Eimco Elecon (India) Ltd
Market Cap.: ₹ 230.80 Cr.
Current Price: ₹ 400.00
Book Value: ₹ 386.79
Stock P/E: 14.20
Dividend Yield: 1.25%
Face Value: ₹ 10.00
Company is virtually debt free.
The company has delivered a poor growth of -5.42% over past five years.
Company has a low return on equity of 9.50% for last 3 years.
Net Profit: 16.25
For me doesn’t look good.
Eimco was first to introduce intermediate technology of Side Dump Loaders (SDLs), Load Haul Dumpers (LHDs) & Rocker Shovel Loaders in India to partially mechanise the underground Coal and metal mines.
Eimco later introduced Face & Roof Drills, Coal Haulers, different models of LHDs / SDLs, etc. for underground mines. Eimco has also started manufacturing equipments for the construction segment.
Eimco has cash and liquid investments of around INR 115 cr which is 48% of the current market cap.
Eimco depends on Coal India for around 85% of its revenue. Management is trying to reduce dependence on Coal India by developing new products lines.
I can’t rely on government of India though .. they can void the contract give it to some other company
How automated is CIL?
Management efficiently launched Drill Machine product line. The trials started in 2009 and manufacturing in 2010. Eimco got the manufacturer status in 2011.
Valuation by cash flow and cash investment:
Average CFO for Eimco Elecon over 5 years: Rs. 27 cr.
Cash & Investment in mutual funds/stocks at the end of FY2016: Rs. 115 cr.
If free cash flow can cover 1/3rd of the interest part that much money a bank can give comfortably so even at 12% interest rate a bank can give 75 cr with 9cr as interest per year
If Eimco Elecon borrows Rs. 75 cr, the overall cash position will improve from Rs. 115 cr to Rs. 190 cr (115+75). Eimco Elecon has outstanding shares of 0.6 cr.
New cash & equivalent per share = (190 / 0.6) = Rs. 317