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Recommendations
SEL Manufacturing
BUY : CMP Rs 517
Target : Rs 800.
Term : Medium Term
SEL Manufacturing is one of the fastest growing textile company in India. The company’s
strategy of growing organically and inorganically has paid huge dividends, where the
turnover and the profit have grown almost 3x in two years.
Aggressive capacity expansion to fuel growth:
The company has undertaken two projects toexpand its capacity in various divisions. The first project (which was undertaken in July 2007) isalready 50% completed. The balance part consists of expanding the garments capacity by 3.5mn pieces p.a. (mppa), spinning capacity by 50,400 spindles, knitting capacity by 1800 tons, aterry towel plant of 3600 tons p.a. (TPA) and a captive power plant of 10 MW. These capacities would be commenced in a phased manner in FY09, the benefits of which would be seen in FY09 and FY10.
Company Background
SEL Manufacturing, a part of 40 year old R.S. Saluja Group, is a vertically integrated multiproductand multi location textile company, manufacturing & exporting readymade garments,knitted & dyed fabrics and cotton yarn with production facilities located in Ludhiana in Punjab and Baddi in Himachal Pradesh.The company was incorporated in 2000 for manufacture of readymade garments with an installed capacity of 2.5 mppa. Over the last few years, the company has integrated its operations from being a garment manufacturer to a fully integrated textile house.
Group company mergers
Year Company Area of Business
April 2004 Saluja Processors Pvt Ltd, Fabric knitting & processing
Saluja Fabrics Ltd
April 2005 S E Exports Acquired 99% stake in the Group
Partnership Firm engaged in garmenting
June 2006 Saluja Cotex Pvt Ltd Acquired 100% EOU spinning unit
Key Concerns
• The company derives almost 50% of its income from exports. This exposes the
company to currency risk. However, the risk is mitigated to an extent by exporting to
more than 40 countries globally. Also, 80% of the company’s billing is in Euro, which
to an extent has offset the impact of strong rupee.
• Any delay in the expansion plans will hurt the growth and accordingly our estimates
Disclaimer
The contents of this material are general and are neither comprehensive nor appropriate for
every individual and are solely for the informational purposes of the readers.
All investments involve risk and past performance does not guarantee future results.
Investigate before you invest.
This is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or
instrument or to participate in any particular trading strategy.
6:05 AM
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