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Tuesday, August 26, 2008

Nelcast:-One of the cheapest buy

Scripscan:Nelcast Ltd
Traded in:Nse-bse

Story:Nelcast"s principal activity is to manufacture castings for automotive industry, farm equipment industry, railways and pipe fitting industries.The company has two plants, one located in Gudur (Andhra Pradesh) and Ponneri (Tamil Nadu) with installed capacity of 42,000 MT and 60,000 MT respectively operating at an average utilization rate of around 80%.The company manufactures around 200 different casting in SG and GI cylinder blocks, flywheels, flywheel housing, housing hubs, spring shackle, brackets, transmission case, axle housing, and exhaust manifolds etc. catering the needs of commercial vehicles and tractor industry. The company has also started serving the Indian railways by supplying small components recently. In the business of manufacturing casting components, Nelcast is likely to scale up its growth, given the increased demand for castings in both the domestic and foreign markets. It is also likely to benefit from its proposed increase in focus on exports and machined casts. This apart, its set of established clients such as Ashok Leyland, TAFE and TATA Cummins also lends confidence to its earnings growth prospects.The stock is currently trading at 2.8x FY09E EPS of Rs 25.6 and 2.4x FY10E EPS of Rs 29.9.The valuations are very attractive and offer excellent long term investment opportunity considering its size, past track record,huge demand,customer profile and its potential to improve its revenues and operating margins going forward.The company is quoting at a huge discount to its ipo price thus one should avail the oppurtunity to grab it at these mouth-watering prices.A great buy at present levels.

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