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Thursday, December 27, 2007

Bombay Rayon can give 40-50% returns


Apurva Shah, VP & HOR, Prabhudas Lilladher is of the view that Bombay Rayon Fashions can give 40-50% returns in the next 6-8 months. It is a very strong growth story of a CAGR of 70-75% earnings. They are largely exposed to the euro, so even they are reasonably well protected on the forex front as well and valuations going about 10-11x but for a company which is growing at 70% plus that’s reasonably priced, he added.

Shah told CNBC-TV18, " Bombay Rayon is mainly a growth story and its also reasonably priced. It is a very strong growth story of a CAGR of 70-75% earnings and revenue growth over the next two-years. They have a major expansion coming up in Maharashtra. They will be almost doubling their garment capacity and increasing their fabric capacity by almost four times in the next six months. So, we are looking at a margin expansion of more than 600-700 basis points in the next two years. Again despite being a garment exporter they don’t have much of an exposure to US dollar. They are largely exposed to the euro, which is not such a bad situation as the dollar. So even they are reasonably well protected on the forex front as well and valuations going about 10-11x but for a company which is growing at 70% plus that’s reasonably priced. It can easily again give returns 40-50% in the next 6-8 months."

Disclosure: It is safe to assume that analyst & his clients may have investment interest in the stocks/sectors that have been spoken about.