Tinplate

 

Steady Growth In Economy Will Ensure This Stock Keeps Its Journey Forward

 

THE stock of Tinplate Company has been the darling of investors for the past few trading sessions. It made a whopping 17% gain on Wednesday, thereby taking its total return in one month to around 34%, much higher than close to 5% rise seen in the case of ET Metal Index. For investors, it is quite obvious to ponder what to do with this stock, given the fact that many a time stocks within the smalland mid-cap space rise to new highs in a few trading sessions. Not to forget about market manipulations and stock rigging by promoters, among others.

   Thankfully, in case of Tinplate, a Tata Group company, investors need not worry about such things. Rather, they should find out the steam left in this particular stock. The company, Tinplate, manufactures tin plates, which are largely used in food packaging industry. In a developing country like India, use of tin plate in packaged foods is still at a nascent stage. The per capita tin consumption in India is only 0.3 kg compared to 1 kg in China and 8-12 kg in developed nations. Tinplate, being the market leader, is likely to benefit from the rising demand for packaged foods from urban population and increasing use of tin plates in packaged foods. The gradual rise in confidence about the growth of Indian economy has been clearly reflected in stock price of Tinplate Company for the past several months. Also, the company gets 25-30% of its revenue from exports and the recent signs of a recovery in global economies have improved investors' confidence about the company's future earnings.

   While there are signs of a demand uptick for its products, the company is on track to expand its production capacity by 2 lakh tonnes, a rise of more than 50% in production capacity of its finished products. In October, the company announced installation of equipment for this proposed expansion plan. All these events have fuelled the stock price movement.

   Before the 27% rise in stock price this week, the stock was trading at a forward price-earning multiple of close to 6. This appears to be lower, considering its historical P/E multiple of 8-12. However, this week's rise in stock price has raised its P/E multiple close to 8. But if the economy continues to grow at this pace, it is bound to reach higher P/E multiples and will offer good return.