Sanjay Chhabria is an equity analyst and investment consultant based at Raipur (Chhattisgarh). At the time of writing this, he doesn't have any position in the stock mentioned above. He brings out a weekly Investment newsletter Market-View to help investors take an informed investment decision. He invites Readers to send him email to get free 1 week trial offer of Market -View. He welcomes comments, feedback & investor queries at valueinv@sify.com. Under no circumstances does the information in this report represent a recommendation to buy or sell stocks. This report has been prepared solely for information purposes and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Readers using the information contained herein are solely responsible for their actions and are advised to satisfy themselves before making any investments.
Cheviot Company Ltd (Rs 240)
(BSE Code-526817)
Cheviot Company Ltd, a recognised export house has emerged as one of the leading manufactures and exporters of fine jute yarn, hessian sacking and industrial fabrics. Exports constitute more than 70% of total turnover of the company. The Cheviot share at Rs 240 trades at 4.7 times FY'07 earnings (Rs 50.57) and offers an attractive investment opportunity for the medium-long term.
Cheviot Company Ltd was incorporated in 1897, in the name of Delta Jute Mills Company Limited (DJML). Subsequently, the name of DJML was changed Cheviot Company Limited (CCL). The Jute Mill of the Company is located at 19, Mehta Road, Budge Budge in District 24 Parganas of West Bengal. The unit has been focusing on continuous technological improvements, breakthrough, R&D and machinery development. It is equipped with the state of the art technology. The major concentration is on specialty fabrics and precision wound yarns meeting the most challenging technical parameters. CCL has been a producer of traditional jute products like sacking and hessian. It is to the credit of the Company that while in the 1980s many jute companies fared quite indifferently, the Company managed to retain a healthy growth and went ahead with the modernization of their manufacturing facilities. In 1996, the company set up a 100% EOU near its said jute unit at Budge Budge for the manufacture of jute specialty fabrics. Again in March'03 the company set up another 100% EOU unit at Sector II, Falta Export Processing Zone, Falta, West Bengal, adding another feather to its cap, for its increasing focus on exports.
CCL continues to operate through two business segments: jute goods and captive power-generation. However, revenues/assets from captive power-generation is not more than 10% of the total segment results/assets. In the jute goods segment, the company manufactures and exports special-quality jute yarn and HDPE/PP woven sacks. CCL today has emerged as one of the leading manufactures and exporters of fine jute yarn. Besides being a Manufacturer of high value non-traditional diversified jute yarns and fabrics, CCL is an IS/ISO 9001:2000 Company and also a recognised EXPORT HOUSE. Exports constitute more than 70% of total turnover. Fine yarns are exported to Belgium, U.K., Germany, U.S.A., Holland and other countries. Cheviot has now carved a niche for itself in the non-traditional and high value market segments.
Cheviot Company had declared bonus issue in the ratio of 1:2 in August 2006 after which the enhanced capital is Rs 4.5 cr. (promoter's stake- 73.13%). For FY 07, the company posted net profit of Rs 22.8 cr. on net sales of Rs 156.86 cr. The EPS stood at Rs 50.57 and the dividend declared is 80% on enhanced capital. The Cheviot scrip has escaped investor attention in the market, as the company is very low profile. At current valuations, the stock is trading at 4.7X FY07 earnings and at around 4 times expected FY08 earnings. The Cheviot scrip looks undervalued considering its steady financial performance. The dividend yield also works to 3.4%. and the dividend payout has been increasing steadily. Cheviot trades at price to book of just 0.74 based on its FY07 book value of Rs 315
Cheviot's current market-cap is around 108 cr whereas it holds investments worth around Rs 50 cr. parked in various liquid mutual funds. Besides it has investments in blue chip stocks valued at around Rs 45 cr. So total investments and cash comes to around Rs 100 cr. against the co.'s mcap of 108 cr. so, the co's business is valued at just Rs 8 cr. .In view of the above, the scrip holds potential for appreciation in the medium term. Investors can accumulate the Cheviot share at this level for decent returns over the medium-long term.
Financials Year ended March 2007
· Net Sales - Rs 156.86 cr
· Net profit - Rs 22.8 cr.
· Equity - 4.5 cr
· Promoters' stake-73.13%
· Public stake-22.75%
· EPS - Rs 50.57
· Dividend - 80% (Rs 8 per share)
· Expected FY'08 EPS - Rs 60 -Rs 62
· Forward P/E- 4
·Current Market Price - Rs 240
· Market Cap- 108 cr
