Experts/Company

Poll Result

Experts view

R S Iyer

(KR Choksey)

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Investors should ignore primary market for the time being as the market sentiments are weak. All stocks are available at cheap price range in the secondary market. Even recently listed IPOs are also trading below their issue price.

SP Tulsian

(Investment Advisor)

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Titagarh Wagons has been posting consistent financial performance year after year. Generally, second half of the company is always better and hence FY 08 may see a topline of Rs 480 crore with PAT of Rs 58 crore, which may translate into an EPS of Rs 31.50 for the year.

The wagon manufacturing division contributed about 80% to the income of FY 07 with Indian Railways being one of the largest customer of wagons. As at 31-01-08, of total wagon orders, 49.9% came from Railways. However, non-railway revenue was 68.25% of total income in FY 07. This is due to strong demand coming in from non-Indian Railway Customers for Wagons. Orders with the company as at 31-01-08 were of Rs 753 crore, of which wagon orders were for Rs 670 crore.

Presently there are 10 wagon manufacturers in India, of which, 4 are in public sector and 6 are in private sector. Indian Railways is planning to purchase 20,000 wagons in FY 09 against target of 11,000 wagons in FY 08, as per the recent railway budget. Wagon Investment Scheme introduced by the Railways from 1st April 2005, in place of Own Your Wagon Scheme also boosted the demand for wagons by the players using rakes for transportation of commodities on a regular basis.

The comparable listed peer for the company is Texmaco, which is now ruling at Rs 1,300. Texmaco is likely to have a topline of Rs 700 crore, with PAT of Rs 55 crore, translating into an expected EPS of Rs 55 for FY 08, on an equity of Rs 10.44 crores. Book value per share of Texmaco is likely to be Rs 200 as at 31-03-08. This means share is presently ruling at a PE of 24 for Texmaco.

While comparing Titagarh with Texmaco, its book value post issue, would be close to Rs 200, if shares are issued at Rs 610 per share. The same would be at Rs 192, if shares are issued at Rs 540. Considering an expected EPS of Rs 31 for FY 08, share at the upper band is issued at a PE multiple of close to 20. Even post issue stake of promoters at 49% is close to 53% of Texmaco. FII stake of 38% in pre-issue instills confidence.

Considering the increase in purchase of wagons to 20,000 in the recent railway budget, the company would be having larger share and may continue to have 27% share of the enlarged orders of Indian Railways. Even procuring loose wheels and axles would improve its wagon capacity.

Share at lower band of Rs 540 is quite attractive and at the upper band of Rs 610 also, leaves room for gain, as FY 09 performance of the company would be quite good. The sector of the company enjoys very good discounting on the bourses and hence investment is recommended in the issue.