20 June 2016
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Three fundamental stocks for long term gains
NCL Industries: A celebrated turnaround in 2014-15, reported its fifth straight quarter of growth in the first quarter of 2015-16 with a profit after tax (PAT) of Rs 20.3 crore. Interest cover of more than five in a capital-intensive business. Assuming the company can report only half its annualised profit, it would still be priced less than eight times the current year earnings. Fancy getting a two-million TPA cement company in the worst of markets (in what could one of the most attractive geographies, going forward) for a market cap of around Rs 300 crore. Current Price - Rs 133 PE ratio - 9.18 EPS ratio - 14.5 Omkar Speciality Chemicals: Generated an Ebitda (earnings before interest, tax, depreciation and amortisation) in excess of Rs 10 crore in the first quarter of 2015-16, with an interest cover of around four. Market cap of Rs 320 crore ,with the possibility of 20 per cent annual revenue growth and attractive operating leverage. Current Price - Rs 160 PE ratio - 10.75 EPS ratio - 14.88 Salzer Electronics: A long-term story in a relatively safe space, with impeccable credentials. Reported a Rs 5 crore profit after tax (PAT) in the first quarter of 2015-16 (Rs 4.83 Earnings per share) and likely to report Rs 18-20 crore PAT for the full year corresponding to a market cap of Rs 220 crore. The Qualified institutional placement will raise equity by Rs 2.6 crore but that would then create the ammunition to generate revenues of Rs 1,000 crore by 2020. Work the math, given that the company is working on a five per cent net margin (and likely to rise). Current Price - Rs 211 PE ratio - 17.03 EPS ratio - 12.40