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Tuesday, July 20, 2010

Small Cap Stock To Buy - Mahindra Ugine Steel Company

Stock to buy in metals and steel sector, Mahindra Ugine Steel company, had caught my attention when I looked at it's negative PE ratio of -5.21 in FY 2009. It is a small cap stock with big company name tag (Mahindra) around it.

I was actually looking for good stocks which were making losses but bare the potential to turn around and start making profits again. There has been a slight delay from my side in posting on Mahindra Ugine as I have already bought stocks of this company at 64 levels around 2 months back. I ignored it meanwhile for sometime as I got busy in my professional life and that I have invested in Mahindra Ugine for long term. 2 - 3 days back I saw some surge in this stock and realised it is already trading at 70 levels now. SO I decided to post asap before it is too late and Indian Stocks News subscribers start cursing me for posting it late.

Mahindra Ugine Steel Co. Ltd. (MUSCO, under SYSTECH sector, belonging to the Mahindra Group is the pioneer & well known manufacturers of alloy steel in the country. The company has three stampings division to manufacture pressed sheet metal components and assemblies in India. The client list is very impressive and all are big names in industry. You can view the client list here.

When you look at the EPS data of company, it was -5.80 for FY 2009, as I have stated earlier about company having negative earnings to price ratio. for FY 2010 EPS was 1.44, company started making profits again. The guidance (estimated EPS) for FY 2011 stands at 5.8 and 7.7 for FY 2012. With this, the P/E ratio for FY 12 is at 9.18 which is very reasonable.

Dividend:
Company has proposed dividend of Rs 1/- per equity share of Rs. 10/- each, as recommended by the Board of Directors. If it is declared on July 27, 2010, it will be paid on or after July 30, 2010. This dividend return is okay and could increase in coming years as company looks well set for future with capex and expansion plans announced.

Stock price target
The current stock price is at Rs. 70 Medium term stock price target could be around Rs 80. A good long term stock to buy. And a buy on dips.

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