CMI FPE is an interesting buy: Paras Adenwala

Paras Adenwala, MD & Principal Portfolio Manager, Capital Portfolio Advisors in a chat with ET Now gives his take on CMI FPE.

If you can take us through CMI FPE.

This company was known as Flat Products Equipment earlier. The promoter sold out to the CMI Group in Europe and CMI Group is one of the largest solutions providers to the steel companies and it is a very strong company which has zero debt in its books and has its operations all across the globe.

They are trying to fortify their operations in Asia because they see that as one of best key drivers for the business and India cannot be left behind when one is talking about Asia. So they have already made deep inroads into India through the acquisition of Flat Products Equipment. The company has turned around in the last couple of quarters.

From a 6% operating margin in the last quarter it had an operating margin of about 20% and order book position which was just at about 300 to 400 crores about 12 months ago now is in excess of 1000 crores and it has begun to receive orders not only from India but also from various parts of the world, Latin America, Europe, other countries of Asia.

So the benefits of having a very strong parent have already started getting into this company. The balance sheet quality has also improved very significantly. I certainly expect the company to notch up a 30% CAGR at least if not better over the next three years with a balance sheet which will give significantly improved ratios and a dividend payout which should be significantly better than 25%. The stock is available at just about 8 times on FY12 and therefore makes an interesting buy.