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Thursday, October 20, 2011

Voith Paper Fabrics India Ltd:-Buy/sell/growth prospects and recommendation,news and results,target price and analysis,view and outlook,multibagger

Scripscan:Voith Paper Fabrics India Ltd
BSE code:522122
cmp:240

Story:This is a paper company. It makes the products which are used for paper manufacturing. It is a 74% subsidiary of Voith Group of Germany. Now Voith Group has got worldwide sales of close to 5 billion euros and employees about more than 40,000 people and about 200 locations all across the world. Now it is said that one-third of world’s paper production is carried out in machines which is made by Voith Paper.So it is a fairly large company specialized in the paper sector.Coming to the Indian subsidiary, Voith Paper Fabric make industrial feel which are used for paper manufacturing. The primary customers for this company are the paper and cement sector. If you look at the valuations of the company, at the current market price, the marketcap of the company is just about Rs 105 crore. It is a totally debt free company having cash in hand of close to Rs 52 crore which makes the enterprise value of the company at just about Rs 50 crore. So you have a multinational company available at enterprise value of Rs 50 crore. There are various possibilities which exist in this company. One is that in case Voith decides to expand their operations in India, they may introduce a number of other products for the Indian market which will definitely scale up the business of Voith Paper.The other opportunity for the shareholders exists in the form of a possible delisting. In case the management decides to delist the share, it can lead to value accretion for the shareholders of the company. Now if these things do not happen, you still have a company which is growing at the reasonable rate and available at very attractive valuation of about enterprise value of just about Rs 50 crore and making a profit after tax of about Rs 8 crore every year and also paying dividends for the past 12 years.So under the first scenario, in case they want to scale up the operations or in case they decide on the delisting then you may have big value created in Voith Paper. In the second scenario, the company decides to go the way they have been going for the past couple of years, grow at about 8-10-12% every year, you still have a company available at an enterprise value of Rs 50 crore and making profit after tax of about Rs 7-8 crore and also paying dividends on a regular basis. So that downside from these levels look extremely restricted upside would depend a lot upon the future course of action which the management wants to do with the company.

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