Skip to main content

Stock Review: Mandhana Industries

But High Valuations May Limit Further Upside In The Stock

 

 

MANDHANA Industries' stock has nearly doubled since its public listing in May. Much of the appreciation tracks the company's robust performance in the September 2010 quarter. However, its current valuations seem to fully factor in the future growth expectations and, hence, a further upside looks limited.


   Mandhana Industries is a textile company involved in yarn dyeing, fabrics and garments. It raised over . 108 crore through an initial public offer in April to fund the expansion of its weaving and garment capacities.


   Mandhana earns four out of every five rupees of revenue from the fabrics segment; the garment division contributes the remaining. While it sells fabrics locally, most garments are exported to major retailers in Europe and the US.


   The company has shown a strong momentum in both the segments. In the first six months of FY11, its total sales grew 31.4% to . 328.7 crore and net profit shot up by 64.2%. According to the management, its business grows faster in the second half of the year due to higher export order bookings. Hence, it anticipates an overall topline of . 800 crore on the higher side of the guidance for FY11, 28% more than the previous year's revenue.


   Though the topline growth looks promising, it will not be easy to retain net margins given the rising input costs. Cotton prices have doubled over the past 12 months, propelling yarn prices by more than one-third. Mandhana has so far been able to fully pass on the impact of rising input costs but at the cost of expanding its working capital cycle. It has offered a higher credit period to its clients. This has increased the time to convert raw materials to cash by nearly two-fold to over 120 days. A higher working capital cycle increases the requirement of short-term funds, thereby putting pressure on margins.


   During its post-results conference call for analysts a month ago, the company guided for a net margin of 9% for FY11. Considering this and its revenue guidance for the year, the stock trades at a forward P/E of around 12. This is much higher than P/Es of 5-7 for other textile companies such as Alok Industries and Sangam India. Bombay Rayon, a garment maker with marginally higher profitability than Mandhana, trades at a P/E of 12. Hence, the valuations of Mandhana look rich, thereby leaving no major room for a further increase in its stock price.

 

Popular posts from this blog

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

How to Pick Top Performing Mutual Fund Schemes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   How to Pick Performing Schemes  Funds that continue to stay in the top grade of performance over longer periods are the ones to bet on, advise investment experts   The mutual fund performance charts of the past few months make for an impressive reading. Funds across all categories boast of stellar returns. Sample this: The mid and small cap category has averaged 77 percent return over the past 12 months, with the best fund delivering a staggering 120 percent. The tax-saving funds also average an impressive 51 percent, including a fund which has soared 92 percent. Many of the table-toppers are funds of proven quality and track record. However, there are also schemes that are not that well-known. Some of these have rarely made it to the performance charts in the past, yet, of late, they bo...

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...

Bharat Bond ETF

Top SIP Funds Online   The government of India has paved the way for the launch of India's first corporate bond ETF called as Bharat Bond ETF. Edelweiss Mutual Fund will be managing it. The fund is mandated to invest in AAA-rated bonds of select public sector companies (see the table 'List of constituents and their proportions in the portfolio'). The government has a threefold objective behind launching this product. One, to deepen the liquidity of the Indian debt markets and provide a gateway for easy retail participation. Two, to solve investors' dilemma of picking premium bonds. Lastly, to help the underlying government-owned companies raise funding for their operations. But does it make sense for you, the investor, to invest in it? Lets find out. What is the product? As the name suggests, it is an exchange-traded fund which will be listed on a stock exchange from where its units can be bought and sold post launch. It will have two variants - one maturing in 3 ye...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now