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Thursday, March 1, 2012

Bimetal Bearings Ltd:Buy/sell/growth prospects and recommendation,news and results,target and analysis,view and outlook,multibagger

Scripscan:Bimetal Bearings Ltd

Story:Bimetal Bearings, is a South India-based auto ancillary unit, manufacturing thin-walled bearings, bushings and thrust washers. For the year ended 31 March 2011, the company posted a net sales of Rs. 153.76 crores compared to Rs. 119.61 crores in the year 2010. The company's net profit came flat Rs. 9.14 crores in the year 2011 compared to Rs. 8.94 crores in 2010.The company also exports its products which contributes nearly 25-30%. The company also maintains a very clean balance sheet with negligible debt and surplus cash and other investments. The company also maintains a generous dividend payout of about 35-40% of net profit.In 2011, the company celebrated their golden jubilee. It has very good track record of paying dividends and also maintains a debt free status. But, for the past 4-5 years the company's return on equity has been in single digits. The company could post rise in sales over the years but its net profit has been flat at Rs. 8-9 crores. The reason which I found was that, they depend on diesel generator for significant amount of their power requirements and the cost of grid power has also been increasing every year. As of 2011, their average power cost including grid power and diesel generator based power works out to about Rs. 8.80 per unit. This high power cost shaves of nearly Rs. 5-7 crores of net profit as of 2011, assuming the average grid-based power cost of Rs. 4.5 per unit.In 2011, the company utilised hundred percent of the installed capacity which can pave the way for future expansion. As on date, at the share price of about Rs. 287 the company is trading at below its book value of 329rs. At about 200 plus levels this stock should be a good buy and can at the maximum reach Rupees 400+ levels in 2 to 3 years time as the power cost gets reduced due to lot of power plants getting commissioned in Tamil Nadu in the next few years.

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