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Sunday, September 27, 2009

Shree Rajasthan Syntex Ltd:Paid call to members(future growth prospects and outlook)gem of a penny stock(stock under 10rs)

Many of you repeatedly in my mail have asked for paid calls and what they will be and all.Now as an amateur and being a social guy I would always safeguard the vested interest of investors than something else.The open blog is a place for me to give guidance..paid blog is for the one who needs those calls and my bigtime guidance desperately.Anyways here"s an example of a paid member call and the type which I provided just few months back.

Scripscan:Shree Rajasthan Syntex Ltd
Duartion:9-12 months
Return percentage:260%
Stop loss:Not needed

Story:2007 & 2008 proved to be the worst ever in Indian Textile Industry wherein, demand slumped, R/M prices went up and selling prices plunged. Due to same, share prices of textile companies touched new lows. However, fortunes of many textile companies have again taken a U-turn and still such scrips are available at dirt cheap valuations. SRSL is one such company and hence the recommendation.

BACKGROUND: Udaipur based SRSL is engaged in the production of Grey Yarn, Dyed Yarn and PPMF Yarn:

Grey Yarn: Grey yarn is produced using blends of different synthetic fibre such as polyester/viscose, 100% viscose yarn, 100% polyester fibre yarn and pure cotton. These qualities are produced in SRT division and Polycot division of the company.

The company has niche markets for 100% viscose fibre yarn. Specialty fibre yarns were developed for industrial and home textile applications.

Dyed yarn: Dyed yarn is produced at Syntex division of the company. These yarns are relatively higher value added products and made according to customers specification of blend, counts and shades. The company has specialty in producing home textile dyed yarns for end use such as carpets, tapestry and upholstery. Further efforts are being made to develop melange yarn for weaving and knitting applications.

PPMF Yarn: Polypropylene multifilament yarn is produced at Shree Shyam Filament division of the company at Bagru, Jaipur, POY and texturised yarn is produced for knitting, socks and furnishing applications. BCF yarn is produced for carpet applications.

Recently, SRS has also commissioned 10MW Power Plant for captive use. Its installed capacity are as under:

1. 67584 Spindles for Synthetic Blended Yarn.

2. 14520 Spindles for Cotton Yarn.

3. 3600 tonnes for PPMF.


2 0 0 8 - 2 0 0 9 2 0 0 7 - 2 0 0 8
Rs/Cr Rs/Cr

Turnover 271.22 303.38

Interest Cost 10.64 9.49

Depreciation 10.66 9.95

Profit/Loss - 9.38 0.37

Equity 11.75 11.75

Book Value Rs. 39.55 47.70

In 2008-09, performance was severely affected due to slowdown in domestic as well as international market. It produced 22915 tonnes of yarn as against 24306 tonnes in previous year. During the year, exports fell to 56.50 crs. as against 102 crs. in previous year. Above results include forex loss of 5.24 cr. It means loss from the operations was 4.14 crs. Since depreciation stood at 10.66 crs., cash loss was just 1.28 crs. In Q4, it commissioned 10MW Power Plant which will not only reduce power cost but will ensure higher production.

Presently, huge expansion of weaving is taking place in Bhilwara which is the biggest yarn market in India. On the other hand, no new spinning capacities are in pipeline. Hence, it is estimated that next year, demand for yarn will be much higher and spinning companies like SRSL will have better profit margins. Also, even next year R/M prices will remain soft/reasonable and very unlikely to rise due to huge global capacities.

Valuations: SRSL is available dirt cheap at CMP considering the following:

A. Current Market Cap is just Rs. 7 crs. (and Company has a debt of 167 crs.). However, replacement cost of SRSL is nearly Rs. 350 crs.

B. Stock is trading at 1.13 x FY10E Cash EPS. Estimated cash profit is 14.50 crs. which is 85% of current market cap.

C. Stock is trading at less than 1 x FY11E Cash EPS.Estimated cash profit of 17 crs. is more than current market cap.

D. Stock is available at 1x FY11E EPS.

E. Current Market Cap is just 2.4% of FY10E sales.

F. Gross Block is 274 crs. It means, market cap is just 2 odd% of gross block.

G. Net Block is Rs. 152 crs. It means market cap is just 11% of Net Block.

All said and done its a multibagger.A great buy at presnt levels of 5rs.

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