Richa Industries : A good infrastructure stock available at CMP 33-35 Buy for Target price of 50

Richa Industries Limited, established in the year 1991, has two divisions, namely, Textile and Pre-Engineered Building (PEB) Divisions. The textile division has a manufacturing facility for dyeing, processing and finishing of knitted fabric. The company is involved in this business since its inception and has two textile units at Gurgaon and Faridabad in Haryana. The PEB division was setup in the year 2008 to provide cost effective, high quality and high tech building solutions. The PEB unit of the company is located at Kashipur, Uttarakhand. The head office of the company is located at Faridabad, and it has branch offices in number of major Indian cities like Mumbai, Pune, Ahmedabad, and others. Mr. Sushil Gupta is the Chairman and Managing Director of the company.

Richa Industries has evolved as one of the leading Pre-Engineered Steel Buildings companies of the country. They have a fully automated and ERP integrated state of the art PEB manufacturing unit in Kashipur, Uttarakhand with an installed capacity of 72000 MT annually which is one of the largest PEB installed plant in Northern India. Established in 2009, Richa Industries have come along way as they are amongst the best manufacturers of PEB products in the country.

Pre-Engineered Building (PEB) is a steel framework or construction that is built over an architectural concept of primary members, secondary members and cover sheeting, all connected to each other. Each structural member is tailor-made to be light in weight while they remain to be high in stability and strength. Steel building designs have gained immense popularity because steel is more mold-able, tenacious as well as adaptable as compared to timber and concrete, making it the prime choice in building construction

Financials:  Company achieved turnover of 276.5 crores with net profit of  9.4 crores resulting in EPS of 4.22 in year 2013-14.DFor six months year ending 2014-15 company has delivered revenue of approx. 100 crores with NP of 1.64 crores. Company is consistently trying to reduce debt burden and the debt equity ratio has been brought down to 0.78 over the years from 1.92 which is a good sign.
Also company is trying to become 100% infrastructure engineering company and trying to sell off the textile division and looking for suitable buyer which should unlock the hidden value and help to pare off balance debt. Once it is able to do the same then it may be rerated and could command higher PE multiples.

Stock from current valuations is available at PE multiple of 10.With growing economy the demand of company’s product are set to go up that should improve revenue and profitability and stock can significantly go up from current levels.

Buy with target price of 50-55 in short term

20-10-2015 :Please hold new investment till financial performance improves.