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Sanghvi Movers (CMP-Rs104)
Sanghvi Movers is a crane hiring company servicing infrastructure and mining companies. The company owns over 400 hydraulic truck mounted cranes with lifting capacity of 200 to 800 tons. The company has expanded its fleet which has largely been funded by debt which has increased from Rs275Cr in 2007 to Rs640Cr in 2011.
Sanghvi’s sales increased during the same period from Rs179Cr to Rs361Cr in and is poised to cross Rs400Cr in just concluded fiscal year (FY12). Net income increased from Rs47Cr in 2007 to Rs86Cr in 2011. We estimate the company to register net profit of Rs100Cr in 2012.
Based on FY12 earnings, the company is trading at PE of 4.5x. Given strong business fundamentals and high growth potential, we expect he company’s valuation multiple to be re-rated upwards over the coming years. This coupled with growth in earnings will boost company’s valuation over the coming years.
At CMP of Rs104, we expect growth in company’s stock price to exceed hurdle return rate of 18%. Dividend yield of 3% further sweetens the deal. Hence we rate the company a BUY for long term investors. (Investment Horizon:2-3 years)
However, the company high debt and capital requirements to fund its expansion coupled with week market sentiments will keep the stock price pressurized over the near-to-medium term. Hence fresh position in the company should be taken only with long term investment horizon.
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