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Sunday, March 4, 2012

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

Scripscan:Patspin India Ltd

Story:Patspin India Ltd., belonging to BK Patodia group of companies, is a south based Cotton Yarn producer. As of 2011, the company's installed capacity is 111,024 spindles and 5.8 MW captive wind mill based power. Patspin posted Rs. 436.24 crores sales and a net profit of Rs. 25.34 crores in FY 2011 compared to a Sales of Rs. 292.7 crores and Rs. 4.06 crores net loss in FY 2010.It was jointly promoted by Patodia family, its group company GTN Textiles who together holds 47.25% of shareholding in Patspin, Japanese company Itochu Textile Materials (Asia) Limited holds 9.70% and Kerala State owned KSIDC holds 8.05% . Nearly 50% of its sales are exports and remaining is sold in the domestic market. The company undertook major expansion with the help of loans at attractive interest rates.Due the massive expansion plans the company's current debt to equity ratio is a HUGE 5.8 .Lot of other cotton yarn companies have also put up huge capacities using cheap funds supported by Ministry of Textile schemes. Currently there are surplus capacities and overall capacity utilization is very low. With the removal of export subsidies and incentives Patspin is at a disadvantage. No doubt the company's management record and its dividend payout has been excellent. It was paying good dividends till FY 2007 and then due the expansion plans, the interest costs and higher depreciation ate away its profits.2011 was an exceptional year for Cotton Yarn industry in my opinion.At Rs. 13 -Rs. 14 should be the fair value for this stock because even during the the boom time around November 2010 the stock made a high of just Rs. 25.05.The stock may rally further to those levels only when we see a rally in cotton and cotton yarn prices like 2010. Otherwise we can simply ignore this stock as there are better options in the Cotton Yarn industry with less debt and good dividend record.

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