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Wednesday, September 8, 2010

Stock To Buy : Empee Distillaries

This is another stock to buy discussed recently by a stock broker on Moneycontrol who also has advised to buy stocks of VLS Finance. He has discussed Empee Distillaries as value stock to buy with good potential intrinsic value. Let's see why it is a stock to buy.

Empee Distilleries Limited is engaged in the business of manufacturing of Indian made foreign liquor (IMFL) and power. The Company's business segments include Liquor(IMFL), power, sugar and industrial alcoholic plant (IAP).

It’s factories include Mevaloorkuppam Village, Sriperumpudur Taluk, Kancheepuram District, Tamil Nadu and Mevaloorkuppam Village, Sriperumpudur Taluk, Kancheepuram District, Tamil Nadu. The two factories at Mevalurkuppam and Palakkad produced 3761337 cases as of March 31, 2009.

Empee Distilleries came up with an IPO at Rs 400 in 2007. Current stock price is at RS. 167. The stock has book value of Rs. 132 which is good and near it's stock price. P/E ratio of 13.9 at current stock price is fairly lesser compared to industry standard P/E of 80. Compared to peers like United Breweries, Empee distillaries is available at cheap stock valuations.

Market Cap 318.59
EPS (TTM) 12.06
P/E 13.90
P/C 10.99
Book Value 132.77
Price/Book 1.26
Div(%) 50.00%
Div Yield(%) 2.98
Market Lot 1.00
Face Value 10.00
Industry P/E 80.86

Empee distillaries has tremendous hidden assets into the company. One of the best is the real estate part where we feel the company would be developing the real estate in the next three years. This real estate development could generate cash flows of more than the current market cap of the company. That means in the next three years the company’s cash flow from the real estate itself will be much more than the current market cap.

Empee distillaries has paid a dividend of Rs 6 this year. The dividend yield at this rate is pretty good for even dividend income along with growth opportunities.

Company also have a power generation capacity of 10 megawatts. 75% of this generated power is freely salable and only 25% needs to be transferred to Tamil Nadu government. This sale of power adds about Rs 3-4 crores of free cash flow to the bottom-line. Empee distillaries is holding 2.81 crore share of Empee Sugars and Chemicals as investment.

Considering the dominating position of company in southern markets, real estate development, small power play and intrinsic value, Empee distillaries is a stock to buy with stock price target of at least Rs. 400 levels in next 2-3 years.

1 comment:

  1. What crap. Look at the share price 16 months down the line from when it was recommended. It has halved (down 50%) from the reco. price.
    The best thing about such analysis/analysts is that they give a reco for 2-3 years, the logic being who is going to check back 3 years later? By then these so-called analysts will be long gone and u will be left drowning your sorrows in the produce of Empee Distilleries.

    ReplyDelete

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