Buy of The Week – RSWM Ltd

BSE Code : 500355

LNJ group co is largest producer of PV yarn in India with installed capacity of 3.50 lacs spindles. This apart, It also produces and selling of suiting material under famous brand MAYUR, has denim mfg and 48MW Power plant.

RSWM had incurred huge loss in 2008-09. However, company has stage massive turnaround in 09-10 with PAT of Rs 33.85 cr. In Q4 alone,RSWM reported EPS of Rs 10.70. Yarn prices continue to rule at all time high levels whereas raw material prices are still at reasonable levels, leading to further expansion of margins.Its denim division had been making losses since inception. However, now denim division too has started making decent profits. RSWM is set to reported best ever results in its history.

On small equity,. turnover is reasonably high and hence, even reasonable expansion of profit margin leads to sharp Financial Performance rise in EPS. Networth of RSWM as on 31.03.2010 is approx 230 crs. Market cap is 278 cr Rswm is likely to earn total C ASH PROFIT of approx 300 cr in 09-10 and 10-11 and market cap is less than that. Scrip is trading at: 3.56xFy11E Eps 1.65xFY11E Cash Eps Market cap is just 16% of Fy11E sales RSWM appears grossly underpriced at CMP.

RSWM also holds equity stake in group company which is in hydel power business. Share price can be 175/ in 2-3 months and 225/ in less than 1 year.

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