Mid Cap Stock To Buy - Page industries

Here is one Mid cap stock to buy with huge growth potential still waiting ahead.

Page Industries is a franchisee of Jockey International (USA) in India. It manufactures and distributes Jockey products in India, Sri Lanka, Bangladesh, Nepal and UAE. Its products include innerwear and leisure wear for men and women. Though men's innerwear is the major contributor to total sales, the contribution of women's innerwear and that of other categories has been rising steadily. It has an installed capacity of almost 10.9 crore pieces per annum. The company has very strong distribution channel and you can see the Jockey products selling in every clothing shop across the nation.

GROWTH
The company is in business for more than 17 years now and has established itself in India with very strong distribution network of 400 distributors and 20,000 retail outlets. It is a very wellknown brand with superb brand power that gives it product pricing power to keep it's profit margins stable.

The innerwear market has been growing at compounded annual growth rate of 12% for last ten years. Sales of Page industries have grown at a CAGR of 34% for past 10 years. Company has increased it's manufacturing capacity by 500% in past 10 years. With added capacity in future, company will explore markets of Sri Lanka, Bangladesh, Nepal and UAE.

STOCK FINANCIALS
Sales of Page Industries have grown at a CAGR of 38% in the past five years. Net sales is expected to be Rs.700 crore in FY12. Operating margins are 21% for past five years. Its PAT has grown at a CAGR of 40% and is expected to be Rs.93 crore for FY12. It's debt- equity ratio was 0.4 as on September 30, 2011. The debt was for faster capacity expansion.

STOCK VALUATIONS
Return on Equity for Page Industries has been very high (43 in FY10, 53 in FY11 and is expected at 65 in FY12). Very few stocks can generate such a high and a growing return on equity. The stock trades at stock price of Rs.2,900 currently. This puts P/E ratio at 36. The steep valuations seem to be very high at this point of time. It is the price of being very high growth stock. This high growth potential certinaly makes it a stock to buy. If this stock corrects with valuations of below 30 P/E, one may buy stocks of Page Industries for long term investment.

Stock to buy - Tech Mahindra

Should you buy stocks of Tech Mahindra post merger approval news and if yes, for what stock price target?

Recently, Tech Mahindra (Tech M) and Mahindra Satyam (Satyam) merger has been approved with their wholly owned subsidiaries, Venturbay Consultants Pvt. Ltd., C&S System Technologies Pvt. Ltd., CanvasM Technologies Ltd. and Mahindra Logisoft Business Solutions Ltd. The swap ratio approved by the board of both the companies is 2:17, i.e., 2 shares of Tech M (face value of `10 each) for every 17 shares of Satyam (face value of `2 each). The merger process could take up to nine months to complete and will be effective from April 1, 2011.

Shareholding pattern:
Mahindra Group will own 26.3% in the combined entity, British Telecom (BT) will own 12.8%, 10.4% will be held as treasury stock, 34.4% will be held by public shareholders of Mahindra Satyam and the balance 16.1% will be held by public shareholders of Tech Mahindra. The intention of creating a treasury stock is to allow the company greater liquidity when needed. This, especially in the matter of acquisitions, is on the agenda of both the companies. Tech M will issue 10.34cr new shares, thereby increasing its outstanding shares to 23.08cr and its equity capital to `230.8cr.

Well-diversified revenue mix:
The combined entity will have a broad-based play across industries such as manufacturing, BFSI, telecom, technology, media and entertainment, retail, transport and logistics and lifesciences and healthcare.

Geographically, the revenue would be balanced between Americas at 42%, Europe at 35% and emerging markets at 23%. British Telecom is Tech M's biggest, revenue share from BT would come down to ~17%, while Tech M currently derives 35% of its revenue from BT. The combined entity would have 75,000 employees in 54 countries with over 350 clients. Company would have net cash surplus of Rs. 1,600cr-1,800cr.

Read more:
Best Stocks To Buy Now in 2012

Stock valuation:
The benefits of the combined entity will start being reflected only after few quarters after merger completion. The combined entity is expected to post a 10.7% CAGR over FY2011-13E, with growth of 8.9% yoy in FY2013. PAT of Tech M and Satyam is expected to be at Rs.674cr and Rs.900cr for FY2013, respectively. Considering the new share count, the consolidated EPS comes in at Rs.68.2. If you value Tech Mahindra conservatively at 13x FY2013E EPS of Rs.68.2, one may buy stocks of Tech Mahindra with stock price target of Rs. 900 in with one year time horizon.

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Best Stocks To Buy Now in 2012

Welcome 2012. Year 2011 was the year most investors would like leave behind in memories as soon as possible. It was an year of high volatility in stock markets. It was kind of a roller coaster ride which people did not enjoy much! There are much of the talks about first half of 2012 observing similar rides. In such times, as a value investor, with no doubts, you should buy stocks of good companies for long term, so when time turns around,  you are ready to be part of that turn around and associated growth. And the single most important task to achieve this is to find Best stocks to buy in 2012 and start accumulating those for long term. I am going to find some of the best stocks to buy now in 2012 and discuss here on Indian Stocks News with you all.

As discussed in my one of the previous posts "When to Buy Stocks in current sinking stock market?" about how BSE SENSEX has lost more than 20% steadily in last one year and that as value and growth investor, we can focus on beaten down Small Cap, Mid Cap and Large stocks for growth.

