Eastern Silk - Result Update Q1 FY09

Eastern Silk is involved in manufacturing of value added silk textiles. The company had made a loss of 15 crores in the last quarter and the stock got beaten down badly. The huge drop in sales from 168.96 to 31.34 crores did not look good at all. One of the FIIs (Merill Lynch if I remember it correctly) also emptied it's entire stake. Within three months, the stock fell down 60% from 42 to a 52 week low of 12. I had looked at it 3 months ago, but deferred buying the stock so that I can buy the company once it gets beaten down fully. I had forgotten about this company until it figured in 52 week low list in moneycontrol. It was trading at a 50% discount to it's book value, the company was in existance since 1958 and the company had implemented capex plans over the past few years.

Though no reason was given by the company for the loss it made in the past quarter, I speculate that the losses would have been forex derivative losses. Since it is an export oriented company, it needs to peg the indian rupee against various currencies. Grapewine also talked about disruption of silk supplies. I did not analyse the company completely due to lack of information, but the discount to the book value looked attractive and so did the age of the company. The PE of around 2.5 was also attractive.

In the results announced today, their Q1FY09 sales turnover was 481 crores leading to a net profit of 58 Crores. They have also announced a dividend of 45% which turns out to be Rs 0.9 per share of face value 2. So far, so good. I am eager to get hold of some Analyst Report or a Investor Call transcript which will tell me the reason for the loss they made in the previous quarter. As they say, lack of information is also considered as RISK.

UPDATE : An article in moneycontrol gives the reason for the Q4FY08 losses, and I had "speculated", they were forex losses.