ORIENT CERAMICS & INDUSTRIES LTD - BUY !

Business : I have been tracking this upcoming giant for some time – a tile manufacturer and walls & floor decorator – ORIENT CERAMICS & INDUSTRIES LTD. OCIL since its inception in 1977 has been at the forefront of innovation in home décor ever since and is the pioneer in the manufacturing of Ultra Vitrified Tiles in India. Under the expert guidance of Mr. M K Daga, the foremost ceramic tile technologist in India, the company has grown strength to strength and has expanded in terms of size, scale, network, product portfolio and revenues. It got listed on the BSE in 1993 and on the National Stock Exchange (NSE) in 2007. For the first time, an Indian company has hired a European Designer to unleash next generation innovative tile suits. OCIL manufactures one of the widest range of Non-Vitrified, Vitrified, Ultra Vitrified and 3rd Fired Decorative Tiles for walls, floors & facades. Starting with an initial installed capacity of 4,000 TPA in 1977, the company’s production capacity has grown multifold and stands at 220000 TPA today.

Financials : For FY2009-10, the company posted revenues of 269.75 crores (up 13% from FY09) and PAT of 11.46 crores (up 80% from FY09) with annualized EPS of 10.88 (up 80% from FY09). The company continues its fairy tale declaring outstanding results for Q1FY2011 – net Profit of 5.31 crores (whopping 249% growth over Q1FY2010) and an EPS of 5.04 (250% zoom over Q1FY2010). Looking at prolific success of its newly launched decor ranges – Europa and Stiler – the company is heading for an annualized EPS of around 18+ in this FY itself. At current price of 85 Rs – this stock is seriously undervalued and available at a PE of around 5. The stock is a sure shot buy and one can expect a huge upside in time to come. The downside looks limited.  

Positives – The company has an outstanding SHP which increased from 70% to 74% now in last 8 years – speaks volumes of promoters confidence in the company.

-      OCIL clientele in the real estate development space includes biggies like DLF, Unitech, Parsvnath, Shobha Developers, Rahejas, L & T, Rites, CPWD, MES, AAI and several medium scale builders.

-      Orient products have been extensively used in the construction of the prestigious Rashtrapati Bhawan in addition to beautifying structures like India Habitat Centre (New Delhi), Delhi High Court, Kolkata Airport, DMRC Stations among others.

-      Orient Tiles client base is not only found in India, but are also spread across Europe, South East Asia, Middle East and the SAARC countries.

Negatives – None.

Conclusion : Start accumulating ORIENT CERAMICS & INDUSTRIES LTD at current price and on dips and I can foresee an EPS of 18 or more this FY. Hold the stock for 2-3 yrs timeline for 250-300% gains. This stock is a MUST in your portfolio and could be held even for long term.