In continutation of my previous posts (see here and here), I am posting a very rough analysis of a few more rejected and ‘in-process’ ideas. Again a disclaimer – I am not promoting or justifying any of these stocks. These stock may be injurious to your networth if you are looking for quick profits (if they come, no credit for me on that). With that out of the way, a few more ideas follow

No Go bucket

Motherson sumi systems – The company is priced at a PE of 25. Unlikely that the stock is undervalued. Just had a quick look at the financials and have no reason to believe that the stock could be undervalued.

Electrosteel – The company is into DI pipes and has a PE of around 7-8. The performance has been cyclical. The net profit reached a peak of 97 Crs in 2002-2003 and this performance was repeated only last year with a net profit of 108 Crs. The company raised capital via a GDR issue and has backward integrated into sponge iron. The economics of the business are ok and the performance has been a bit cyclical. The stock may be a bit undervalued, but I am not sure if the discount is more than 20-30% and hence I am not too excited by the stock. The company seems to be fine and the stock a bit undervalued, but I think there are better opportunities in the market.

Go bucket

Savita chemicals – A midcap chemicals company. Topline has grown from 250 crs to almost 700 odd crores. Netprofit in the same period has climbed from 11 crs to around 38 Crs. The company has a low debt on the balance sheet. The margins have held steady at 5% and the ROE is 20%+. The company may make a profit of 40-42 crs this year. At a market cap of around 350Crs the company seems to have a reasonable valuation of 7-8.

MRO-TEK – A small cap company into computer hardware. The topline has grown from 90 Crs to around 150 Crs and the net profit from 7 to around 17.5 Crs. This year could be lower at around 9-10 Crs. Net of cash the company seems to have a valuation of around 7-8. The margins have flucutated between 4-10% and the ROE has also fluctuated between 7-25 %. Cannot make up my mind on this stock. Will need to analyse further. However overall the stock does not look too exciting.

I have posted earlier a list of investment candidates which had passed through my investment filters. After doing a quick 20-30 min analysis, I slotted these ideas into the ‘Go’ bucket which are good for further analysis and into the ‘No-go’ bucket which are the rejected ideas.

A few more ideas in each bucket follows –

No Go bucket

Pricol – An auto ancillary midcap company. Topline has grown by 50% in the last 5 years and net profit has doubled in the same time. ROE is firmly above 20% and the valuation seems to be cheap at a PE of around 7-8. However the company has a high debt of almost 230 crores (DE ratio is more than 1 ) and the cash flow is poor too. Debtors have gone up by 400% and inventory has doubled too. The quality of earnings seem to be poor. I would this company a pass for the time being.

Navneet publications – A publishing company. The topline and bottomline has been stagnant for quite some time. The balance sheet does not look too good with inventories up 4 fold in the same period. The ROE and other numbers such as margins and debt equity ratio seem to be fine. However the free cash flows seem to be poor and the performance is erratic. Although the company seems to have some competitive advantage, the performance in the past has not been very good. Would give this company a pass.

Go bucket

Sarla polyester – A small cap company into textile processing. The turnover has grown from 30 Crs to 88 Crs in 2006. The netprofit has gone up to almost 11 Crs and this year could be almost 13-14 Crs. The company has a very low debt of 8-9 crs on books and a high ROE of 20%+. The valuations are fairly low at a PE of 6-7. Definitely worth a closer look

Investment and precision casting – A small cap casting and forging company. The net revenue has tripled in the last 5 years and the net profit has also tripled in the same period. Net margins have held steady at 15% and the ROE is 20%+. The company has a low debt partly offset by cash balance. The current year profit seems to be flat at 8 Crs and the valuation seem reasonable at 10 times current year earnings. Worth a closer look.