Book Partial Profit - Patspin India

Patspin India was a part of our recommendations in the issue dated Aug 30- Sept 12, 2010. The scrip was recommended in our ‘Cover Story on Turnaround Candidates’ at a price of Rs 15.14. Since then, it has continued to amaze us. With a 52-week high of Rs  25.50 and at CMP of Rs 19.60, the scrip has already given amazing returns of 68.42 per cent overall and 29.5 per cent at current levels. What’s more, this has happened in just a couple of months since our recommendation whereas the Sensex has moved up by only 9 per cent. It clearly shows that the scrip has done much better when compared to the broader markets.

Part of the GTN Group, Patspin is into manufacturing and selling of cotton yarns in the export and the domestic market. More than 70 per cent of its revenues come from exports to Europe, Japan and Korea and the balance from the domestic market. Factors such as overall revival of the textile sector, emergence of demand both on the domestic and the exports front, increased capacity utilisation, improving realisations, realigning of debts leading to reduced interest cost and further margin expansion made us recommend this company to our avid readers. Turnaround candidates are selected if we are convinced that the company has the potential for making profits on an annual basis and can give good returns. At FY11 EPS of Rs 3.66 current levels, Patspin still looks attractive at 5x. Though it has achieved its target, there still seems to be an upside left. Hence, one can book partial profits and continue to hold the rest.