Thursday, February 16, 2006

Amtek India - is it another hidden goldmine?

Rakesh had posted a comment on a previous blog, seeking views on Amtek India. In a rather nonchalant manner I was examining the stock stats. Infact let me put down the stupid comments I was about to post ...

"Hi Rakesh, I checked out Amtek India. You may have something here. The stock is currently trading at a fwdP/E of 10.4 which is rather good. Though it doesn't have any margin of safety to speak of and a low dividend yield of 0.4% - I like the fact that it is growing at 25% year on year in Sales and Profits and fantastic management."

Repeat : it doesn't have any margin of safety to speak of

A look at the balance sheet may give a different picture. Annual Report. Pg 29 .. under Investments, reads 9675095 shares of Amtek Auto Ltd. of Rs. 2/- each .... amount 3511.2 lacs. So each share of Amtek Auto is being evaluated at rupees 36.29 only. The current price of the same Amtek Auto share (Feb 16th) is 302.00 rupees on the NSE. Which means, investments on the basis of this one holding itself is atleast INR 29,218.78 lacs (292.18 crores).

292.18 crores is exactly 50% of the current m-cap of Amtek India (587.86 crs).

There is my margin of safety.

Moral of the story ... always, always read the annual reports !!!!

7 Comments:

Blogger Rakesh said...

Shankar,

Thanks for your analysis on Amtek India. In fact I was holding back for your comments before investing in this counter, in spite of my own +ve evaluation of this company. I definelty missed the Amtek Auto angle. I am going ahead and investing in this counter now.

9:38 AM  
Anonymous Anonymous said...

Good one mate. Will make a note to read the annual report henceforth!

Any analysis on Neyveli Lignite would also be helpful. I have invested at 73.8. CMP is around 72.0 now.

Thanks, Sai

10:13 AM  
Blogger Rakesh said...

Hi Sai,

Though I am not an expert in terms of understanding intricacies of stock valuation, but according to me Neyveli Lignite is going to be very slow mover. It is a safer bet though. I bought few shares at Rs. 62 around one year back and sold 75% of it at around 80. But it is between 72-84 range for long. We got to compare such stocks with Mutual funds where also you can get safe returns and it may be more than what Neyveli Lignite is going to provide you.

1:51 PM  
Blogger Laxmikant said...

Hi,
So what you suggest on this should one can go and purchase.

9:12 PM  
Blogger Shankar said...

Hi Laxmikant, I find the financials and the long-term business of the company to my comfort. So i'll buy and hold. (already bought at 99.2 rupees)

Warm Regards, Shankar

9:24 PM  
Blogger Rakesh said...

Hi Shankar,

Bird flu has cause Venky's stock to come down by 15% today. It is quoting at Rs. 132 today. A good buy, what say?

-Rakesh

11:12 AM  
Anonymous Anonymous said...

Thanks for the info Rakesh... Was really helpful.

Cheers,
Sai

4:45 PM  

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