I have written a post on my blog (click HERE) in regards to Sanghvi Movers. While my post is more about the mistake I made by NOT buying this stock when it was trading at Rs 100 as it offered a great margin of safety with an upside of atleast 30% at that price, some of the insights in the blogpost maybe useful to investors:
This stock, even when viewed most pessimistically i.e. from a Cigar Butt perspective (a company which generates positive cashflow but only a limited number of years prior to being liquidated), has a value of around Rs 130/share (and that is why it was a value buy at 100). The detailed calculations are also shared in an excel linked in the above post.
What about buying the stock at the current price
Before that, one should understand the revenue growth of the company. Crane rental business quite obviously is dependent on the infrastructure investment cycle. The company showed spectacular growth from FY06 until FY12 by tripling its revenues. As the investment cycle started slowing down from FY12 onwards, the revenues started to fall. The company ended the decade at a revenue of Rs 323 crores in FY20 – almost the same amount as it was 10 years in FY10. Furthermore, in the entire decade this company could not earn a return above its cost of capital. Consequently, you could make a return on this stock only if you bought it at a substantial discount. There is a post by @premsagar above and it is tremendously insightful in this regard.
IMHO, at the current price the market is asking you to take a view whether they company will increase revenues over the medium and/or whether over the long term it can earn a return above its cost of capital or a combination of these two factors. If your answer to this is in the positive then you can consider buying it.