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Tuesday, June 28, 2011

Rajoo Engineers Ltd:-Buy/sell/,growth prospects and recommendation,news and results,target and analysis,views and outlook,multibagger

Scripscan:Rajoo Engineers Ltd

Story:Rajoo Engineers Ltd (REL) is one of the leading extrusion machinery manufactures in India and has emerged as an undisputed global player in blown film and sheet extrusion lines. The company has the largest market share of blown film lines, sheet lines and thermoformers on the Indian sub-continent.With exports representing ~50% of the total sales, the company enjoys successful and satisfied customer base across the globe due to its ability to meet technical demand through innovation.The growth of plastic industry has a strong co-relation with the growth in GDP. Historically the plastic industry has seen 1.5x-2x the growth rate of GDP, at the current Economic growth rate of ~ 8% p.a, even at a conservative rate we can expect the industry to grow by 12% and Rajoo Engineers being the leading manufacturer of Plastic extrusion machinery will be a major beneficiary of the same.Rajoo Engineers offers a wide range of extrusion machinery which in turn is used for manufacturing various kinds of plastic films and packaging. Other than machinery sales the company focuses on services of the existing machinery as well, which acts as a natural hedge against any slowdown in the economy which might act as a dampener in product off take.Despite competition from established worldplayers,REL has created its own niche for extrusion machinery which finds acceptanceacross the globe. REL exports its products to over 40 countries and exports constitute 50% of the revenue, thus de-risking the business model.With a modest beginning now the company has achieved scale of business. After reporting a healthygrowth of 19% in revenues (Rs 47.8 cr) in FY09, during FY10 the company reported a jump of 55.6% in its top line to Rs 74.3 cr. The company has also been steady in maintaining its operating margins of 10-12% and PAT% of 5-6%. With the completion of capex and new acquisitions the company is likely to report accelerated growth in revenues and profits.Looking at the niche market which the company is targeting, it is expected to report strong growth going ahead. Wide product portfolio along with the recent acquisition and JV will help the company in reporting superior numbers in the future. At the CMP of INR 15 the stock is available at 5.8x its FY12E EPS of Rs 2.6.Investors with a time horizon of more than one year can buy the stock with a target price of Rs 24 an upside of 60% from current levels.
Source:Sanguine capital

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