Butterfly Gandhimathi can move to Rs 500: SP Tulsian

Tulsian told CNBC-TV18, "You can call Butterfly Gandhimathi Appliances a mini- TTK Prestige. They are into making stainless steel appliances, pressure cooker, kitchen and household appliances, and they practically have the same product range. The reason for good growth in this stock is largely because of TTK prestige. The kind of run up and the kind of valuations which have been given to TTK prestige with a PE multiple of about Rs 25 plus and still the stock is going strong."

He further added, "Butterfly Gandhimathi Appliances has added Butterfly to its brand name, which earlier used to be Gandhimathi Appliances. The financial performance of the company has been exemplary. For first nine months of the current year, they had a turnover of Rs 400 crore plus while that was about Rs 200 crore plus for the similar period in the previous year for nine months ended December 2010."

"Similar is the case with 100% growth in topline and 120% growth in bottomline. The PAT for nine months of the previous year was at Rs 11.5 crore and for these nine months, the PAT is at Rs 25 crore."

"And if you see their Q3 performance, it is exactly the same at Rs 225 crore, with PAT of about Rs 11.5 crore. That means what they have achieved in nine months of previous year, that is FY11, has been achieved in Q3 of FY12, and the same growth is likely to get continued. The EPS of Rs 16 which has been posted by the company for first nine months of FY12 is likely to be in my view at about Rs 27-28. They may not be able to hit Rs 30 EPS though."

"The company has a debt of about Rs 90 crore in its books which is largely for financing working capital because this industry is highly capital intensive. They have to have the inventory; they have to have debts, finished goods and all sort of things."

"Apart from this, the promoter stake is expectably high at about 78% with 9-10% held by HNIs. This stock also has come into the limelight with the recent announcement of Q3 results. So taking all this into account, I am expecting the share has the potential to move to about Rs 500 in the next six months or so."

Disclosure: No interest or holding in the above stock.