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Friday, June 26, 2009

Ingersoll-Rand India Ltd - Value Stock To Buy From Infrastructure Sector

The booming Indian economy has provided companies in various sectors with a huge growth opportunity. Engineering companies, especially those associated with infrastructure development, have done extremely well, thanks to the massive government thrust on this sector.

Why is this engineering scrip languishing?

The capital goods and engineering sector has been one of the biggest gainers in the bull run.

One company from the engineering sector which has been beaten down, even as stocks of other companies in the same sector scale new all-time highs, is Ingersoll-Rand India Ltd. Part of the Ingersoll-Rand Company, US, this engineering outfit has been present in India since 1921. Its recent performance has been impressive; revenues have risen by an average 22% over the past five quarters while its operating profit grew by 264%, although operating margin is thin at 9%. Yet the stock has not been in the spotlight during this humungous bull run.

Market Cap 935.20
EPS (TTM) 21.57
P/E 13.73
P/C 12.94
Book Value 243.78
Price/Book 1.22
Div(%) 60.00
Div Yield(%) 2.03
Market Lot 1.00
Face Value 10.00
Industry P/E 14.24

One reason for this is the concentrated shareholding of the company. Some 74% of its equity is held by the parent company; another 6% is held by financial institutions. The remaining shareholders are probably waiting for a buy-back which may be on the cards.

Or are we witnessing an accumulation at lower levels before the stock takes off? Either way, this stock is reasonably valued with a market-cap to sales ratio of 1.67 and a market-cap to operating profit ratio of 19.10. The parent company’s stock price has been zooming and has touched a 52-week high in the US.

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