Buy Munjal Showa, says Aashish Tater

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Buy Munjal Showa, says Aashish Tater

Buy Munjal Showa, says Aashish Tater, Head of Research, Fort Share Broking.

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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 Munjal Showa See messages about Munjal Showa

Buy Munjal Showa , says Aashish Tater, Head of Research, Fort Share Broking.

Tater told CNBC-TV18, "Munjal Showa was one stock which was our pick of safe bet list this year and this is continued pick from my side. We recommended this stock even at Rs 50-52 levels and even at the current level the stock downside is capped."

He further added, "It has three plants one at Manesar, Gurgoan and another one in Haridwar, all these three plants are capable enough to meet its current demand. The management pointed out that they would slowly expand the capacity of 6-7% YoY from next year. For this particular fiscal we expect a 25% jump in terms of topline and similar result could be seen in terms of net profit margin also. The margins have actually stabilized and for Q1 itself the company has done Rs 3.95 EPS."

"Hero Honda Group has splitted into Hero Corp and Honda and Hero Corp has pointed out that they would be targeting aggressive sales even going forward with new models coming in. Shock absorbers have to be apart and given the parentage is Munjal's the order would direly flow to both Munjal Showa and Munjal Auto, so there is limited downside risk."

"The company has been very investor friendly in terms of dividend; they have increased their dividend from Rs 2-2.5. So even on dividend discounted model, the worse case scenario which I was pointing out at Rs 44-45 somewhere that February mark has gone to Rs 50. Looking into all this perspective, I think this is one candidate that is a buy at current levels and definitely buy on dips from a longer-term perspective of two years of a close target of close to Rs 122-140 mark."

"This kind of stock actually trades at 5 to 14 times PE multiple given the scenario of the market. We have taken median average of seven times. So if a PE multiple of seven times is assigned from two years perspective the stock in next 18 months can go and test Rs 120-140 odd mark."

Disclosure: We have recommended the stock to our clients and firm might also have positions. No personal holding in the stock.