Aashish Tater's view on Electrosteel Castings

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Aashish Tater's view on Electrosteel Castings

Aashish Tater of Fort Share Broking shares his view on Electrosteel Castings.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Aashish Tater See what other Experts & Brokerages are saying about Electrosteel See messages about Electrosteel

Aashish Tater of Fort Share Broking shares his view on Electrosteel Castings .

Tater told CNBC-TV18, "Electrosteel Casting was a proxy that what we took a call on Tata Metaliks. It didn't work for us. After having a multibagger idea at Rs 120, we had to come out with a sell report on Rs 98 because we had taken a negative call on the entire steel sector. We felt that even these kinds of proxy businesses would dwindle. Tata Metaliks from Rs 98 corrected to almost Rs 50-55 where we felt that the downside looks limited. Similar is the story for Electrosteel Casting. They are number one and largest players in this particular industry."

He further added, "The best thing is that the company has gone for vertical integration and would start benefiting in FY13 and 14 results. Taking a call from this particular quarter, because of high input prices, the company is down into red. But we feel the margins would improve and for next year we are working for an EPS of close to Rs 4.5-5 on conservative side."

"If there is a sentimental change in terms of steel outlook, the EPS for the input prices would again go and change to Rs 6-6.5. From conservative side, take a call of Rs 4.5-5. This is one management which has rewarded its shareholders by paying a dividend of Rs 1.25. This time they would not be able to pay this handsome dividend because the business itself had to face lot of challenges. But once that vertical integration comes into play, they would again be rewarding the shareholders."

"I was going through old brokerage reports and they were pegging a target of close to Rs 50-60 odd mark, which is reasonable given the book value of Rs 52 and good management with good mix of integrations. From a two years perspective, the business would do close to Rs 7 in two years and companies like Electrosteel Casting definitely deserve a PE multiple of seven-eight times."

"So from that angle also if someone buys now rather than trading the stock here and there and sells partly at Rs 30-35 and then again sells the remaining quantity at Rs 55-60 the average return that he would get is roughly around 58-60% from two years perspective."