SIMRAN FARMS - Buy Now !!

Business : Simran Farms is an Indore based company engaged in Poultry vertical. The company is growing thick and fast as we see March 2010 turnover is more than 136 crores. On an equity base of just 3.8 Crore company the firm has posted an EPS of Rs.9/- There are not many listed players in Poultry segment other than the known Venkys India and Srinivasa Hatcheries. If we analyze company’s recent performance, an EPS of 7.35 in FY09 has grown leap & bounds to an EPS of 9.19 in FY2010. Icing on the cake, latest June 2010 quarter EPS of 5 makes me feel confident of FY11 earnings of nothing less than 16 EPS. Currently hovering around 54-58 Rs range, this stock is available at a PE ratio less than 4 and is dirt cheap by all means - a MUST buy !!

Positives : Since listing in 2002, Simran farms have a very strong SHP (share holding pattern) with promoter stake around 36%. I foresee increase in promoter’s stake in time to come considering company’s prolific growth.
- In last 2-3 years company has not increased its equity share capital and has no plans in near future too.
Negatives – Company does not have a website but I guess the day is not far when the company will officially launch its website. It does hinder some transparency from company management side but its earnings growth speaks volumes.
- Please note that Poultry stocks are cyclic in nature because every 3-4 years, one or the other kind of chicken flu arises & that’s the time to get out of poultry stocks!!

Remark : Start buying SIMRAN FARMS between 50-60 range and I can see sure shot FY11 earnings of 16 EPS. That suggests a target of around 140- 160 in another 8-10 months. Depending upon future performance which looks promising this stock could be held for 2-3 years timeline for a 3-4 bagger returns. I strongly believe that Simran can turn out to be next Venkys India in the making.