Kabra Extrusiontechnik - Stock to buy in 2012?

Kabra Extrusiontechnik had a bad FY12 financially due to slowdown in Indian polymer consumtion growth. Construction pipes and FMCG packaging oriented polymer consumption is expected to resume it's growth in FY13 and so the growth of Kabra Extrusiontechnik. Does this makes it a stock to buy in 2012?

As stated, The polymer consumption in plastic pipes for irrigation, water management, construction, telecom industries and packaging films for edible oils, milk, processed foods and other FMCG products is expected to show healthy growth in FY13 and beyond. Kabra Extrusiontechnik (KETL) is India's leading manufacturer of heavy machinery/plants for plastic processing industry to produce plastic pipes and packaging films. The expected growth will ensure demand for products of company.

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.

The company has set up one more manufacturing unit at Daman with investment of Rs.35 crores for new products. This additional capacity will be available from FY13 onwards.

Kabra extrusion has paid dividend consistently for last 7 years in a row. It's current stock dividend yield stands at healthy 5.17%.

KETL's profits plunged 75% against a 14% fall in its net sales in first three quarters of FY12. This was due to investment in new plant in Daman and increased expenditure due to hike of 30% in local electricity rates. Company's revenues have grown at a CAGR of 16.9% with profit growth at 32.5% in the five-year period ended FY11. Its debt-equity ratio at end September 2011 is at 0.1.

The stock trades at current stock price of Rs.34. The price-to-earnings multiple (P/E) is at 11.67 and price-to-book value ratio (P/BV) of 1.01. The board has recommended dividend of Rs. 1 per share for 2012 which makes dividend yield at 3% which is not bad. Looking at growth prospects and limited downside, it is a good small cap stock to buy at dips and wait for a year or two to get good investment returns.