Buy Esab India, says Aashish Tater

2284 Investors following Esab India. Share this News with them.

0

Like this story, share it with millions of investors on M3

Buy Esab India, says Aashish Tater

Buy Esab India, says Aashish Tater of Fort Share Broking.

Post your opinion here

 

0

Tweet

Share on Tumblr

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 Esab India See messages about Esab India

Buy Esab India , says Aashish Tater of Fort Share Broking.

Tater told CNBC-TV18, "On July 7, 2011 we suggested that Esab India would come with an open offer around Rs 550-600 because charter would have been taken over by some strong hands. Fifty five percent is already owned by promoter, 20% is in strong hands like FIIs and DIIs and remaining float is 18-20%. They have come out for 26% open offer. Now, the weak hands would go and tender the stock and then the actual story would begin."

He further added, "If we look at it from the parent's perspective Colfax, I am taking a standalone call on the company, it is roughly USD 2 billion with a price earning multiple of 50 times listed on NYSE bourses. The company is estimated to grow at approximately 32% CAGR over next three years. If we take that call on annualized equivalent value, it roughly works out to be at 11.1% which is on standard basis is very high."

"From Indian perspective, this had to be a very slow year for companies like Esab India and they have done well in terms of bottomline. We still expect them to clock close to Rs 50-52 crore in terms of bottomline. For next year, we expect them to go back to their old levels of profit. By FY14 they will be doing close to Rs 80 crore of profit. Of these 20% strong hands not even 10% go and tender, weak hands are out of the system, the stock should be hovering around Rs 500-530 even after the tender offer is over."

"But what will happen with 75% and I am taking a call that not more than 20% would come, whatever you buy now and you tender, it should get absorbed. The remaining 25% will be again in the strong hands. The people who have tendered at Rs 550 levels, if they get anything at Rs 500 odd levels would buy the stock."

"From longer term perspective, Rs 80 crore of marketcap for a company like Colfax should at least get a price earning multiple of close to 14-16 odd times on conservative side in average times. In good times that PE multiple would expand to 20-22 price earning multiples. They recently announced about the people who will to lead Esab business from Colfax and all of them have expertise of at least 10-15 years in their domain. When this integration works, this is going to be the power of multiples."

"We had a target of Rs 1,000, but looking at the one who has acquired this particular stock post offer from two years perspective, this could even go further to around Rs 1,200-1,300. This is a stock which will give a dividend yield of close to 4-4.5% on conservative side and a target of Rs 1,200. If one calculates a CAGR return it roughly works out to be over 50% from next three year's perspective."

"This is a definite buy and right now it is a hold because Rs 550 would not be conquered till this open offer goes out. Once the system absorbs that liquidity, then there will be scarcity premium and talks of delisting. This is because if they are struck with 76-77%, I don't think Colfax will take a call of selling 2% but they would definitely go for delisting Esab."