Key Positives(Abstract): As already mentioned Company is doing very great and expected to perform more efficaciously in coming quarters. There are abstract of some positive points which are very favourable Investment Rationale. Some of the key positive points are mentioned here below:
1) Company is engaged in manufacturing of Steel Bars and these are used in Construction sector the most. Construction Sector is in huge demand these days and so demand of Steel Bars is also escalating.
2) Government’s Housing for all, Affordable housing, many Infra Projects they all are creating huge demand for Steel Bars.
3) Prices of Steel are increasing beyond of the fence these days so Rathi Bar is definitely going to earn huge amounts of Profits. Infact its Next year EPS is estimated Rs.3.50/- on a very conservative basis. Discounting forward earnings Rathi Bars Limited is now trading at P/E of Just 5, which is very attractive in this segment.
4) Company is going through Capacity expansion. Once it is completed (Which is estimated to complete in 2021) Its Revenue will be doubled and Profits will rise hugely.
5) Instead of distributing profits to shareholders, Company is opting to repay debt which will reduce its Interest costs and Net Profits of the company will improve. Most of it Debt is due to ongoing expansion which will boost overall profitability of the company.
6) Management of the company is very known in this field and having vast experience. They are working very hard for the growth of Rathi Bars Limited which is also seen from its Sales & Profits CAGR Growth of last 3 years.
7) Shareholding pattern of the Company is very strong as more than 64% shares are held with Promoters, with no any single share pledged. More than 1% are held with DII and rest are with Retail Shareholders.
8) Technically Stock is in up trend and trading above of its all of 20, 50, 100, 200 day moving averages with support of RSI, MACD and other indicators.
Conclusion and View: We expect company to perform exceptionally well in coming quarters and years. Once Work in progress is completed and company starts its operations with extended capacity, they will be in a good condition to repay debt in short period of time. Company have very strong brand in this field and management is leaving no stone unturned to improve the numbers of company and to deliver the better results every quarter. Fundamentals of the company are really great and favourable investment option. Now mentioning the Technical Parameters of the Company, at CMP of Rs.20-21/-, shares of the company are trading above its 50, 100 and 200 DMA. Trading Volumes are also surging in last 1 Month. MACD and RSI above also indicate that Stock will be in big rally in coming weeks and months.
Rathi Bars Limited with its strong earning visibility, strong brand and sound fundamentals, has huge potential to deliver very good returns on investment in coming quarters.
So at CMP of Rs.20-21 /- is very lucrative as only 2 years past its high was more than Rs.45/-. So It is prudent to accumulate the Stock at cmp and on declines with
maximum Portfolio allocation of 5% or Rs.25,000/- (whichever is lower) with Stop loss of Rs.15/-.
On the upside one can expect targets of 40/50/60+ in the holding period of 12 Months holding period.
