Poddar Pigments - BUY !

Business : Jaipur based Poddar Pigments Limited is coming out with flying colors – Yes, PPL produces colored Dyes and Pigments used in Textiles, Plastics & packaging, Engineering compounds, molding machines etc. The company claims to be the pioneer in India for fibre-grade Master-batches with a capacity of 8400 TPA and the first in India for creating Master-batches for dope dyeing for Poly propylene, Nylon & polyester multifilament yarn & fibres. Looking at its product offerings & portfolio, well, no prizes for guessing  that its pigments will always be in increasing demand from domestic as well as international customers. The potential markets for PPL products looks really impressive -

- Knitted Fabrics (Socks, Sportswear and undergarments etc.)

- Carpets (Floor coverings)   

- Woven Fabrics (Medicinal and Sanitary clothing)

- Household Textiles (Upholsteries, Textile Wall coverings, Garments etc)

- Non-woven - Hospitals and other sanitary supplies.

Financials : For FY2009-10, the company posted an EPS of 12.10 (almost 4 times of FY09) with a topline of 162.4 crores and net Profit of 14.20 crores (up whopping 257% from FY09). The company continues to be in sync with its exponential growth pattern declaring decent June10 Q results – an EPS of 2.49 (compared to 2.04 last year). Looking at the potential market reach and growing orders – this company seems pacing for an annualized EPS of more than 12 this FY also. At current price of 48 Rs – this stock is highly undervalued and available at a PE of less than 4.5. The stock is a DECENT BUY and one can hold this stock long for strong upside in time to come.
Positives : The company has a strong SHP which increased from 41% to 55% now in last 6 years – in fact, last year company management did a buyback of its shares from the market which highlights that future looks bright for Poddar Pigments – speaks volumes about promoters confidence in the company.

- PPL has a topline of more than 150 crores on an Equity base of just 10.61 crores – impressive !

- its Debt/Equity ratio is less than 0.5 and it’s backed by good working capital management.

- Poddar Pigments has a huge up growing addressable market.

Negatives : There are a few competitors in the unorganized sector.

- It addresses textile market largely which is a cyclic sector but icing on the cake ~ we are currently in a textile boom cycle.

Conclusion : The stock has been hovering around 44-49 range for some time which makes a perfect buying zone. The recent revival in company with strong Q figures makes Poddar Pigments a SAFE BUY @ CMP of 48 Rs for decent returns in medium to long term. The stock has definitely the potential to double at least in next 8-9 months duration visualizing an EPS of 12+ this FY. If the company continues to perform well as shown by its profits & earnings, the stock is a hold for 2-3 years term for further strong gains.