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Wednesday, March 2, 2011

Small cap growth stock analysis - Kabra extrusion technik

Here is one lesser known and less discussed small cap stock, Kabra Extrusiontechnik. This is a steadily growing company and can generate good returns in 2011 and beyond.

Kabra Extrusion Technik is engaged in the capital goods sector, manufacturing plastic extrusion machinery, specializing in manufacturing of plants to produce a range of plastic pipes like polyvinyl chloride (PVC), high-density polyethylene (HDPE), low-density polyethylene (LDPE), polypropylene (PP) and composite pipes.

The Company's major products are plastic processing machineries and parts of plastic processing machinery. These products cater two types of industries: Pipe and Films. Company is a domestic leader in extrusion machinery.

Company recently launched new product for manufacturing drip irrigation tube lines in collaboration with Drip Research Technology Services from US. They are in planning stage to launch new high-speed multi-layer blown films plants in FY 2011.

The company is also planning to make an investment of Rs.85 crore. This investment will more than double its gross block by FY 2012. India’s plastic consumption could double in next six years.

Industry experts believe that investment of nearly $10 billion would be required in the plastic processing industry to meet the future demands. Such big investments in the plastic processing industry will be a key growth driver for sector and so for the company.

Other small cap stocks discussed recently
Stock valuations
Kabra Extrusion Technik has been growing at 15.5% (sales) for 3 years CAGR. At the same time profit after tax (PAT) has shown 3 year CAGR growth of 43.5%.

At current price of Rs.59.5, stock trades at P/E of around 8. Dividend yield comes at healthy 5.8%. Kabra extrusion has paid dividend consistently for last 7 years in a row. This makes it a good dividend yielding stock.

Considering all above mentioned facts, I am adding it to my list of stocks to buy in 2011.

One may buy stocks in small quantities at all dips for long term investment. It has potential to at least double from current levels in 12-18 months.

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