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Tuesday, June 16, 2009

Manugraph India Ltd:-A great dividend play

Scripscan:Manugraph India Ltd
Traded in:Nse-bse

Story:Manugraph India has emerged as the country's leading manufacturer of web offset printing machines. These machines are used for printing newspapers and periodicals and the company has benefitted greatly from a media boom in India in the last few years. Manugraph claims to control nearly two-thirds of the domestic market. Right now it is in the process of further augmenting its product portfolio.The manufacture of printing machines of different configurations is only business line of Manugraph India. The company derives close to 30% of its business from its export sales and rest from domestic business. There is hardly any competition in the organised sector, and most of the competition comes from either the unorganised segment or foreign manufacturers. In the past six months or so, the company has suffered some setback due to the global recession, and the management has admitted cancellation of few orders by some of its overseas clients. This has led to piling up of inventories and higher inventory carrying costs, thereby forcing the company to operate its two units in Kolhapur for five days a week, instead of six days. This would affect the profitability of the company in the second half of current financial year.In the light of the global economic slowdown, Manugraph is likely to close FY09 with net profit of around Rs 50 crore, which would be at least 20% below its last year's net profit of Rs 62 crore. The second half of FY '09 is likely to be tougher than the first half. However, considering its low debt-to-equity ratio of less than 0.5 and strong cash flows from operations, the company appears to be well-positioned to withstand the current slowdown and emerge stronger when upturn comes. At its current stock price, the stock has a dividend yield of 8%, more than current yield on bank deposits. Even with estimated net profit of Rs 50 crore, the company is likely to sustain a 200%(FV2-4 RS per share) dividend payout (same as last year) even in FY '09. This makes Manugraph a good bet from dividend yield point of view. The only risk, being a faster than anticipated deterioration in the global economic environment.

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