Hind Industries is a Delhi based company. This company is into export of meat and meat products. What we like about the company is that the company has got a subsidiary which is roughly 5.5 times the size of the company. This subsidiary is called Hind Agro Industries. Though Hind Industries does a revenue of close to Rs 125 crore, the turnover of Hind Agro is about Rs 680 crore and these two companies together do a revenue of more than Rs 800 crore.
Now, the company along with the subsidiary is the largest exporter of meat and meat products from Northern India. As a part of its expansion project, Hind Industries is setting up a slaughter house in Chennai which is being done on a build-operate-transfer (BOT) basis. This will go operational in the month of October-November 2010 and will start adding to the profits and revenues of the company.
Now, if you look at the financials of the company for FY10, the total sales were about Rs 800 crore, operating profit was about Rs 42 crore and profit after tax was about Rs 7.7 crore, which mean an earning per share (EPS) of close to Rs 9. So, at the current price of Rs 35, this stock is trading at P/E multiple of 4. Now, you have a company where the sales are about Rs 800 crore and the marketcap is only Rs 35 crore, P/E of just about 4 and the cash profit for FY10 was about Rs 17 crore, which means that you have a business which is available at roughly two years of its cash flow. These are businesses where the management is experienced and there are high entry barriers to the business.
Book value of the company on consolidated basis is about Rs 115 and standalone basis is Rs 70. The stock is available at a significant discount to the book value. The best part is that the equity of the company is just about Rs 9 crore. It does revenues of more than Rs 800 crore, which means that even 1% increase in net profit margin will add to the EPS by Rs 10.
Now, there are few risk associated with the business. Since the company exports most of the products, it is definitely exposed to the forex risk and also the profitability of the company is dependent upon rupee-dollar and euro-dollar parity.
To sum it up, I think you have a company, which operates in a niche, it is the only listed company manufacturing meat and meat products, it has got a fairly large size, I think it is an undiscovered story. It is only that management has not been very transparent. The day management decides to get transparent and share information with the investors, I think the profit potential of the company is very high and the stock has the potential to go places.
Source: Internet (moneycontro.com by Ashish Chug 30/08/2010)
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