>PAREKH ALUMINEX LIMITED (ANAND RATHI)

Investment Rationale
Company is world class manufacturer of Aluminum foil products, which are used in hygienic food products packaging. Its facilities are fully automatic and meet health / safety standards of European nations. Company is expanding capacity by three times to cater to rising demand from domestic and global markets. The expansion of Rs 240 Crs is underway and for which funding was raised earlier in 2007-08; wherein company raised about Rs 125 Crs by equity dilution [in the range of Rs 225 to 260 around Jan’08], by placing equity under QIP route. Even equity warrants were issued @ 115, which are being converted now. So whereas most of the equity dilution already happened, the fruits of this mega expansion [which will triple the capacity] will be visible from 2010-11. The company, which is having very healthy B/Sheet, attractive earnings/earnings growth; will be able to grow even faster in coming years.

Company is likely to become one of the biggest Aluminum foil producer in the world, and will be able to achieve turnover close to 1000 crs, once this expansion is completed; is available to you at Mkt Cap of Just around Rs 100 Crs. If we value such companies very conservatively at 0.5 times of sales, then I think this stock should be 4-5 times from current levels in next 3 years. Even at ‘09 expected sales of over Rs 400 Crs, the business value of company should double at least, if not more, from current levels.

Risks
Any delay in expansion or quality issues, may change the equation.

Recommendation
Company is likely to report [for March.’09] EPS of Rs 25-28 on diluted equity, which can go up further to Rs 30 in current year. But real growth due to mega expansion will come there after. That’s why we have covered this in Multi-bagger category for long term investors. But in one year also we expect it to give 100% returns.

To see full report: PAREKH ALUMINEX