I have a close friend who is in love with Ramky. Ramky Infrastructure's stock, that is. After a few luncheons where I overheard the goodness of Ramky in detail, I decided to explore it myself. I am happy to disclose that Ramky Infra finds a good place in my portfolio as well now.
Ramky is a giant of a Infra firm, and has built Roads, Residential buildings, Dams, Barrages, Water Treatment plants, Sewage plants, SEZs, bridges, flyovers and Power transmission projects. With the Infra starved country that India is, Infra specialists firms have a good future ahead. All they can build, India can absorb, and will demand for more, atleast for the next decade or so. Also, Infra sector is out of favor currently, but with Interest Rate cycle reversing its path, monetary loosening on the anvil, capital hungry firms such as Infra will be back in favor.
The current valuation of Infra firms is very depressed on NSE / BSE, very typical behavior of Mr. Market. With Risk-off behavior of investors, firms like Ramky, which do yearly business of Rs 3094 crores, are currently seeing current market valuation of a paltry Rs 545 crores. Thus there is atleast a 3X to 4X multibagger behavior expected of this specific scrip.
Ramky's annual growth has been impressive from Rs 1049 crores in 2008 to Rs 3094 crores in 2012. EPS has grown 2.5X impressively, from Rs 10.32 profit per share to Rs 25.12 per share.
Best thing about Ramky is its low debt, unlike other Infra firms dying of their debt load. Ramky has 855 crores of Secured loan, with a 909 crores of Surplus, that's a affordable leverage on this firm. \
Promoter's shareholding is growing, from 66.85% to 67.3% in last two quarters, which is a sign of promoters beileving that firm is available at discount to its intrinsic valuation. If owner is buying, so should we.
Book Value of Ramky is about 169 Rs per share, and with Mkt price of Rs 95 or so, scrip is available at 45% discount to its book value. A typical Warren Buffet style stock with a good margin of safety. Grab it, this one is for keeps.