Mahavir Spinning Mills

Mahavir Spinnings performance in the first half mirrors that of Vardhman Spinning, a group company, and has also been good especially at the net level. While sales rose just 10 per cent to Rs 279.37 crore, net profit has shot up more than 60 per cent to Rs 24.69 crore. The company has largely benefited as its unit at Malerkotla, with 35,000 spindles, had started production during the previous year. Further it had covered its cotton requirement for the first half of the current year when cotton prices were low. Mahavir has launched value added dyed products and introduced fine counts and is giving a greater thrust to exports. At the current price of Rs 51 this scrip is available at a PE of 2.67 annualised 1997-98 earnings.

 

Technicals

The Mahavir Spinning stock exhibits all the technical signs of a scrip that has recently bottomed and seems to be poised for a sharp rise. The scrip has seen a continuous drop from the Rs 360 level in October 1994 to a recent five year low of Rs 45. From that level, it has firmed up and is forming a saucer-shaped bottoming formation. It has risen to Rs 51 with sharply increasing volumes in the last fortnight when it has bucked the general market trend.

It has moved past its own 20 day Moving average. This indicates the scrip is in an intermediate uptrend. The next serious resistance is at Rs 60 where there has been a lot of previous trading and the scrip will encounter strong selling pressure. The long term trend of the scrip shows signs of bottoming both on analysis of chart patterns where it has broken successive trendlines and on various momentum indicators. However the scrip has not yet confirmed its reversal of the long term trend. The most likely pattern is that the stock will test the Rs 60 mark several times before moving further. There is excellent support at current levels.