Dec 05, 2011, 11.16 AM | Source: CNBC-TV18
In an interview with CNBC-TV18, Aashish Tater, head of research at Fort Share Broking gives his views on select multibaggers like Atul Ltd and Fiem Industries.
From next 12 month perspective, Tater expects Atul Ltd to test Rs 235 mark based on projections.
"On risk-reward basis, Fiem Industries is one stock where a small position can be made to gain around 30-40% from a yearís perspective," he added.
Below is the edited transcript of Taterís interview with CNBC-TV18. Also watch the accompanying video.
On Atul Ltd
We have been trading Atul Ltd through quant modules. Going forward, we expect it to test Rs 235 mark that we were boosting for last year also. If I take a call from fundamental perspective, last year we estimated that the company would do around Rs 90-98 crore of profit for the full year. For this year our projection is somewhere between Rs 58-64 crore.
But during these last 18 months, the promoter stake from 41% has gone up to 50% because they have a hidden asset in their balance sheet.
Atul Ltd. has a large chunk of land in Atul, we feel that there could be a part of land monetisation which can give them close to Rs 250 crore of cash inflow. That might be a reason for the promoter to increase its stake every quarter from 43-46% in March, from 46-50% in last two quarters. Any other increase from current levels would trigger an open offer from promoterís side. For this year the creeping acquisition will end.
If we knockout their cash, cash equivalent investments, loans and advances then the company is available at approximately Rs 350 crore. And from Rs 350 crore, it is available at a PE multiple of 6 because raw material prices have gone up. That is why itís difficult for the company to substantiate even on increasing sales.
The raw material peak out will happen somewhere in quarter 1 of next fiscal and the company could do profit of close to Rs 80-85 crore. With positive news on the land development front, it can test Rs 300. From next 12 month perspective, the company would test Rs 235 mark based on our projections.
On Fiem Industries
Fiem has got very interesting developments coming through in days to come. Last time when we pushed for this stock, we had a technical stop loss Rs 138. This is because we felt that if this particular level of closing basis is broken, then the story might be in the dwindling format. But the way it has shown its quarterly performance we have re-instigated our target from Rs 190-208 levels to Rs 220 mark maintaining the same stop loss.
The reason for this being that the company has done almost what they did last year in terms of bottom-line in the first two quarters itself. But the more interesting aspect on this particular front is that Ichikoh Japan has two Memorandum of Understanding with Fiem Industries which also has alliance with Valeo France. If Ichikoh Japan comes and takes a particular economic interest apart from the technological tie-up they have the company would be significantly rerated.
We have seen what has happened to Lumax Industries in case when Stanley came and took a chunk from the promoters. It changed the fortune of the company. If we go with the same valuation, the company is attractively priced in terms of cash PE multiple of close to 6-6.5 times for this fiscal because on conservative side they will do a cash EPS of close to Rs 26-28. The promoters are maintaining their stake at close to 68%. I donít see any exit from promoterís side at current levels because the stock is definitely underpriced compared to its peers.
So from medium-term perspective if someone has next 12 months target he can get price of Rs. 208. If Ichikoh takes an economic interest then the stock would be significantly rerated from current levels. A stop loss is defined at Rs 138 on closing basis which it has not done for almost a year and there is a significant upside from current levels. So on risk-reward basis, this is one stock where a small position can be made to gain around 30-40% from a yearís perspective.
Disclosure: I have no personal holding in any of the stocks discussed, but have recommended them to clients.