Commercial Engineers & Body Builders Co. Ltd. has entered the capital market on
The company is engaged in making vehicle and locomotive bodies for road and railway transportation and has been doing large part of work for Tata Motors Ltd. apart from doing it for Indian Railways, BHEL, Ashok Leyland, Volvo-Eicher JV, and many large industrial corporates.
However, it seems that we are seeing very loose or poor disclosure in RHP, as seen from a statement that there are no comparable listed companies with the same business as that of the company. Infact, Automobile Corporation of
In contrast, this company also had flat year for FY09 with topline at Rs. 126 crores and PAT at Rs. 1.74 cores. In FY10, the company improved its performance with topline at Rs. 183 crores and PAT at Rs. 19.20 crores, resulting in an EPS of Rs. 4.48 for the year, on fully diluted equity base of Rs. 42.90 crores. The massive increase in equity has happened due o issue of bonus shares of 600%, during the year. Even if we assume the FY10 as its normal year,( though margins in the previous years have been quite low) share is being issued at a PE of close to 28 times.
The company claims to have orders of Rs. 623 cores as at 15th July 2010, of which, major orders are indicative ones, as given by its customers and hence may not materialize into orders. Does not this concept of treating "enquiry as order" seem too risky? Net worth of the company is meager at Rs. 71 crores, with debt of 54 crores, as at
As stated above, Auto Corporation of Goa with expected EPS of close to Rs.20 for FY 11 and now ruling at 370 is ruling at a PE of about 19 times, while it is at a price to book value of just 1.80 times. If Tata Motors have 14% stake (Pre-IPO) in this company, it is the promoter of Auto Corp. of
Considering all these, it can definitely be, concluded that the issue is overvalued and does not deserve a valuation of more than two digits.
Better to give a pass to the issue and buy Auto Corporation of