Well a good amount of detailed discussion has been done in this thread.
Well I will keep things simple.
At the CMP 1200+, ambika is not undervalued in my opinion.
Even if one look at average historical p/e trend.
Ambika has been running at neck utilisation for few years now. The capex in the main segement(30k spindles) was in talk since 2015 and for various reasons it didnot fruictify. The reasons has been discussed so let me not go there.( Land, approval delays and also unwillingness of managemnt part).
Hence the growth in topline was majorily driven by forward integration( knitting capacity) and improvement in its efficiency.
Now both has its own limitations and kinitting contributes a small part of net earnings( though it has grown in last 2 years considerably with regular capex in the segment).
However the company now seems to suggest that all is clear for their 30k spindle capex which will be done in phased manner by 2020.
But we don’t know how will be demand for those added capacity or how the market is, as there is no immediate past record to suggest the demand in yarn segment is lucrative for ambika to grab.
One would say they have kept their margins and ran on full utilisation for few years now and hence new added capacity will be commercialised as it gets on board.
But I feel thats a question mark?
Knitting capacity is growing and company has every intentiion to grow it further.
Are they looking to make the fabric and yarn contribution more evenly?
Time will tell.
Mr. Chandran has been a great man at helm. Future holds little uncertainity. So lets see how things goes.
I have not added numbers as it has been extensively discussed by others.
I may be wrong in my views as i try to look at simpler and bigger picture.
I feel from these levels( it is not undervalued so not a low risk bet) but fairly decent one. Future is little unrcertain in terms of higher growth numbers if ambika can achieve , the very nature of their business model/ industry has its own inherent risks.
It is a fantastic business and on my watchlist.
M not invested.
Regards,
Mike