Kavveri Telecom looks undervalued: A Chugh

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Kavveri Telecom looks undervalued: A Chugh

Ashish Chugh, Investment Analyst & Author Of Hidden Gems is of the view that Kavveri Telecom is looking undervalued. The company has a strong R&D and manufacturing capabilities. It manufactures Antenna’s , radio frequency (RF) equipment and micro wave products and it supplies these products to various telecom companies.

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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 Kavveri Telecom See messages about Kavveri Telecom Kavveri Telecom BSE | NSE 01/06/12 Are Mutual Funds betting on Kavveri Telecom?

Ashish Chugh , Investment Analyst & Author Of Hidden Gems is of the view that Kavveri Telecom Products is looking undervalued.

Chugh told CNBC-TV18, "Kavveri Telecom Products recently won the innovator of the year amongst small and medium enterprises instituted by Business Today, Yes Bank, this itself talks about the strong R&D capabilities of the company. This is a company catering to the telecom infrastructure space and this company has a strong R&D and manufacturing capabilities. It manufactures Antenna's , radio frequency (RF) equipment and micro wave products and it supplies these products to various telecom companies like Erricson, Motorola, Aircel, Aritel, Reliance Communications and Bharti Electronics."

He further added, "In the past two years this company has made 4 acquisitions primarily in Canada. This will enable the company not just to acquire new products and customer but also allow the company stronger penetration into the defence, aerospace and space segments."

"If one looks at the financials of the company for FY09 the company achieved a 28% increase in sales to about Rs 180 crore. Profit after Tax (PAT) was almost flat at about Rs 11.5 crore. The company has equity close to Rs 10 crore which means an EPS of about Rs 11. The stock currently trades at about Rs 46-47 which means a price to earnings ratio of about 4-4.5. Looking at the financials of Q1 even though there has been a decline in the revenues, the PAT has gone up by about 33% to Rs 5.5 crore, this is after providing for a tax of more than 400% compared to the same period last year. What is noticeable is a significant improvement in margins. So you have a company catering to a sector where the growth is good and the performance for this year is expected to be much better than last year. In fact last year they made some extra ordinary provisions because of which the profits were lower. So going forward the stock looks under valued given the price to earning ratio of about 4-4.5."

Disclosure: I would have a vested interest in this stock.