Aarti Industries can move to Rs 60: SP Tulsian

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Aarti Industries can move to Rs 60: SP Tulsian

Aarti Industries can move to Rs 60 in next one year, says SP Tulsian of sptulsian.com.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by SP Tulsian See what other Experts & Brokerages are saying about Aarti Industrie See messages about Aarti Industrie

Aarti Industries can move to Rs 60 in next one year, says SP Tulsian of sptulsian.com.

Tulsian told CNBC-TV18, "Aarti Industries is into making specialty chemicals and intermediates, which are used in pharma, power, paper and petrochemical industries. The company has about 18 plants in four states."

He further added, "If you see the financial performance, I think it is quite robust. The company has been consistently improving its performance. In the first half of FY12, the company has posted an EPS of close to Rs 4.70 that is a growth of about 25% over the corresponding period of the previous year. If you see the track record of the company, they have been a consistent dividend payer. For FY12, the company has paid a dividend of 50%. It has a face value of Rs 5, so the company has paid a dividend of Rs 2.50."

"Though they have the cluster of plants, since they are catering to different sectors of the industry, it acts an agent and is not concentrating on any one industry. Recently it has forayed more into the agri-inputs because the agro-chemicals now have started taking off quite well and yielding better margin. So that is the advantage which has largely been seen reflecting in the first half results of the company. And I think the same trend is likely to continue."

"Agro-chemicals which has a contribution of about 20-25% in the portfolio, is likely to get increased over next couple of years, may be to about 30-35%, and that will improve the margins of the company in times to come."

"Book value is close to about Rs 63 per share. If you see the debt in the books of company, that is close to about Rs 500- 550 crore, which is largely of about 80-85% for financing the working capital. The chemical industry is quite a high working capital intensive industry. And since Aarti Industries has net current assets of Rs 600-650 crore, the major portion of this debt has been used for financing the working capital. Foreign currency load is very minimal, may be close to about Rs 50 crore or something like that in the form of FCCB. So taking all this into consideration, I think the stock looks quite interesting at Rs 47. If one can keep a view of about may be one year, one can expect a price of about Rs 60."

Disclosure: I have no personal holding or interest in the above stock.