Gravita India Ltd:-Buy/sell: multibagger

Scripscan:Gravita India Ltd



Story:Gravita India Limited engages in the smelting and refining of lead products inIndia. The company manufactures lead metal products, including pure lead/refined lead ingots; lead alloys, such as lead-antimony, lead-selenium, lead-calcium, lead-copper, and lead-tin solder alloys; and lead powder. It also provides lead chemicals and oxides in powder and granules forms, such as lead sub oxide, red lead, litharge, lead nitrate, and lead mono silicate products. In addition, the company offers lead products comprising sheets, foils, wire, glass/shielding, anode, pipe, bricks, sheath, coolant in nuclear power, artistic products, shots/balls, blankets, wool, flange, cames, bullets, and weights. It offers its products primarily for use in industries, such as battery, glass, ceramic, pharmaceutical, paint, and electronic industries. Further, the company provides turnkey solutions and consultancy services on engineering and design for the secondary lead recycling plants. It also exports its products to various countries.The stock had hit a record high yesterday after the company said it has raised stake in its Jammu & Kashmir-based unit, Metal Inc, to 100% from 80% earlier.The good part about this acquisition is that Metal Inc belongs to a tax beneficial zone and business operated from that region will result in tax saving of around 5%, which in turn will help the margins of Gravita.For the price at which it is quoted today, the financials seem too small. On a topline of Rs.51 crore, the company had a net profit of Rs.2.17 crore for Q1FY12. OPM is at around 7% and NPM at 4.24%. The stock is probably excited after the company stated that this acquisition will boost the topline by 35-40 crore and bottomline by 3 to 3.5 crore. Annualised EPS currently stands at Rs.6.40 and that discounts the current price at crazy PE of over 60 times. Clearly, stock price has far surpassed the current fundamentals.Sell and move on to something better with cheaper valuations.

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