Aksh Optifibre Limited (FV-Rs5) 532351: Excellent Buy at CMP of Rs 20-22 potential to become a multibagger in long term

About Company: AKSH OPTIFIBRE LIMITED is a 27 year old company which is into manufacturing of optical fibre and optical fibre cables (OFC).

 The two key raw materials, optical fibre and FRP rod, constituting 70% of cost of optical fibre cables are manufactured in-house. This makes Aksh as one of the most cost effective optical fibre cable manufacturer. Also, Aksh is now the largest FRP rod producer, supplying to all optical fibre cable manufacturers in 56 countries across six continents.

Manufacturing units: AKSH has two plants at Bhiwadi, Rajasthan for Fibre & Optical Fibre Cables. And one plant at Reengus,   Rajasthan for Fibre Reinforced Plastic Rods (FRP).

Future Outlook: India today is at the threshold of breaking into the big league of digitized nations. With investments upward of Rs 450,000crores being announced in the recently conducted Digital India Summit and continued support from the State and Central Government, the optical fibre cable industry is looking for a bright future ahead.

Special initiatives such as the Digital India Campaign, Smart Cities, National Optical Fibre Network and renewed faith in the deployment of large scale Optical Fibre backbone networks by private telecom companies have upped the morale of the entire industry. The spread of technology through various channels will ultimately lead to the building of an efficient national network . In addition next generation technologies such as LTE and FTTx, which require last mile connectivity, would also propel the demand for optical fibre cables in the coming years.

Considering the huge demand for Optical Fibre Cables Company has approved an expansion plan that will see capacity expansion in its Optical Fibre and Optical Fibre Cable business at its existing manufacturing facilities in India. The FRP business is also set for expansion through its wholly owned subsidiary AOL FZE, Dubai. The Company will be investing around Rs.95 Crores for the expansion and setting up of additional manufacturing lines across all the facilities. The expansion is proposed to be funded out of debt and internal accruals.

Financial Performance:

As per the below financial performance of last 5 years company has performed well in last 4 years and maintained profitability as well.

	2015	2014	2013	2012	2011
Revenue(Crores)	348.3	220.06	233.01	185.24	9.83
Other Income	5.84	7.42	7.2	8.78	2.54
Total Income	354.13	227.49	240.21	194.02	12.36
Expenditure	-294.74	-179.42	-193.91	-163.58	-27.11
Interest	-10.26	-7.06	-3.73	-5.35	-2.32
PBDT	49.13	41.01	42.57	25.09	-17.07
Depreciation	-16.31	-14.99	-16.63	-13.3	-9.19
PBT	32.82	26.02	25.94	11.79	-26.26
Tax	-0.71	--	--	-1.1	-21.55
Net Profit	32.11	26.02	25.94	10.69	-47.81
Equity	75.77	74.28	74.28	71.46	71.46
EPS	2.18	1.75	1.77	0.75	-4.37
CEPS	3.2	2.76	2.87	1.68	-2.7
OPM %	17.05	21.84	19.87	16.43	-150.05
NPM %	9.22	11.82	11.13	5.77	-486.48

In the financial year 2014-15 there was a surge in demand of OFC, largely fuelled by introduction of next generation technologies and up gradation of existing 2G networks to make them 3G and 4 G compatible. A trend which is set to increase further in the coming year, with several Greenfield sites are being rolled out and more in the pipeline with operators preparing to launch 4G services, OFC network deployment is likely to gain momentum over the next few years making India one of the fastest growing markets in this segment.

India optical fibre cables (OFC) market is expected to grow robustly due to expansion of telecom infrastructure throughout the country over the next five years. Being the second largest telecom market worldwide, India exhibits high data traffic owing to increasing penetration of smartphones and growing demand for broadband services, thereby creating significant demand for OFC installations. Consumers are increasingly shifting towards internet driven applications like HDTV, video on demand and high-speed file sharing. To address the soaring demand for high speed data transmission, the government of India along with telecom giants is investing substantial capital in upgrading the country's telecom infrastructure. The existing network of copper cables is being over hauled by using advanced fibre optic technology. All these factors are consequently providing a considerable thrust to the OFC market in India.

The demand of company product is truly reflecting in the company’s financial performance. The 2014-15 revenue increased by more than 50% and in quarter ending June-2015-16 the revenue increased by approx. 28% and net profit saw increase of 80% in comparison to June quarter-14-15.

Share price valuation: Share is available at CMP of Rs 16.50 at a PE multiple of 7.5 .Technically stock had created highs of Rs 22.50 in the past and it can easily surpass the same in short run. Fundamentally with continuous increase in demand of product the performance of company is set to improve year on year from here on.

Promoters, FII and DIIS have increased their investment in this turning around company which reflects there confidence in company’s future performance. As promoters are investing in ongoing expansion through internal accruals and Loans hence Company has not declared any dividends to shareholders.

Long term investors can invest at CMP of Rs 16.50 for long term multiple gains in this company which is set to grow in next 3 years. It is difficult to project the future financial performance since it would be based upon the no. and value of orders it receives from govt/private sector. My immediate target would be new high of Rs 23 and then it should get into uncharted territory and could further create new highs in coming future based upon orders received.

Long term Investors must buy and hold stock for next 2-3 years for multiple gains..