In next few weeks and months, I would come up with ideas on best stocks to buy in 2012 with my stock research. Also I am going to discuss the sectors that have bright future in India in coming few years. Although I will try to cover as many stocks as possible, It is impossible for me to every good stock to buy out there in stocks market. I would like to invite you to discuss your ideas on best stocks to buy and good sectors in invest in. Send me your stock ideas either in below comment form or on email "Editor at IndianStocksNews.com". I will publish your stocks ideas here on Indian Stocks News along with your name.

Keep watching this space for updates on Best Stocks To Buy in 2012. Alternatively, subscribe to Indian Stocks News free email newsletter to get the post updates directly in your mailbox and do not miss on stock ideas.

Let's share our ideas to invest better!

Best Stocks To Buy Now in 2012 discussed here till now:

1. Stocks To Buy in 2012 - Noida Toll Bridge

Stocks To Buy in 2012 - Noida Toll Bridge

A stock of a company which has already made it’s investment, done all the work and now just collects revenues with minimal operational expenses should be on your list of stocks to buy in 2012 for sure. Any value investor should buy stocks of Noida Toll Bridge in 2012 for excellent returns on investment looking at future developments in company. Here is the reasoning.

Business
Noida Toll Bridge Company Ltd. (NTBCL) has constructed and now operates a bridge (popularly known as DND flyway) that connects South Delhi to Noida. It is an 8 lane world class highway with toll plaza. NTBCL is promoted by IL&FS. NTBCL has only one business, to collect toll revenues form DND flyway which it has already constructed. The bridge is like cash machine for company. The company just have to spend money on minimal operational needs and maintenance of bridge. Operational expenses are not very high. And that is the reason behind company’s operating profit margin of 76% in FY11. Company has to pay big portion of this for debt repayment and interest costs associated with it.

Thousands of vehicles travel everyday on DND flyway out of need to commute between Delhi and Noida. And DND flyway is the only time and energy saving route that vehicle commuter has. Other two routes (via Nizamuddin bridge and Okhla bridge) are free to use but are time consuming and traffic laden. I have travelled a lot on DND flyway and of course on other two mentioned bridges myself by car and at any given day, I have preferred to use DND flyway paying toll. This was to save my time (approximately 20-30 minutes if I use other routes) and of course to save fuel. As per my calculations, with an increased driving distance of 4-5 kilometers per trip if I use alternative free routes and not DND flyway, I would burn more than 1/4th liter of petrol or more in driving, spending at least Rs.18-20 extra in petrol (petrol at Rs.70/liter). And then, extra travel time, hassle of very slow moving big traffic (that burns more fuel than mentioned earlier). Any sensible car driver would use DND flyway so NTBCL may never face slowdown in terns of traffic. Traffic is in fact bound to increase due to huge business infrastructure and residential developments in Noida, Greater Noida and along the sideways of Noida-Greater ay. Visit DND Flyway site for more details on business.

May be, Delhi metro should prove competition to DND flyway (two wheeler riders may opt for metro) but chances of travelers using cars being diverted to metro are very less in my opinion.

Stock Financials
Now, just imagine a company which has operating profit margins of like 76%, will make how much profit once it becomes debt free! NTBCL had debt of Rs. 358 crores in March 2005. As on Sept. 2011, the debt is down to Rs. 126 crores. At this speed, company may repay entire remaining debt within 2 years. And there after, you would have a company which is debt free, generates cash on the spot from toll collections with big operating profit margins.

Along with toll revenues, NTBCL also collects revenues by placing advertisements along side the entire bridge. And advertisement revenues are growing every year (up 20% in FY11 from 10 in FY10 to 12 crores). Under the project agreement with Noida authority, company has right to earn assured returns of 20% on total project cost through toll collection for 30 years from Jan 1999 onwards. The total project cost also includes major maintenance expenses on top of which the profit would be earned.

As in FY11, the total project cost with profit projections that NTBCL management has estimated stand at Rs.2021 crores. And to recover this money, NTBCL will have possession of DND flyway for 40 more years additional to 30 years in contract! There is an alternative using which company can recover these costs. The alternative is that Noida authority would award development rights of land along DND flyway to NTBCL. And this land is very precious and at prime location between Delhi and Noida. So there is a real estate play for company in future.

Stock Valuations
5 year median P/E ratio for NTBCL stands at 22. The stock trades at CMP of RS. 20 with P/E of just 10. Company’s EPS growth for last five years (CAGR) is about 25%. The PEG (Price earnings to Growth) ratio stands at 0.4. Any stock with PEG ratio lower than 1 can be considered as value stock. NTBCL can be called as a good value stock. Company has started paying dividends in 2010. Dividend was 50 paise per share which puts stock dividend yield at 2.5% annually at CMP of Rs. 20. As the debt would reduce in future, net profit would increase and so the dividends. You can expect NTBCL to be a good dividend yielding stock in future for long term.

All in all, Noida Toll Bridge is one of the very good stocks to buy for long term investment portfolio. It will pay you good stock dividend too. It has good scope for capital appreciation in future looking at current stock valuations. One may buy stocks of NTBCL at CMP (Rs.20) or below, which has limited downside.

Disclaimer: I own this stock at 22-23 levels and determined to add more at CMP and below for long term.