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Tuesday, April 20, 2010

IFB Agro: 20% rise..What Next?

IFB Agro industries was recommended as an investment on March 21,2010 at a price of 80.55
Today IFB Agro traded at 98.75 (up 19.99% for the day) we review the investment once again and estimate what should be our strategy going forward.

1. Price movement chart: This clearly shows that the company is on an uptrend and support is being provided by the 50Day Moving Average. Any investment can be considered at the 50Day moving avg (around 80 levels)

2. Performance Chart: This shows that there is a sharp increase in profitability though profitability varies from quarter to quarter which is a big negative for the stock and shows inconsistencies.

3. Index Comparison: IFB Agro is moving along with the index which does not provide us with any insight infact the stock is performing at the same levels.

4. Shareholding Charts: Shareholding charts show that the promoter shareholding has increased which was already specified in the initial investment discussion.

Conclusion: Company valuations are still cheap
CMP: 98.75
Market Cap: 79.07Cr
Sales March TTM (Twelve Trailing Months): 298.4Cr

Gross Profit TTM: 24.4Cr
Interest TTM: 1.66Cr
Taxes TTM: 4.77Cr
Net Profit TTM: 9.36Cr
Debt March 2009: 12.34Cr
Ideal valuation would be atleast 1 times sales ie 298Cr. The company results are still very shaky and we need to see consistent profitability every quarter. Strategy can be two fold.

Strategy 1(Active trading): Sell on rise and buy close to 50Day moving avg.
Strategy 2: Buy close to 50Day moving avg and hold for long term to see value unlocking.

Note: These are my personal views and not any recommendation for investment. Please do your own deep dive before making any investment decision. Also note that IFB agro does not give any dividents which means your investments do not earn any returns while you wait for stock price appreciation. There also seems to be hostile investors in IFB Agro holding more than 10% shares in the company.

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