JAIN IRRIGATION; THE AGRI-RURAL STORY (BEST ENTRY PRICE)

In this Post we shall examine Jain Irrigation and try and determine the Best Entry Price for a long term investor. As we all know, the Agri-Rural theme  is much talked about in Analysts' circles but strangely there are not too many Stocks which have been suitably identified as Portfolio Picks.

First looking at the TECHNICALS, we see that on the 5 year Price Charts the 2 year DMA has always acted as a reasonable support, only having been violated in the 2008 meltdown period and then 9/6/11 to 23/6/11 period. However of late, the Scrip has violated the 2 year DMA level a tad more frequently, first on 4/8/11 and then on 20/9/11. But reassuringly the break below this 2year DMA level has always been swiftly and surely bought into at levels of max 15% below, resulting in a smart V-shaped recovery. This gives us hope and indication that, technically, levels of 130 odd on the lower side are very unlikely to break. The 2 year DMA at CMP 144 is at 164 approx.

On the FUNDAMENTALS, things  look good for the Company; it is in a space which is yet relatively untapped and has tremendous potential; the micro irrigation, piping, food processing verticals are doing well and most importantly with Governmental Rural spend always increasing, the demand catchment area for the verticals will see good growth. Briefly looking at the Results we see that targeted 25-30% approx topline as well as similar Net Profit growth has been delivered and has also been guided for in the next couple of years. A couple of negatives though that possibly spooked the Markets recently are the relatively high debt levels and the capex plans of the Company which are sure sentiment negatives in the present Interest Rate scenario. At CMP 144 the Scrip is trading at 12x FY12E approx., which is reasonable. However Market sentiment being what it is now, the Stock could see some volatile times in the short term, so one would have to be nimble and buy in on bad days.

Overall, in my opinion, the Stock presents a good long term buying opportunity in the range 125-145, for the long term investor.