Multibagger Series – A front runner

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Dear Readers,

As promised in the previous post, I wish to light on an outstanding scrip in this new fiscal year. The following lines are my plain conclusions, compilations or suppositions to have this stock or all of the following grounds are collectively compelled me to hold this stock even in extreme provocative times. I am watching this scrip by a couple of years and day by day feeling more comfortable on the horizon developing by this company. When I search for good scrips to invest, it is one of them I found with alluring rationales and feels the path ahead is promising. If you feel comfy after a read, go ahead.

BSE Code---------------------------532606
CMP (13/04/2010)---------------- 153.65
EPS-----------------------------------32.98
PE -------------------------------------4.66
BV-----------------------------------205.18
FV-------------------------------------10.00
52 Week Low/High------------------ 53.15/166.90
Ever high since inception ---------301.00(Nov 2007)
Market Cap--------------------------198.82
Chairman/MD-----------------------Amitabh Parekh
Promoter’s holdings----------------33.91%

Parekh Aluminex Limited (PAL) is the leading conglomerate and exporter of Aluminium Foil Containers (AFCs), Aluminium Foil Rolls (AFRs) and Aluminium Lids. PAL is the single largest player in the organized sector in India with more than 75% market share in the business of supplying Aluminium packaging stuffs to Airways, Railways, Reputed Hotel networks and major caterers who serve food on travels/parcels. The ISO 9001:2000 and ISO 22000:2005 certified company is an apex name in AFCs in the globe and especially in the sub-continent.

AFCs are the most versatile, eco-friendly and attractive solutions for punters in this fast-food era. The compliance level and versatile features of these products are making PAL the leader in the segment and their products are utilized in domestic, industrial and commercial sectors globally. It leads the domestic market with sales to institutional/corporate customers including Air India, Indian Airlines, Indian Railways(IRCTC), various flight kitchens including Taj Air Caterers, leading hotel networks, Jet Airways, Kingfisher etc...

The flexibility and recyclable nature of Aluminium Foil Containers makes them the most appropriate packing/serving solution of the time and to the fore. AFCs are 100% recyclable and are far better for the environment than plastic or other alternatives. AFCs can be easily made as per specific requirements to suits user choices on temper, gauge and styles. These are defensive to extreme temperatures; idle from freezer to oven without trouble or damage. An AFC puts a resistant metal wall around the content, which assures product freshness and increased shelf life as well as capable to counter infections/micro-organisms.

Parekh Aluminex Ltd has around 80 avant-garde varieties of molds to form products that can pack every kind of solid, semi-solid and liquid eatable products in a hygienic, standardized and practical way. The company lead the market in the AFR segment with their ME brand of aluminium rolls and are also manufacturing the same on a job-work basis for Hindalco, the largest manufacturer of aluminium in the country, which markets it under the Fresh Wrap brand. The strategic three-year liaison with Hindalco gives the advantage of sourcing raw materials at privileged rates. It has an agreement with ALCAN, one of the established producers of aluminum in the world, to market AFCs and AFRs in Germany; and an agreement with the Danone group for supply of AFC.

The two production units are located in the Union Territory of Tax safe Dadra and Nagar Haveli with high-end production bases. PAL exports products to the United Kingdom, Bahrain, Turkey, Greece, US, South Africa, Dubai and Germany. It has acquired a Singapore-based company DES along with its customer base and has added Etihad Airways, Emirates Flight Catering, Gulf Airways, Thai Airways, and Singapore Airlines along with others as its customers. With over a decade of presence in international markets PAL has established a good name with international buyers for quality, variety and for punctual supplies. PAL has also in endeavor to trial exports to fresh markets like Nigeria, Yemen and Sri-Lanka with positive outcomes.

PAL is the first company in its category to receive the prestigious ISO 9001:2000 certification from BVQI, UK and the only company from India shining in the highly quality conscious European markets. The company assures a zero human touch to the end-product in their whole manufacturing process to preserve strict quality standards and drugs-related hygienic requirements set by international standard setters. By focusing on R&D, Parekh Aluminex is in endeavor to introduce innovative product variants which have not yet been familiar with the global markets. The promoter holding has been steadily increasing in the last few years. The company is under finishing of a 250Cr expansion project and it will boost their production in a great way.

The financial result of PAL for the current year and past 5 years are showing an increase of more than 35% CAGR on both sales and profit. In its first year of operation (1994-95) the company registered sales of Rs.4.40 million, rocketed to Rs.4212.60 million in 2008-09 and expect around Rs. 5400 million in FY 2009-10(It is one of the very few companies on which I usually sit with a calculator after every qtrly results). I hardly consider the transitory technicals while suggesting any stocks but here, having a book value of RS.205.18/- per share, and with Rs.32.98 trailing 12 month EPS, CMP around Rs. 150/- I think it will be a great buy even at current levels. Net Sales, PAT, EPS and BVPS all denotes, this business is heading to the right direction with a right pace. I think the following quote by Buffet, suits best for such scrips. “If a business does well, the stock eventually follows”..

My View on the scrip

I hope multiple fold returns from this scrip if you have patience. The revenue growth of this company is sustainable and the business model is outstanding. The gifted management has set few realistic goals which are likely to achieve in very near future, considering the history and current growth pace. The business has huge growth potential in the future and their products sell like FMCGs where the demand will keep increasing. The company has made big moves to penetrate the foreign markets. In addition, the booming retail spectrum, fast changing consumer trends, involvement of starred or reputed hotel chains, increasing fast food outlets, escalating Air & Rail traffic numbers and sizzling tourism scenarios will surely bless us in the long run. The stock has very low downside risk and the upper side is unimaginable. We will talk about this scrip after 2 more Aprils and hope you may secure your positions well before..

Dear clients , An anticipated ban on plastic is ahead and we may say “bye” to Manjushree at the right time and I hope PAL is the most appropriate substitute. Accumulate till that time and don’t skip the following link.

http://www.forbes.com/lists/2009/24/best-under-billion-09_Asias-200-Best-Under-A-Billion_Company_6.html

Comment please...

Happy investing & Regards

Shabu Thachat

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