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There has been a huge polarization in Indian markets over the past 2 years. Domestic Consumption based shares at trading at very high P/E multiples (25-30X Earnings), whereas Infrastructure, Investments or Manufacturing related companies have been beaten down severely and quoting at very low P/E Multiples. Everyone accepts that Indian Secular growth story is still strong and the opportunity for well run consumer focused companies in India is very high. But, its difficult to earn strong returns – If you are buying an already fairly valued share. Any appreciation is possible only on the basis of earnings growth and the risk of de-rating erases the Margin of Safety in the stock.
But here we have a company which is highly efficient with a Robust business model, Domestic consumption stock, Strong Return parameters, Good Management and still Quoting at attractive Valuations. C*** company in no way can be classified as a Tier-2 Consumption stock, as its Financials are comparable with the Marquee names. The stock has the double booster of Strong Earnings growth in the coming years combined with a Potential P/E re-rating, which makes it a strong candidate for generating Multi-bagger returns.
C*** company with its strong Base built over 20 years, is well positioned to reach its ambitious Revenue target of 1000 Cr by 2015-16. Even if the company’s management is able to achieve 70% of its growth targets, the Share will be at much higher levels when compared with the current prices. Moreover, we feel that the Quality of C*** growth with sustainable margins is highly attractive.
C*** at the present price quotes around 11X its one-year forward earnings, which is attractive for a company which generates greater than 24% ROE and 30% ROCE. More importantly, C*** has a lot of factors to maintain such high Return ratios and also improve on it during Good Environment. This provides a strong case of Re-rating of the stock. Investors are advised to take a small exposure to the stock at current levels and accumulate it over the next few months, to generate strong compounded returns over the next 3-5 Year time frame.
- Team HBJ Capital