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PPAP is a leader in the segment it operates into. All its customers are on the expansion mode.
Going forward, the business will become volume business and margins that are hefty at these levels, may not sustain. As far as growing input costs are concerned, the pressures from customers to cut down the costs, will eat into the margins.
The EOS business will contribute to bottomline.
P/E = 14 to 15
PPAP suffers from high customer dependence, both in automobile, white goods and EOS.
We recommend subscribe- HIGH RISK HIGH RETURN- with a medium term perspective.
Please note that the Directors have extended a loan to the company. The interest/loan ratio stands at a hefty 18% for FY2006-2007. On the other hand, ICICI Bank has extended loans at an average cost of 10%. So the call is all yours if you are comfortable with such activities, go ahead, but understand momentum.
This is an opportunity issue as the market is doing well. If one feels that the market remains good for next 2-3 months, then one can apply for the issue for listing gains and not for holding purpose. But if the market gets setback of 1000-2000 points in near term then the stock may not list above issue price or not even at par.