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Wednesday, October 21, 2009

Associated Stone Industries Kotah Ltd:Future growth prospects and outlook

Scripscan:Associated Stone Industries Kotah Ltd

Story:Associated Stone has Kotah Stone Mines. Kotah Stones are architectural materialused in the construction of residential, commercial and even industrial structure.Apart from domestic sales, company is exporting its products to over 30 countries.Company has also diversified into Wind Power Projects which are being funded frominternal accruals. It had installed 2.25 MW Wind Power in 2007-08. Subsequently, itcommissioned another 2.50 MW Wind Power. Now, total capacity stands at 4.75.Despite recessionary conditions prevailing all over the world, Company reportedexcellent results for 08-09. Its sales went up from 116 cr. to 127 cr. and GrossProfit was 18.81 cr. as against 13.76 crs. in previous year. Company, in order tomaintain prices, decided to lower the volumes and sold 123.31 lakh sq. mtr. asagainst 147.03 lakh sq. mtr. in previous year. This strategy yielded good resultsleading to improved profits. During the year Company installed 2.50 MW WindPower in Maharashtra. Now, total capacity stands at 4.75 MW. Stock is trading at6.15 x FY09 EPS and 3.68 x FY09 Cash EPS.ASIL has already achieved EPS of Rs. 9/- in Q1. Company has also applied for Carbon Credit benefits for its Wind Power Business. The proposal has been recently granted 'Host Country Approval' by Government of India. Now, proposal has gone to germanyfor final approval. Benefits of carbon credit will be reflected next year onwards.Stock is trading at 3.33 x FY10E EPS. This valuation is dirt cheap. MiningStocks get very high valuations. Even if Associated Stone gets modest P.E. Ratio of 6, based upon FY10E EPS, share price should be Rs. 144/-.Buying strongly recommended as share price can go up 30-40% in next few weeks (after announcement of Q2 results). Long term investors can gain more than 100%.


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