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Bharat Bijlee an investment bet: Tater

Published on Wed, Nov 30, 2011 at 10:44 | Source : CNBC-TV18

Updated at Wed, Nov 30, 2011 at 11:01

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Aashish Tater, Head of Research, Fort Share Broking

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Bharat Bijlee is an investment bet on spread basis, says Aashish Tater, Head of Research, Fort Share Broking.

Tater told CNBC-TV18, "Bharat Bijlee was covered by us on October 19, we had suggested that after Q2 results people would be disappointed. This is because Q1 did not reflect actual numbers since a large part was extra ordinary income. We felt that the stock could correct to Rs 620 levels but it corrected to almost Rs 590. With Rs 340 crore market cap this is one stock we definitely warrant attention from longer term investor from spread to spread basis."

He further added, "From balance sheet perspective, it holds blue chip companies - HDFC , Siemens and mutual funds to a tune of close to Rs 200 to Rs 240 crore given the current market scenario. If we knock out almost 50% of this, still we have Rs 100 crore to Rs 120 crore in terms of good blue chip companies."

"These can be very easily sold on very bad days. So, Rs 120 crore for that plus Rs 30 crore in terms of cash that the company is having so almost Rs 150 crore of Rs 340 crore. The company would be doing on conservative side close to Rs 30-35 of EPS from their core business."

"We are projecting a dividend of Rs 32 for this fiscal because of extra ordinary income. But we have cut down on our projection and we fell that the company would still be paying a dividend of Rs 25. This is stock which is available at Rs 600 with almost no downside because of its strong balance sheet and consistent earnings. Though the business that they are operating in has some problem industry wise, still they will be able to clock EPS of Rs 35 to Rs 40 on conservative side on business front. From every angle the stock is available adjusting all this at a PE multiple of less than Rs 5. This definitely warrants an investment bet on spread basis."

"During the correction of 2008-2009 weighted average price for the stock on conservative side was roughly around Rs 450, since then they have added almost Rs 100 on to the balance sheet. That roughly makes Rs 530 to Rs 550 on conservative side as weighted average. If someone spreads this investment and takes a two year call from here, then he will be able to sell the stock between Rs 900 to Rs 1,000. Also, he is protected on long side because of balance sheet of the company."