Sunidhi Securities is bullish on Cheviot Company and has recommended buy rating on the stock with a target of Rs 450 in its November 27, 2012 research report.
“CCL was incorporated in 1897 as Delta Jute Mills, whose name was changed to Budge Budge Amalgamated Mills. CCL came under the exclusive management of Basu Deo Kanoria in 1976. Harsh Vardhan Kanoria is looking after the day to day management of the company. CCL has been a producer of traditional jute products like sacking and hessian. Exports constitute over 40% of sales. In 1996, CCL set up a 100% EOU near its said jute unit at Budge Budge for the manufacture of jute specialty fabrics. Again in March 2003, CCL set up another 100% EOU unit in Falta Export Processing Zone, Falta, West Bengal for increasing focus on exports. CCL today has emerged as one of the leading manufacturers and exporters of fine jute yarn. The product range includes jute decorative fabrics, hessian bags, hessian cloth, sacking cloths, jute sacking bags, jute goods, backing jute bags, different types of jute products and jute-industrial packaging products.”
“During Q2FY13, net profit surged by 29% to Rs9.4 crore (Rs7.2 crore) on 6% lower sales of Rs75 crore (Rs80 crore). OP and NP margin stood at 19.7% and 12.5% as against 14.3% and 9.1% respectively in Q2FY12. (YoY). Q2FY13 EPS works out to Rs20.9 Vs Rs16.1 in Q2FY12. During H1FY12, net profit rose by 34% to Rs19.2 crore on 2% lower sales of Rs142.5 crore. OP and NP margin stood at 20.5% and 13.5% Vs 14.8% and 9.8% respectively in H1FY12. H1FY13 EPS works out to Rs42.7 Vs Rs31.8 in H1FY12.”
“CCL’s Export Oriented Unit at Falta Special Economic Zone continues to operate at reduced scale due to lack of orders for industrial fabrics on account of recession in Europe. However, during FY12, CCL has created required infrastructure at its Falta unit to venture into export of jute shopping bags, the work on which continues. In the backdrop of rising global awareness to use more natural fiber products to keep the environment free from pollution, Government and industry are making concerted efforts to promote the advantages of jute especially the environment friendly attributes in enhancing the diversified uses of these fibers. Considerable progress has been made in developing diversified jute products for various end uses like jute geotextiles, floor coverings and many more projects are being taken up to develop products with promising market prospects and consumer needs.”
“The extension of compulsory packing of 90% food grains and 40% of sugar [under Jute Packaging Materials (Compulsory use for Packing Commodities) Act, 1987 (JPMA)] till June 2013 augurs well for the jute manufacturers. The extension is reviewed every year by the Ministry of Textiles in order to help the workers and protect the environment because the jute is natural, biodegradable and reusable fibre. At the CMP of Rs346, the share is trading at a P/E of 4.1x on FY13E and 4.0x on FY14E. We recommend BUY with a target of Rs450 in the medium term,” says Sunidhi Securities research report.
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