Navratan SIP on Zee Business: Buy Century Enka - Check price target

Navratan SIP on Zee Business: In a special edition of Navratna SIP, Zee Business research analyst Ashish Chaturvedi recommended Century Enka for investment.

Century Enka Limited, NSE: CENTENKA: Century Enka is a BK Biral Group company. It is in the business of high-quality Nylon Tyre Cord Fabric (NTCF) and Nylon Filament Yarn (NFY). While NTCF is used as reinforcement material in bias tyres, NFY is mainly used by the apparel industry. The company is the market leader in the segment with over 25% share. 

According to Ashish Chaturvedi, there are several triggers of growth with the most important being anti-dumping duty on the import of tyres. 

"As there is an anti-dumping duty on the import of tyres, there has been a continuous surge in the demand for the company's Nylon Tyre Cord Fabric. Also, the company is expanding its business in this segment and commercial operations are likely to start from the fourth quarter of the financial year 2023. As a result, there will be a considerable increase in the earnings of the company. It is doing good in other segments as well. So there will good growth in top-line and bottom-line of the company in the coming days," Chaturvedi said.

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In the last three years, the company has registered a profit of around 33% CAGR. Also, the company is completely debt free and has given a dividend yield of 2.3 per cent. 

The share is available at a 5x P/E ratio or price-to-earnings ratio and the price-to-book value ratio is at 0.75x.

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Terming the valuation 'very attractive', Zee Business Managing Editor Anil Singhvi said that stocks are almost available for 'free'. 

"The company is financially very strong and even after completing the expansion process worth Rs 350 crore, it is debt free. On top of that, there are several factors that will work in favour of the company in the coming days. For example, they have already increased the prices of products and now the cost of raw materials is coming down. Century Enka's Nylon Tyre Cord Fabric is in huge demand as most of its customers have expanded their business. Also, the government has extended the anti-dumping duty on NCFT. So, all these factors will result in an increase in the margin by around 2-3%," Singhvi added.

Century Enka Limited Share Price Target - Rs 700 (1 Year)

Singhvi said that this share could easily give more than double returns in 3 years and investors can expect the target of Rs 700 in one year. He said Rs 1,000 and Rs 1,200 can easily be achieved in two and three years respectively.