Synthetic Products Enterprises Ltd (SPEL) – Potential Top Pick
Synthetic Products Enterprises Ltd (SPEL) is a dual play stock having 60% FMCG play & 40% auto sector play (based on company’s revenue mix).
The company has done a good job in managing its balance sheet as well. Leverage ratios have been curtailed in the recent years by consistently building up asset base. Key trigger for the company is the material information that was announced of expanding its manufacturing facilities, while focusing on achieving more efficient and profitable utilization of the installed manufacturing capacity.
A new manufacturing facility in the Industrial Estate of Rahim Yar Khan is planned for which 6.5 acres of land has been acquired. Financial side of company shows FY16 earnings have increased by a whopping 53% and forward earnings FY17E are further expected to increase by ~20%as per conservative estimates by industry Analysts. 5-Yr revenue & net earnings CAGR stands at 15%& 31% respectively.
The stock is trading at 9.7x forward earnings for FY17E which is at a steep discount to the valuations of the relevant sectors mix (which usually hovers way above 12x).