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Multi Baggers

Sushil Finance

5.30 AM Jan 1st 1970

Nile

BSE ID : 530129     NSE ID :

RECOMMENDED PRICE 185.55

PEAK FROM RECO 1164.00 527.32%

CURRENT PRICE 1250.00 Resource id #18

We believe, the company is currently available at discounted valuations and showcases huge upside potential from current levels and derive a target price of Rs 370 for the stock.

Nile Ltd

Company Overview:

Founded in 1984, the company was originally incorporated as Navbharat Industrial Linings & Equipments Private Ltd. and turned into a public listed entity during the same year.

Currently, the company offers pure lead (99.97%), lead antimonial alloys, lead selenium alloys, lead calcium alloys and lead tin alloys. The company supplies its products to Amara Raja, Icomm, ITW Signode, Kedar Metals and others. For the year ended March 31, 2014, the company registered a net sales of Rs.2,781.8 mn with an EBITDA of Rs.168.2 mn and a net profit of Rs.51.1 mn. Moreover, with the increased capacities, the company has showcased robust growth in Q1 FY15. The company registered net sales growth of 36.4% YoY to Rs. 837.4 mn with a net profit of Rs.28.8 mn as compared to moderate losses in Q1 FY14.

We believe, the company is currently available at discounted valuations and showcases huge upside potential from current levels and derive a target price of Rs 370 for the stock.

Growing Indian battery market:

Over the past few years, Indian battery market which has been a primary consumer of lead metal, has grown at a robust rate to reach the size of Rs 224 bn, according to an industry magazine citing sources including SIAM, Telecom Department and Indian Power Ministry. The Indian battery market is being driven by the growth in both automotive and industrial sectors - including telecom, railway, power and others. The market is largely dominated by the unorganized sector as only one-fourth of the total batteries manufactured are branded. As branded batteries are priced higher as compared to the non-branded batteries, the unorganized market dominates the replacement market.

Increasing capacities to drive growth further:

The consistently rising demand from the downstream industries and limited primary supply has led the lead recyclers to think about increasing capacities substantially. The company, in-line with other peers, has done fresh installations raising the capacities from 26,000 TPA in 2009 to 50,000 TPA by 2012 and 72,000 TPA by 2014. For the past few years, the capacity utilization has remained low on account of slowdown in the automobile industry and limited activities in the other industrial segments. Nevertheless, the recent quarters have indicated a surge in the industry activities with the substantial increase in the top-lines. For the quarter ended March 31, 2014 and June 30, 2014, the company has posted a topline with 32.5% and 36.4% growths on an annual basis.

Available at cheap valuations:

Although, the shares of Nile Ltd. have rallied significantly, having returned more than 200% on the year-to-date basis and quadrupled from their 52 week low levels in November, 2013 - the stock still looks attractive at current valuations. For the year ended March 31, 2014 the company registered a revenue of Rs 3094.6 mn and net profit of Rs 51.1 mn with an EPS of Rs 17 and thus, at current price of Rs 183 the stock is trading at 10.7x FY14 earnings and with our conservative estimated EPS of Rs 34 for FY16 Rs 46 for FY17, it is currently trading at 5.4x and 4.0x forward P/E, respectively. We believe, the company is currently available at discounted valuations and showcases huge upside potential from current levels.

Outlook and Valuation:

The growth of Nile is directly linked to the growth of country's battery market which is dominated by the automobile sector. India is emerging as a favourite destination for global automakers and is likely to be the manufacturing hub for the global automobile companies in times to come. There would be demand from Original Equipment Manufacturers (OEMs) and there would be equally robust parallel demand from the replacement market. Apparently, the Indian battery market is expected to double over the next four years. The growth is coming from both automotive and industrial sectors on account of surge in usage in telecom, railways, power and other industrial applications. Though the lead demand has remained low for past few years on account of global economic slowdown, there has been an uptick witnessed over the last few quarters with the pick-up in demand from automobile and industrial spaces. In line with our robust outlook on automobile and auto-ancillary, we expect strong traction in lead demand mirroring the demand for batteries. Furthermore, the company has recently enhanced capacities and showcased strong top-line growth in quarter ended June 30, 2014. At current price of Rs.183, the company is trading cheap at 10.7x its FY14 EPS of Rs.17.0 and going forward, we expect company to register an EPS of Rs.46.2 in FY17 and by allocating a target multiple of 8.0x, we derive a target price of Rs 370 for the stock.

For full details, Click on the attachment.

Disclaimer: This report is prepared for the exclusive use of Sushil Group clients only and should not be reproduced, re-circulated, published in any media, website or otherwise, in any form or manner, in part or as a whole, without the express consent in writing of Sushil Financial Services Private Limited. Any unauthorized use, disclosure or public dissemination of information contained herein is prohibited. This report is to be used only by the original recipient to whom it is sent. This is for private circulation only and the said document does not constitute an offer to buy or sell any securities mentioned herein. While utmost care has been taken in preparing the above, we claim no responsibility for its accuracy. We shall not be liable for any direct or indirect losses arising from the use thereof and the investors are requested to use the information contained herein at their own risk. This report has been prepared for information purposes only and is not a solicitation, or an offer, to buy or sell any security. It does not purport to be a complete description of the securities, markets or developments referred to in the material. The information, on which the report is based, has been obtained from sources, which we believe to be reliable, but we have not independently verified such information and we do not guarantee that it is accurate or complete. All expressions of opinion are subject to change without notice. Sushil Financial Services Private Limited and its connected companies, and their respective directors, officers and employees (to be collectively known as SFSPL), may, from time to time, have a long or short position in the securities mentioned and may sell or buy such securities. SFSPL may act upon or make use of information contained herein prior to the publication thereof. Stock Review Reports: These are soft coverages on companies where Management access is difficult. Views and recommendation on such companies may not necessarily be based on management meeting but may be based on the publicly available information and/or attending Company AGMs. Hence Stock Reviews may be just one-time coverage’s with an occasional Update, wherever possible.

Nile Ltd_Sushil Finance_Multibagger.pdf

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