Powerfulpicks call update: On July 24th, I gave a call on UFLEX at 128 for a target of 172. That was met. Then on Sep 7th, I called for a 2nd target of 194. That has been met too. Today, UFLEX touched 213.80 and is nearing my 3rd target of 220. When I had stumbled upon UFLEX in late July, I could not believe my eyes. How could FIIs, DIIs and HNIs miss on this gold mine so far? I had waited for 2 days before telling anyone because I thought I was wrong in my analysis. But it seems the market has now discovered the potential of our packaging industry. Those who had bought at 128 after my call are sitting on a notional profit of 67% in just 2 months.
Some of you asked me on the rights issue. Here is what I know and think:
Uflex board has approved rights issue in ratio of 1:4, limited to a maximum of Rs 250 crores; this will open by the Sep end or Oct beginning. Almondz Global Securities is the lead manager for the issue. I think one can subscribe to the rights issue. And this is because the prospect of UFLEX in future is very bright.
UFLEX supplies flexible packaging materials to clients like PepsiCo, Nestle, Gillette, Ranbaxy, Procter & Gamble, Britannia and other fast moving consumer goods and pharma companies in India and abroad, catering to global markets spanning USA, Canada, South America, UK, Europe, Russia, CIS countries, South Africa and other African countries, the Middle East and the South Asian Countries. Growth of organized retail segment and brands has increased demand for flexible packaging products. The Rs 15000 crores domestic flexible packaging industry is growing at around 15-17% and one can 'feel' the increase on demand, especially in FMCG and food segments. The Rs 75000 crores global market too is growing at 6-7% annually. These are mind boggling figures and industry wise, present a very large field for UFLEX to play around its core business and grow from it. The company has manufacturing facilities at Jammu, Noida, Gwalior, Mexico and Dubai.
The company is going to invest over Rs 1,150 crores in the next 2 years for capacity expansion. The company has invested Rs 620 crores in a new plant in Egypt and its production has just started, aiming to produce 35000 tonnes of BOPP film and a second phase will be operational by next year end. The company will invest Rs 300 crores in the 2nd phase of Mexico plant. Some capacity expansions in its Indian plants are also being planned out. The company is aiming to increase earnings from Rs 2,296 crores in 09-10 to Rs 4,500 crores by 2013 (96% top line growth), 60% coming from international revenues. Margins are projected to increase to 22-23% from the current 19-20%.
What else can you look for from a company, who has worked out their future plans with such intricate details? So go for the UFLEX rights issue.
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