I am not a technical expert and a pure fundamental analyst. The way I see it in the screen is that today's volumes which you call double the previous day volumes were 70 % contributed by two block deals. Also, if I am right, technical analysis works on stocks which trade high in volumes and not in cases where the volumes have never reached above 1 lac shares. Such shares are called undiscovered stocks which trend as per technical analysis only after they have appreciated considerably.
The approach towards investment into risky assets like equity is not atall a shrewd approach if you need such money for critical purposes or in the medium term. However, one thing you need to understand that equity investment into well managed fundamentally sound companies multiplies your money over a 3-5 years period the way no other investmestment option multiplies. My approach is to invest in the companies that have grown consistently over a period of last many years amidst adverse conditions and are operating in a niche segment which itself is expected to register a double digit p.a. growth over the period of atleast next 5 years, that have scope of expansion in NPM and are professional managed.
Now, with rgds. to plastiblends, although still i am doing a deep analysis of the company but so far (70 % complete), this company :
(1) looks excellent on balance sheet front with low debt and high reserves.
(2) The segment in which it is operating viz., masterbatches, has shown a CAGR of 15 % since last 5 years and is expected to register a 10-15 % p.a. growth till 2015.
(3) It has high promoter holding of 56 + % and its parent company viz., kabra extrusions has recently announced bonus and has an egm on 26/08 for approval of the same.
(4) Plastiblends is a consistent high dividend paying company and has reported positive bottomline over the period of last 10 years.
(5) From just 92 cr. topline of FY05, it has attained a 210 cr. topline in FY10 with 60 cr. of that already achieved in Q1FY11.
(6) It is worthwhile to note here that 60 cr. topline is the highest qrtrly. topline figure attained by the company in its history of existence. This is the main attraction towards this company and only one another good qrtr. will compel its rerating on the bourses.
(7) Management has already given a guidance of 270 cr. topline figure for FY11 and the management has the track record of under-promising-and-over-delivering.
(8) A tiny equity capital of 6.49 cr. with 75 cr. reseves and Rs. 126 book value and a robust current FY11 make it a promising candidate for bonus as well as rerating.
(9) If we put conservative estiimates then Plastiblends is likely to achieve Rs. 28.70 EPS in FY11 with no equity dilution expected (for fund raising) over next 3 years.
(10) Even if you forget bonus and concentrate on just fundamentals then at a P/E of 6.6 and a dividend yield of 3.68 and a market-cap-to-sales of 0.45 Plastiblends is a safe buy and will remain a safe buy till the P/E of 8-8.5 xFY11E EPS which is the historical P/E band in which it is being traded.
The current market is such that you don't know whether it will go into medium-term correction or will reach new highs. Hence, you need to invest in such companies which are not going to go down substantially but are going to go up substantially on discovery. It is under-ownership factor and non-discovery factor that you need to bet on and this requires a lot of hard work. I advice on only those companies in which I have conviction and I put my own money into it. I do a thorough research and to put plastiblends call without detailed analysis was the reason of the fact that the stock is showing accumulation pattern since last many days and in case of any upward spike in price before my analysis gets complete I don't want my readers to loose out.
I still maintain that Riddhi Siddhi is the safest buy in current market followed by plastiblends. On simran farms i have already advised booking profits.
Rgds.
Mahesh
