Hold Radha Madhav Corporation: Sheth

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Hold Radha Madhav Corporation: Sheth

Dipen Sheth of Wealth Management Advisory Services is of the view that one can hold Radha Madhav Corporation for long term.

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

Dipen Sheth of Wealth Management Advisory Services is of the view that one can hold Radha Madhav Corporation for long term.

Sheth told CNBC-TV18, "Radha Madhav is a very interesting company because they are in the packaging business and this is a company, which went public close to about 2 years ago, I think at a Rs 10 premium. So, at the current market price of about Rs 110-115 or so, it kind of looks like it has run its full course. But that is not entirely true. They are rapidly evolving in terms of their product mix. They started off as a packaging films company and they went forward into custom solutions for FMCG packaging and they went forward into a slightly more sensitive area of food packaging. Now, they are going the whole hog and getting into pharma packaging."

He further added, "The kind of stuffs that companies like Bilcare or Ess Dee Aluminium have achieved, it is going to take a while before Radha Madhav evolves to that stage. But what I notice was that on an FY07 balance sheet size, the total capital employed of less than 110 crore, they had already committed investments of over a Rs 150-160 crore. But that is not going to happen in a quarter or two; it is going to take a year to pan out."

"The management seems very capable. I have spent some time talking with them and trying to figure out their product mix. I can already see a shift in their EBITDA margins.  So, that gives me faith that the investment cycle that they are entering into is going to be very positive for them, both in terms of margin expansion and obviously topline growth. That is why we are backing this as a long-term hold. I think you need to hold this stock over the next couple of years to really see it flower into its full potential."