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Wednesday, December 9, 2009

Shiva Cement Ltd:Buy/sell/hold,growth prospects and recomendation,news and results,target price and analysis

Scripscan:Shiva Cement Ltd

Story:A small cement company with a tiny sales figure of 31crs in fy09 planning big by expanding the capacity up to 20.3 million tonne to be implemented by 2013.Its planning a rights issue to raise some money which would result in an equity dilution of 40%.The company has been in the business for last 2 and a half decades but cudnt take off in a big way till date.As a matter of strategy in FY08,It entered into strategic alliance with ACC with two objectives; one to expand the plant and second to market its product under their brand equity. So its obvious that the company is expanding big depending to a large extent upon ACC.Projects materilization risks,funding risks,high dependence on ACC makes it very vulnerable.Lets look at the valuations,it expected to clock an EPS of 1re in 2011 which makes a PE of 11 at present prices.Shiva already has got a blotted equity and thats set to get enlarged after the rights issue.There are so many better and bigger efficient cement players quoting at low single digit multiples that it makes no sense to invest in shiva cements.Simple retail investors would always have a fetish as far the penny price stocks are concerned.But if the valuation metrics goes wrong you would end up eventually in losses.Either make a switch to a better cement player or go for other penny stocks having better prospects and outlook.

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