Rakesh Jhunjhunwala’s firm Rare Enterprises bought 42.5 lakh shares of Singer India on Tuesday; 16th August 2022 at a price of 53Rs. 50paise via a bulk deal on BSE. Following this, Singer India’s share price hit an upper circuit of 20% on Tuesday. On Wednesday, the share price rose by about 5.72%. Currently, Rare Enterprises hold about around 8% shares in Singer India. It is said to be Jhunjhunwala’s last investment bet.
Let us now analyze the company, Singer India.
FUNDAMENTAL ANALYSIS
Product portfolio – Singer India sells sewing machines, air coolers, food processors, fans, kettles, geysers, washing machines, irons, refrigerators and other appliances. It is one of the largest players in the local sewing machines industry with a market share of 42% in the branded sector and 24% market share of the total market. It sells sewing machines under the renowned brands “SINGER” and “MERRITT” in domestic market.
Distribution Network – It has a very vast network of distribution channel with 13500+ sales points including showrooms, wholesalers and after sales network system. (65% of its sales come from wholesalers).
Financials – It has a 5yr. Return on equity (ROE) of 15.3% and a 5yr. Return on capital employed (ROCE) of 14.6%. The company is net debt free with a debt-to-equity ratio of only about 0.49%. Its sales show a rapidly increasing trend since the last 9 years. Singer’s sales in December 2020 were 6,450 crores and in December 2021 was Rs. 11,915 crores which is a startling rise of about 84.7%. Its net profit also saw a similar increase of about 87% during this period.
Singer India also has been maintaining a healthy dividend payout of 17.6%.
Hence, the company has very good fundamentals
TECHNICAL ANALYSIS
200-day Exponential Moving Average (EMA) – The price has cut the 200-day EMA from the bottom. This indicates an uptrend in the stock.
Support and resistance – The stock took support at Rs. 75.55 and moved upwards. This shows that there is a possibility that the stock can hit a target of Rs. 89.95, which is resistance.
Relative Strength Index (RSI) – The RSI is above 70. This indicates that the stock is in an overbought zone. This shows that a pullback can be expected in the stock price.
Hence, currently, the stock is showing fair technical signals.
AN OVERVIEW
We can see that the company is having good fundamentals as well as fair technicals. Still, this company does not come under our criteria of research since we preferably invest in companies that have a market capitalization of more than about Rs. 3000 cr. Singer India is a small cap having a market capitalization of only about 470cr. rupees. These stocks can be manipulated very easily by the market players. Hence, this stock does not come under our investment criteria.
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Good–Information