With a view to cleanup the Portfolio and also book some profit, I was contemplating to sell off my small holding in MM Forgings. As I mentioned in my previous post, 'When to Sell' is still a mystery. I was looking at the financials @ Indiaearnings website and in the process ended up looking at the board comments. My past observation is that most of these comments are a Punters view, more of speculative in nature. Someone argued that Automobile Industry is picking up & with a low PE, MM Forging is a good bet. I looked at the numbers more closely and changed my mind. Having decided not to sell, I went ahead and increased my position a bit more. This was few weeks before.
What has followed is the strong quarterly results and the price is now up 25%. With the original investment made year ago, my overall gain is 37 % before tax. EPS (TTM) is Rs. 11.87 p.a. & PE is 8.9. The Q2-2010 EPS is Rs. 4.05 and assuming this reflects annual growth, this translates into an EPS of Rs. 16.20 p.a. Industry PE multiple seems high but even at PE of 10, the valuation works out to Rs. 162. Current Market Price is Rs. 105. My average cost is Rs. 77.
No - I may not add any more but will just hold on & see if the growth is consistent in Q3-2010. How did I originally get into this script? think it was one of the Outlook Profit issue that carried a detailed analysis by one of the leading fund manager. Seems like a worthy pick.
So my investment style has changed with reduced time at hand. Its difficult for me to get into a full fledged research on my own and I have started relying on professional research though very selectively.
Regards, Rohit
Disclosure:
As stated above, I have a holding in MM Forgings
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