Now, this is one stock that puzzles me.
1. SRF, over the last 4 quarters, has made an after-tax profit of about 200 crores. Yet, the entire company is available at just Rs. 730 crores (Apr 11)
2. The company makes over 3 times of what it made exactly 3 yrs back. The equity structure has not changed much in these years ... and yet, money invested on April 11th, 2005 would, in 3 years, have yeilded a return of just 2.1% (excl dividends)
3. The book value of SRF is today higher than the CMP. In the last 3 years, this has never happened.
4. The stock is available at a PE of 3.42. While the textile industry is down, it's less profitable peers are at an average PE of 7.
Heard anything? Or is it just another value investing candidate?
Tuesday, April 15, 2008
SRF Limited
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2 comments:
Hi Shankar,
I had quick look at the SRF.
They have Debt of 483 crore.If you add that with Market cap 730 Cr, EV comes out 1213 Cr.
If you look at the Netprofit @ Year 2006 (104 Cr) , Year 2005 ( Profit 104 Cr) , it does'nt look promising.
EV / (Normalised earning) will be much higer.
It can be considered as a good dividend yield candidate, But I believe Bakshi bought this stock at 14% Yield. (Which you wont get it now)
Regards
Vishnu
Hi Vishnu,
I have a PAT of 104 crs for FY2006 and 289 crs for FY2007. The trailing 4 qtrs have put together a PAT of 190 crs for FY2008.
If I take a 190 crs and a 60% dividend payout (over 6.8 cr shares), the net income comes to 234 crs. PAT/EV = 234/1213 comes to 19%.
For an investor, a 19% should make sense. Vishnu - i'd like to understand the use of EV further.
However, it seems SRF has one more issue :
Saurabh in his blog had pointed to the company's use of carbon credits that perks up the PAT. (http://pseudosocial.blogspot.com/2007/03/srf-ltd.html)
Saurabh writes : When I looked at the results, I found out that income from CERs was 122.28 crores (out of total income of 450.36 crores). And this is where I had problems.
Warm Regards
Shankar
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