Code – KAKATCEM): KCL is a south based company having three divisions – Cement, Sugar & Power. Though first two segments are cyclical in nature but the interesting thing is that this company hasn’t been expanding, rather they have utilized the cash flows to repay the debts and become a debt free company.
At CMP of 80, the stock is available at a PE of just 3, Price to BV of just 0.40. The M Cap is just 60 Cr while the company has cash on balance sheet in excess of 20 Cr.
Negative – The company hasn’t expanded its capacity for quite some time and there is cyclical risk but both cement and sugar has been doing well now.
3. Sree Rayalseema Hi-Strength Hypo (BSE Code – 532842, NSE Code – SRHHYPOLTD): SRHHL is the only Indian manufacturer of Calcium Hypochlorite and one of the few in the world. Calcium Hypochlorite is used in water treatment especially in swimming pools etc. Company sells its product by name of Aquafit.
Though the company is not debt free but they have been reporting very healthy operating numbers for last 3 years but the net profits remain lumpy and volatile due to some uneven tax adjustments and extra-ordinary items. For last 4 years the average EBIDT has been about 40 Cr yet the market cap is 50 Cr. The trigger going forward is that the company has undertaken an expansion to almost double it’s production capacity. The expansion should get completed by Q1FY13.
At CMP of 45, the stock is trading at a PE 2.50 and Price to Book Value of 0.50.
Negative – The promoters have been increasing stake by doing preferential allotment and merging of group companies.
4. Technofab Engineering (BSE Code – 533216, NSE Code – TECHNOFAB): Technofab is an engineering and construction company (BOP) and the company had come out with an IPO @ Rs 240 two years back. Since then the company has almost doubled its turnover and increased its profit by 70% yet the stock is available at just Rs 130.
The company has a pretty good growth record – the sales has grown at a CAGR of 47% for last 5 years from 81 Cr in 2008 to 380 Cr in 2012. The best thing is that the company has remained low on debt during these years and as of FY 2012, the company has excess cash on balance sheet of about 65 Cr. At CMP of 130, the M Cap is just 135 Cr.
Going forward the company the company has an order book of 950 Cr and expects to maintain a 20-25% turnover growth. The promoters have been buyers in the stock and increasing their holding consistently. At CMP of 130, the stock is trading at a PE of 4 and price to BV of 0.80.
Most of the above companies are debt free and having some sort of leadership in their business areas. As they have already done well in the testing times, we expect them to perform better in coming times.