APM Industries Ltd:Buy/sell/growth prospect and recommendation,news and results,target and analysis,view and outlook,multibagger

Stock idea:-

Scripscan: APM Industries Ltd(FV-2)

Bse code:523537

Cmp:18

Target:26

Percentage return:45%

Duration:6-9 months

Quote:This days am not able to concentrate much on my research,thanks to the prolonged bed rest,as suggested by the doctors.But the good thing is my research analyst fraternity have been very generous to share lot of stock ideas.The discussion in the cell goes on for hours.Hemant bhai,the veteran who has been a mentor figure for long now came up with a stock idea which immediately qualified as a decent small cap bet.

Story:Belonging to Rajgarhia group, APM Industries is engaged in production and marketing of Poly/Viscose and Polyester-blended Yarns Having its plant in Bhiwadi, APM has installed capacity of 50,000 spindles. Yarns manufacturer by APM are used for making suiting fabric, shirting fabric and knitted fabrics. APM has been supplying its yarn to leading brands like Siyaram, S Kumars, Raymond, Digjam, Donear etc. Yarn manufacturers are doing extremely well and APM is available at extremely attractive valuations and trading at substantial discount to its Book Value, hence the recommendation to buy.

                               2011-12             2010-11
                              Rs/Cr                 Rs/Cr

Sales                      259.82               243.62

PBDT                       24.13                 26.66

Depreciation                4.62                  4.71

PBT                          19.51                 21.95

PAT                           12.60                13.82

Equity                         4.32                  4.32

Eps Rs                       5.83                  6.39

Promoter                    62.81%

For FY12, APM ind had reported 6.65% rise in its sales. But Pat declined by 9% due to erosion in  profit margins in H2 due to sudden fall in realisation. APM had declared 30% dividend for the year.

FUTURE OUTLOOK:

                            Q U A R T E R  E N D ED        H A L F  Y E A R  E N D E D
                            30.9.2012        30.9.2011           30.9.2012         30.9.2011

Sales                     89.21             84.48                  149.63            146.19

PBT                         9.20               6.37                   14.14              12.50

PAT                         6.18               4.08                     9.41                8.29

Eps Rs                   2.86                1.89                     4.36                3.83

APM Industries has reported fabulous results for quarter ended Sept 2012 wherein Pat has risen by 50% to 6.18 crores. Eps for Q2 ALONE is 2.86.  Eps for H1 is Rs 4.36 as against 3.83 in corresponding half of previous year. APM has declared Interim dividend of 30% i.e 60 Paise.  

In FY12, profit margin of APM had declined in H2 due to unexpected slowdown. However, as per industry sources, now there are no signs of slow down. Rather , fibre prices (raw material for producing yarn) have declined recently. and hence, APM should continue maintain its profit margins in H2. 

For FY13, APM Industries is likely to achieve Sales of 280 cr and PAT can be Rs 19 crores. Thus, Eps for FY13 should be Rs 8.80.  Its Book Value as on 31st march 2012 was Rs 31.40 and should be Rs 38-39 as on 31st march 2013. 

Stock is trading at just 2xFY13E Eps and 0.45xFY13E Book Value. APM will definitely declare handsome final dividend also and may also cheer with first-ever Bonus issue. Management is extremely reliable, efficient with low overheads. Few years back when majority of yarn companies reported losses, even at that time, APM continued to report profit which proves investor-friendly attitude of management. Its such a counter which offers a superb dividend yield of over 7% at present prices.A mere forward 3 PE multiple helps me to arrive at a target price of 26rs.Members can expect appreciation of 40-45% in 6-9 months.