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Tuesday, November 23, 2010

Mid Cap Stock To Buy For Mid Term - Shanthi Gears

Here is one mid cap stock to buy in this falling market for medium term investment horizon. One may buy stocks of Shanthi Gears on every dip during ongoing correction in stock markets.

Shanthi Gears Limited is engaged in the manufacturing gears and gear products. The Company’s products include worm gear box, helical and bevel helical gear box, geared motor, custom-built gear box, mill gear box, open gearing, products for textile industries and CNC machine tools.

The Company’s services includes engineering design, modeling and drafting, analysis and simulation, assembly and animations, reverse engineering and tooling (mould and pattern) design and manufacturing.

Shanthi gears has registered strong show for the quarter ended September 2010. The company has clocked 137% jump in net profit to Rs. 6.37 crore for the quarter over a sale of 25% to Rs. 36.82 crore. Strong bottom-line growth was driven by good operating show over higher sales and equally backed by lower interest cost and depreciation.

Revenue for the quarter was higher by 25% (to Rs. 36.82 crore) but the value of production was higher by 48% to Rs. 36.41 crore on a lower base. While the value of production as % of sales for the quarter is lower by 1% of sales, it was lower by 16.6% in the corresponding previous period.

Strong operating performance was backed by higher other income. Other income was higher at Rs. 33 lakh compared to Rs. 5 lakh in the corresponding previous period. The company's total debt as end of Sep 2010 stood lower at 16.92 crore compared to Rs. 51.83 crore in the corresponding previous period translating into a fall of 67%. Moreover the cash and bank balance was higher by 8% (to Rs. 34.7 crore) on yoy basis. Gained by this the interest cost net of interest income was an income of Rs. 18 lakh compared to a expenses of Rs. 58 lakh in the corresponding previous period. The depreciation cost was lower by 1% to Rs. 6.71 crore. Thus the PBT has more than doubled (up 153%) to Rs. 9.82 crore.

With these kind of strong numbers, one may expect company to perform well in coming time and stock to appreciate in medium term time frame of 6 months. Stock price target could be Rs. 60 in mid term. One may buy stocks of Shanthi Gears in the price range of Rs. 40 to 45.

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