Simplex Castings Ltd – Stock Investment

Simplex Castings Ltd was incorporated as a partnership firm in 1970 for manufacturing grey iron castings. It was converted into Pvt Ltd entity and 1980 and company went public in 1993 Simplex Castings is engaged in production of Heavy Engineering Castings in different grades for all industrial segments including Steel plants, Power plants, Sugar industry, Chemical, Oil, Cement, Defense, Railways, Mines etc. It has 2 manufacturing units, each in Bhilai and Urla. Bhilai factory has installed capacity of 28,000 tonnes for producing Grey Iron casting in single piece weighing upto 45 tonnes. Urla factory is engaged in production of Special Steel castings in single piece weighing upto 25 tonnes. SCL has strong presence in export market as well. Its major customers in domestic market include :- Indian Railways, NTPC, SAIL, HEC, BHEL, Essar, Atomic Energy etc. In international market, its customers include giants like Kawasaki,  Hyundai etc

FINANCIAL PERFORMANCE :- Simplex Castings has extremely steady track-record with consistent profits and dividend payouts For 2009-10, although its turnover declined by around Rs 9 crores, NET Profit went up by more than 15%. EPS stood at 17.80 and stock is available at 4.60xFY10 EPS of  Rs 8.80 in half year ended Sept 2010. It hopes to end FY11 with sales of 185 crores and NET Profit of 11.75 crores, translating

Rs 8.80 in half year ended Sept 2010. It hopes to end FY11 with sales of 185 crores and NET Profit of 11.75 crores, translatinginto EPS of Rs 19.65 Stock is trading at 4.17xFY11E Eps. Considering that Simplex is in business of manufacturing specialised castingsfor industrial/engg use and has consistent track-record, such valuations are very low. Simplex deserves much better valuations. Even if Simplex castings gets very modest PE Ratio of 7, share price, based upon FY11E earnings, should be Rs 160/. Share price has almost bottomed out and is a good case bottom-fishing. Investors can expect/reap more than 50% appreciation in next 3-6 months if markets dont slide more.

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