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Sunday, June 12, 2011

Mid cap stock to buy - Manaksia Ltd.

Here is a stock report on this good mid cap value stock with good dividend yield and promising growth prospects too.

Manaksia Limited manufactures metal, packaging products, value-added metal products, made of aluminum and steel. It also manufactures mosquito repellent coils and vaporizers. Four segments company operates in are packaging product, mosquito coils, metal product, and engineering & others.

Packaging takes care of manufacturing/sale of pilfer proof (PP) cap, crown closures, metal containers, EP Liners, washer, EP sheets. Metal product consists of manufacturing/sale of aluminum and steel galvanized sheets, coils etc. Engineering and others consists of manufacturing and sale of machine, spare parts etc. Company manufactures in India and Nigeria.

Manaksia is well in position to take advantages of growing consumerism in emerging markets with operations in India, Africa and West Asia. Looking at company's expansion plans and restructuring initiatives, the stock looks to be a value stock to buy for long-term investment.

Manaksia has good set of clients including Dabur India, Jyothy Laboratories, Eveready Industries, and McDowell Group. Their metal product division is the main contributor to its revenues and profits.

Growth Prospects:
Company's presence in multiple countries enables it to capitalise on growth in construction, engineering, and transportation sector growth in emerging markets. Expansion in company's balance sheet and steady cash flow over the years proves this and it will continue in similar manner. The company has achieved vertical integration for a number of products that lowers the manufacturing costs. With management's restructuring plans materialization, operating efficiency should improve further.

Stock Valuation:
Over the past three years, the company's consolidated net sales grew by 12% and net profit by 10% when compounded annually. Sales from its metal products division, which contributes about 80% to its topline, grew 11%.

The management has been efficiently using its strong cash flows to reduce its debt burden. With Rs 75.77 crore cash on its books and a debt-equity ratio of 0.3, the company has ample room for fund raising to support expansion plans. It gives a return-on-capital of 12% and a dividend yield of 3.23% at current stock price of Rs.74.

12 month trailing P/E ratio stands at 16.54 for company. This is certainly not cheaper. But with book value if Rs.83 and price to book value ratio of 0.89, Manaksia looks like a good value stock with good growth prospects. For these factors, it could be a stock to buy for horizon of two years at any dips in it's stock price from current level.

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