Buy Company with Strong Fundamentals in Turbulent Market
In a turbulent market, finding out a srcip that can withstand the passing rough and tumble and also offer good returns holds the key for equity investors like us. This can only happen if the company stands on the bedrock of strong fundamentals.
TRF is a counter that satisfies this lookout criterion. TRF designs, manufactures, supplies and installs bulk-handling equipment and systems. Established in 1962, Tata Robins Fraser – renamed TRF in 1984 – was a joint venture of Tata Steel, Robins Engineers and ACC. It was started with the objective of meeting the in-house bulk handling requirements of Tata Steel. But, over time TRF expanded its operations and executed contracts for other steel and power plants. It later expanded operations, which included port, yard equipment and EPC divisions. These have now been bifurcated into two divisions, namely, bulk material handling division or product division and project division or EPC division. The latter undertakes turnkey projects. Currently, TRF caters to sectors like steel, power, mining and port. Its product portfolio comprises a diverse range including mining vehicles, crushers, shuttle conveyors, conveyor components, shipyard cranes and vibro feeders. TRF specializes in the manufacture of customized products to meet customer’s specific needs. As such, it is in a position to command higher margins.
What makes this counter further attractive is the management’s long-term initiatives. It has laid down Vision 2013, which looks at five-fold growth in five years to become a Rs 2,500 crore company and a leader in material-handling equipment, processes and systems. TRF is also exploring overseas opportunities and is currently working on a turnkey project for Oman based Saheed Iron and Steel. TRF is not averse to inorganic growth. It acquired 51 per cent stake for Rs 44.65 crore in the last fiscal, through its Singapore subsidiary, in York Transport Equipment (Asia), a company that manufactures trailers and trailer axles with bases in Singapore, China and Australia. Its products are sold in 27 countries, including India, under the brand names of Rednet and York. This acquisition has given to TRF the much-needed access to international market and also to newer products and technology. This would help it to push up its growth briskly.
As far as profits are concerned, TRF’s product business enjoys better margins than its project business. On the valuation front, at FY08 profits, TRF gives an EPS of Rs 76.67, thereby resulting into an attractive PE of 8.35x. Its market cap-to-sales ratio shows it to be an undervalued counter at 0.78x its FY08 sales. So, considering the fact that the counter has already corrected 69.5 per cent from its January peak, there is limited downside for TRF. At the present valuation, the scrip is good for long-term grab. Looking at the CMP as on June 30, 2008 present market conditions, we would suggest you to buy in small quantity.
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your recmond is very good i am satisfy your recmond