BUY NILKAMAL STOCK AT 310 FOR TARGET PRICE 400

BUY NILKAMAL STOCK AT 310 FOR TARGET PRICE 400

Material handling segment has the potential to report healthy growth/margin.Nilkamal is the market leader in moulded plastic products and plastic crates. The products offered by its largest division, material handling, are sold (on B2B basis) directly by its more than 350 sales personnel to engineering, automobile, pharmaceutical industries etc.

NL enjoys a market share of 60% in this segment, with the second-largest player being Supreme Industries (SIL). Fast growth in the material handling business, which incidentally is also NL’s most profitable segment, is being driven by a multitude of sectors like agriculture, hospitality, logistics, industry, waste management, automobiles, dairy and horticulture products. Because of the diversified customer base, there has not been much impact of the recent slowdown in IIP growth. The Management expects this business to continue to grow at 20% CAGR, with sustainable EBITDA margins of around 14%.

Also another attractive point for NL is that EPS growth over the next three years between FY14 to FY16 is expected to average 18-20% plus YoY but valuation multilpes look quite low between 8x on FY15 and 7x on FY16E. Also NL’s cash earnings have grown robustly in last 3 years with CPS being Rs 67 in FY14 as compared to Rs 51. in FY13 which will further increase to Rs 78. in FY15 and Rs 91 in FY16. Hence it would be prudent to value NL on cash earnings rather then net earnings alone.
To add the current market cap of NL at Rs 527. crs, the NL stock trades a market cap to sales multiple of just 0.27x on FY15E whereas the potential revenue over the next 2 years is over Rs 2200 crs.
Hence I believe that the NL stock should be purchased at the current price for a price target of around Rs 310.

It is best to consider that, i have vested interest in this stock as i have invested !!!

How to identify Multibagger stocks for investment

How to identify Multibagger stocks for investment

Multibagger stocks are typically those stocks that have the potential to become market leaders in their business domain in the future but currently are trading at low values. It is a dream of every stock market investor to identify and invest in these stocks. Just think about the kind of returns you might have got if you were to invest in stocks suchs as InfoSys, Bharati Telecom, Reliance Industries Ltd etc some 10 or 15 years ago. Such is the power of identifying and investing in Multibagger stocks. But the big question remains - How are we supposed to identify such future leader aka Multibaggers? Are their any traits that we have to look for to identify multibaggers? Well, here is some points that could help you in that direction.

Here are few easy steps to identify Multibagger stocks.

1. Look for a company which gives regular dividends. Paying consistent dividends imply that the management is willing to share the profits with the investors. Such stocks mostly lie in A group category. But again, paying too much dividend as a percentage of net profits is also not good. That means that the management is not finding good oppurtunities to reinvest the profits for business expansion. Typically multibaggers stocks will have massive expansion plans most of the times.
2. Go for a Mid cap stocks that have the potential to become a large cap in the near future. Mid cap stocks have a greater chance to move upwards quickly. Preferable a stock whose market cap is less than 1000 Crores.
3. Look for a stock that is doing good business in a flourishing niche sector that have huge future potential.
4. Carefully check the financial figures of the company. Multibagger stocks are typically (but not necessarily) growth stocks that show very good year-over-year growth in both Top line and Bottom line. Also check out the growth in EPS of the company over past fewyears.
5. Check if the company is operating on a new investion or idea or solving a burning problem of the coming days. Say for example there is a invention of a new technology which will be in demand in a near future. An excellent example is invention of 3G. Even TATA Nano can be taken in consideration as it is only one of its kind being the cheapest car in the world. Think of companies that are operating in sectors such as Education, Water Management, Waste Management, Agriculture etc that have huge future potential.
6. Check out for companies order value. There are various companies which have a good amount of orders for future which are of great importance to a company.
7. Check out the expansion plans of the company and importance of the sector that the company is operating in.
8. Last and not the least be confident in your stock pick. For this you have to do a very careful reasearch about the business of the company and once you are confident that the stock has the potential to become a future leader, stay invested in the stock for long term.

Few don’t s in selecting a multibagger stock.

1. Don’t select a Penny Stock.
2. Don’t loose hope in your company.
3. Don’t depend on others , do your own research.

With regards