Buy Kennametal India, says SP Tulsian

Tulsian told CNBC-TV18, "Kennametal India is making hard metal products and machine tools and catering to the aerospace, defense, so obviously they have good margins and they have been enjoying very good profitability. If you see their track record with consistent EPS of close to about Rs 40 and the same trend, which they have posted for calendar year 2011 is likely to get repeated for calendar year 2012 also with top-line of close to about Rs 600 crore, PAT of about Rs 90 crore and again resulting into an EPS of close to about Rs 42-43."

He further added, "But if you see the trading pattern because the stock on an average daily basis gives a volume of close to about 5,000 shares resulting into the delivery, but yesterday we have seen a good volume on the stock exchanges and that indicates that probably the delisting could be in the pipeline. My earlier call was also there as a buy on the stock when it was used to rule at about Rs 800-900."

"If you see the shareholding pattern promoters are holding close to about 88.2% and the institutions or maybe one or two mutual funds are holding about 1.8%. So collectively mutual fund and promoters are holding 90% but interestingly 10% of the float is held by the public and of this 10% as the information’s are gathered one HNI family who can say that they are controlling 40-50 shareholders of the company are having a stake of anywhere between 4.5-5% in the company. That is out of the 10% public float 4.5-5% is controlled by them. So any price decided by them, obviously they are looking for a very hefty price, the kind of delisting pattern we have seen in case of Atlas Copco or maybe in case of the other companies where the PE multiple has been very high even in case of Alfa Laval the PE multiple has been as high as 45-50, if we apply the same parameter probably it gets a valuation of close to about Rs 1,700-1,800. But I am not banking on that kind of price."

"There is no reason for the share to get delisted below expected PE multiple of Rs 30 and that translates into a share price of about Rs 1,300 and I think the move is likely to get initiated because we are approaching the deadline of 3rd June, 2013 by which all the companies need to bring down their shareholdings below 75% and all the multinationals are really quite active that they must accelerate the process to get this process completed quickly. So I am expecting that probably Rs 1,300 could touch in next three months purely on the delisting figure and hence this can be a good short-term buy."

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