This Stock has Tripled in past 2 years and is still a buy!!!!

Hello Friends, The stock that we are going to talk about today is Cheviot CompanyLtd. A stock that was trading around Rs 350 levels in 2015 has has today reached Rs 1072 i.e it has tripled in 2 years. Moreover the technical charts of the company show that in the past 2 years the company has had a very steady growth. Cheviot Company Ltd is a company primarily engaged in the manufacturing and sale of Jute products. The company is based out of West Bengal which is the Jute hub of India. The company is lead by a 60 year old veteran Mr Harsh Vardhan Kanoria having 42 years of experience.





So what is it that makes Cheviot Company so powerful?

Why is this small cap stock so strong?

Let’s look at some facts in accordance to the financial of 2015-16:


  1. The company is a zero debt company (long term debt) with a net worth of Rs 418.09 Crores.
  2. The company’s EPS is Rs 80.85, which means the company is operating at a P/E of 13.54. The average industry P/E is 16.91. This shows that even after the uptrend from Rs 350 to Rs 1072 the company is still undervalued.
  3. The company’s Revenue is Rs 355.75 Crores of which total profit after tax is 36.47 Crores. The net profit ratio clearly exceeds 10% of turnover.
  4. The company is export oriented and operates in SEZ which means tax holiday u/s 10AA gives this company a big boost to reducing tax expenses thereby giving more working capital.
  5. The company has a huge pile of noncurrent investments of Rs 162.46 Crores which is 38.86 % of its net worth.
  6. These investments are majorly stocks, tax free bonds and mutual funds. Therefore most of these incomes are nontaxable.
  7. Looking at the revenue side we can see that the company has Dividend income of Rs 5.29 Crores and Rs 4.27 Crores of Interest income adding up to Rs 9.56 Crores. So 26.21% of the total profit pertains to income from noncurrent investments.
  8. The Company has a cash balance of Rs 8.41 Crores. The company is cash rich.
  9. The Company’s Reserves is almost 100 times its Share Capital. The authorized capital of the company is Rs 7 Crores. There is a huge probability of a bonus issue here.


The company in the current year has already made a revenue of Rs 279.29 Crores in the 9 months making a profit of Rs 32.90 Crores for he corresponding period. Now assuming that the company on the average would be able to make another 10 Crores in Q4 of 2016-17 then we are looking at a total profit of Rs 42.90 Crores. This is a 17.63% rise in net profit.





The company has broadcastered some solid performance and has reached Rs 1072 thereby entering into uncharted territory. Therefore there is no telling where this stock would land up.

However looking at the steady rise RicherInvestor would like to recommend a buy with a target of Rs 1300 within a year.


Thanks for joining us. Have a nice day. 


- RicherInvestor

Written by Roger Vins (CA, MCom)

Disclosure:
No one at RicherInvestor has any financial interest in the company.
The author is not a research analyst.

Comments

  1. GOOD SHARE. I have been with this company share since 2000 and averaged to 134% profit as on today.
    And even today the shares trades between Rs, 1300 to 1500. Expected Bonus and a dividend of atlest
    200% this year ( My expectation )

    ReplyDelete

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