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Friday, August 27, 2010

Small Cap Stock To Buy : Medi-Caps

This is one small cap stock to buy which could fetch excellent returns for you in medium and long term.

Medi-Caps Limited is flagship company of Medi-Caps Group. It is one of the largest manufacturer of empty hard gelatin capsules in terms of manufacturing capacity as well as market capitalization in India. Company was incorporated in 1986.

Company's sales turnover for past 5 years (2006 - 2010) does not shows much growth but still it has managed to grow from 17.37 to 20.70 Crores. Don't forget the recession period in between. Being associated with medical and healthcare sector makes this business recession proof. Expense cuts in medicine supplies is the last thing anyone would do in life and this is the strength of all medicinal businesses.

But this is not the only reason to buy stocks of Medi-Caps. EPS for this company in year 2006 and 2007 were Rs. 20.32 and 25.92 respectively. Company's current EPS stands at Rs. 11.32 due to higher expenses.

Medi-Caps Limited has announced that the company has entered into a Joint venture with Mission Pharmaceuticals for setting up a plant at SEZ in Pithampur (District DHAR) for manufacturing softgel Capsules with the total proposed investment of Rs 20 crores. Further, the company has informed that out of the total proposed investment, it has already contributed Rs 55 lacs in the current financial year.

Company's total investments as per March 2009 data shows Rs. 44.67 crores. Total networth stands at Rs. 54.26 crores. Whereas company's market cap stands at only Rs. 26.33 crores. Book value is at Rs. 184.28

Medi-caps stock looks like a very cheap stock on valuations. The total valuations of company workout to be something like this. current market cap of company + cash investments + valuations of proposed investment (could be 30-40 crores in long term) = 26+44.67+30 = 100 crores

I would remove the Rs. 30 crores future valuation from this calculation. Current actual valuations stand at Rs. 70 crores against market cap of 26 crores. This gives good target stock price for medium term. Including valuations of proposed investments, stock could fetch excellent returns in longer term. Medi-caps is a definite stock to buy for mid and long term.

3 comments:

  1. Hi,
    I would like to know if buying Medi-Caps @CMP which is 85-86 Rs is a good bet... what is the target for Medium and long term

    Thanks
    Sadhvi

    ReplyDelete
  2. good stock but with low volume, you will have to wait for others to discover it for 100

    ReplyDelete
  3. Hi,

    I have purchased Medi caps 25 shares@82.56 and holding since 6 months. Current price is 58 and is falling.
    As per analyse provided by you, this share should return profit!
    Is there any change in fundamental of company?
    Should I wait or exist from this stock?

    ReplyDelete

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