Pennar Industries is a stock that was brought to my notice by Asif, one of our blog readers. It manufactures cold rolled strips, tubes, metal sheet components, road safety systems etc. It is a multi product company. Pennar Industries posted a very strong set of numbers in Q4, infact for the whole year FY11. In Q4 FY11 it posted net sales of 342 cr, up 33% YoY and net profits of 21 cr, up 46% YoY. It’s total sales for FY11 stood at 1210 cr as against 797 cr, up 52% YoY and net profits stood at 75.5 cr as against 50 cr, up 52% YoY.

Pennar Industries has posted an EPS of 6.2 for the year ended FY11 which relates to a P/E multiple of 6.77 on the current stock price of 42 rupees. Brokerages are estimating a 20% or more kind of growth in earnings in FY12. The estimated EPS for FY12 is around 7.5 which relates to a one year forward P/E multiple of 5.6. These valuations suggest that Pennar Industries is an extremely under valued stock and has a potential to show sharp up move if market sentiments improve. Pennar has the potential to become a multibagger if market resumes the uptrend, but that depends on if people are at all interested in small companies then. For now I could give a moderate target to this stock at 8x FY12 earnings.

Buy Pennar Industries(cmp – 42) with a target price of 60 from 12 months view.

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