Sanghvi Movers can give 30-40% return: Ashish Chugh

Sanghvi Movers can give 30-40% returns over a period of one year, says Ashish Chugh, Investment Analyst & Author of Hidden Gems.

Chugh told CNBC-TV18, "This is case of company which is largest in its business but ignored by the markets. I think it is primarily on account of the fact that this company caters to a space, which is probably not having best of its times. This company is the largest crane services company in the country, the third larges crane services company in Asia and seventh largest crane owning company in the world. They have wide range of cranes starting from 20 tones going up to 800 tones."

He further added, "The company caters primarily to the industrial segment where it rents cranes for construction of steel plant, cement plant, wind power and these cranes are also sued in the construction and infra sector. The company is also into logistics services business where it does over dimensional consignments, which have to be transported over difficult terrains."

"If we look at the financials of the company, the FY12 sales were about Rs 450 crore which was up by 25% over the same period last year. EBITDA was Rs 340 crore again up by 25%. Profit after Tax (PAT) was up about Rs 100 crore which was up by 18%. The PAT has not kept pace with the sales and operating profit margin mainly on account of higher interest costs which jumped by about 56%."

"Looking at the financials of the company, it has EBITDA margin of 75% and net profit margin of close to 23%. Generally companies having high EBITDA margins and high net profit margins generally have high discounting on the bourses. In this case the stock is traded at a PE multiple of just about 4.5, which is primarily on account of the fact that construction, infrastructure and industrial activity is not going on at a great pace. But in spite of that this company has increased its revenues by 25% last year. It has defied what was happening in the industrial and infrastructure segment."

"At current price of Rs 110 the negatives look discounted. The stock is available at dividend of about Rs 3 and dividend yield at the current price comes to about 2.75%. So this is a company where I see low downside from these levels. The negatives are there but they look discounted in the stock price and the stock is capable of returning maybe 30-40% over a period of one year."

Disclosure: I have very small investments in this stock.