(BSE Code: 532893) (CMP: Rs.27.80) (FV: Re.1)
Company Background: Incorporated in 1946, Tamil Nadu based VTM Ltd manufactures fabric. Its product portfolio comprises Square Inch Drills, Twills, Piques, Yarn Dyed, Jacquards, Dobbies, etc. It offers woven fabrics such as Cambric, Voile, Feather Proof, Poplin, Pinpoint Oxford, Satin, Percale, Grey Sheeting, Swiss Dot, Birds Eye, etc. It is also engaged in exports. Its manufacturing unit in Virudhunagar is well-equipped with around 270 looms, 132 Sulzer machines, 135 air jets and 3 Jacquard machines to produce ~10,00,000 meters of fabric every month.
Performance Review: During Q2FY19, VTM reported 76% higher PAT of Rs.3.93 crore on higher sales of Rs.42.01 crore. During H1FY19, it reported 49% higher PAT of Rs.6.68 crore with an EPS of Rs.1.66 on a small equity of Rs.4.02 crore. The strong growth momentum is expected to continue going ahead.
Conclusion: Currently, the stock trades cheap at a P/E of 11.16x compared to the industry P/E of 19.15x, S&P BSE Small-Cap P/E of 68.05x and Nifty Small-Cap 250 P/E of 61.4x. Its market cap is just Rs.111.83 crore as against its turnover of over Rs.165 crore. It paid 75% dividend for FY18. Considering these factors, we have a Buy on the stock with a long-term target of Rs.45.