Anil Singhvi picks Ambika Cotton Mills as his SIP STOCK today; know the reason WHY
Zee Business Managing Editor Anil Singhvi today said that the Yarn and Textiles sector will see a strong rally like the sugar sector. Singhvi said that the results of the yarn and textiles companies will surprise positively as they will be extremely strong. In this regard, the Market Guru picked Ambika Cotton Mills as his SIP Stock today
Zee Business Managing Editor Anil Singhvi today said that the Yarn and Textiles sector will see a strong rally like the sugar sector. Singhvi said that the results of the yarn and textiles companies will surprise positively as they will be extremely strong. In this regard, the Market Guru picked Ambika Cotton Mills as his SIP Stock today. The reason for choosing Ambika Cotton Mills is that the company is good fundamentally and the Balance sheet is extremely strong. Yarn prices have moved up significantly in last few months and will continue to move up further which will benefit companies like Ambika Cotton Mills.
Singhvi said that due to lockdown in Bangladesh, they are not able to export; this is directly benefiting Indian Companies. Since the company is export focussed which is nearly 72%, and rising commodity prices globally including yarn prices will benefit Ambika Cotton Mills. The profitability will improve significantly as they will be making 30% – 40% gain on the existing inventory of Rs 343 cr.
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Singhvi said that the US economy is extremely strong and Europe is also recovering strongly. The company has debt of only Rs 48 cr. Expansion plans will be executed which will improve the future cash flow of the company. Valuations are attractive at current levels. The company will do EPS of 160 and cash EPS of 200. The stock is trading at PE multiple of 5 in cash and 7-8 otherwise. The market cap to sales is nearly 1. The stock can see a share price of Rs 1400 – Rs 1600.
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Ashish Chaturvedi, Research Analyst at Zee Business said that company got incorporated in 1988 and now an established player in international and domestic yarn market. In FY20 the company exported 72% of its Total Revenue which was at 59% in FY15 rose to 69% in FY19, so clearly the company is focusing on the export market.
Ashish said that Promoter's shareholding is at 50.17%. The Debt to Equity ratio of the company is 0.1 & ROCE of 14%. Company's FCF will remain healthy as companies need to do only maintenance capex. No major capex needed going forward hence cash flows are expected to be robust. The company has done Capex of Rs 130 cr in the last 5 years.
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