Buy Mirc Electronics, says Ashish Chugh

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Buy Mirc Electronics, says Ashish Chugh

Buy Mirc Electronics, says Ashish Chugh, Investment Analyst & Author of Hidden Gems.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Ashish Chugh See what other Experts & Brokerages are saying about Mirc Electronic See messages about Mirc Electronic Mirc Electronic BSE | NSE 01/06/12 Are Mutual Funds betting on Mirc Electronic?

Buy Mirc Electronics , says Ashish Chugh, Investment Analyst & Author of Hidden Gems.

Chugh told CNBC-TV18, "Mirc Electronics is a company which sells consumer durables under the Onida brand name. They have got manufacturing facilities at Noida, Thane district and two at Roorkee. They are putting up another plant which will be located somewhere in South India."

He further added, "If you look at their financials, for FY10, sales were about Rs 1,500 crore. Profit after tax was about Rs 18.5 crore. In the first nine months of the current financial year, sales are about Rs 1,350 crore, which is up by 20% of the same period last year. Profit after tax is up by 30% to about Rs 17.5 crore. EPS on an annualised basis is about Rs 1.60 paise and the stock trading at price of about Rs 18-19 is trading at a PE multiple of about 12."

"This is a business where there is a lot of competition, not just from the Korean players but also from Chinese companies. Given the brands strength and the fact that they have an established distribution network and after service sales network, these are some things which are positive for the company."

"The company in the last couple of months has done a number of new product introductions. They have moved away from normal TVs and have started manufacturing LEDs and LCD TVs in India. They are focusing on sales of mobile phones. The sales from mobile phone business are close to about Rs 400 crore right now, which they plan to take it up to about Rs 1,000 crore in the next two years. They have also ventured into manufacturing of LED lights powered by solar panels. This is a product which has good potential, especially, in the rural areas of India."

"At a PE multiple of about 12, the stock is neither cheap nor expensive but looking at it from another perspective, the company gave a dividend of about 95 paise in FY10. This is a Re 1 face value stock. Given the higher profits, the dividend is expected to be higher this year. Assuming a dividend of Re 1 for the current financial year, the stock at the current price gives a dividend yield of about 5-5.5%."

"With expected sales of about Rs 1,800 crore for FY11, at a marketcap of about Rs 265 crore, the stock looks undervalued. When compared with its peer group and also smaller companies, the likes of Symphony Comfort, the stock at Rs 265 crore marketcap looks like an attractive buy."

"The management has aggressive targets of sales expansion and they are expecting the sales to go up to about Rs 4,000 crore in the next three years which means a CAGR of close to 30%. At a current marketcap of about Rs 265 crore, current dividend yield of about 5-6%, this is a stock to maybe keep on one's radar and maybe accumulate on every decline."