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Feb 09, 2011, 03.37 PM IST
One should not buy Refex Refrigerants at one go. It should be evened out and spread over the next 30-40 days or even two quarters to actually look into how the management has performed in terms of deliverance, says Ashish Tater, Fort Share Broking.
Tater told CNBC-TV18, "There was a status from my side Nothing works at fair value; either your investment should start at undervaluation or over valuation. Refex Refrigerants has been fairly valued for quite sometime because the promoters of the company did not do certain things, which they were expected to do right from its listing of the IPO. On CNBC-TV18, the management recently gave guidance of a bottomline close to Rs 22 crore."
He further added, "They have ventured out into solar photovoltaic cells where they have guided Rs 10 crore worth of bottomline going forward in FY12. That means that for the next 10-15 months the company would do a profit of close to Rs 10 crore. They are sitting on a marketcap of close to Rs 50 crore."
"The stock has actually been a turnaround story. People have missed out on a story like them. The stock has been hitting down circuits and we feel the stock would eventually bottom out close to Rs 25-27 levels, if not at current Rs 32-33 levels where it is still locked in down circuit."
"Our call on this stock is from a longer-term perspective. With a bottomline of Rs 22 crore and sitting on a marketcap of just Rs 50 crore while is venturing into a space, which is a promising sector, going forward, I feel the stock could be a multibagger in the real sense."
"Taking a long-term call, there are a couple of issues that the management needs to sort out. Firstly, they have booked a loss onto their subsidiary close to Rs 19 crore in the last fiscal itself. That resulted into a net-net bottomline going into red. But seeing their operational performance for this fiscal, I expect the company would end up at an EPS of close to Rs 5-5.5 from their core business."
"There have been brokerage circle rumours that the company has got a photovoltaic EPC contract from Videocon close to Rs 100 crore and if I see a net profit margin of close to 8% that would add another Rs 8 crore to the bottomline. That means the company would do an EPS of close to Rs 9-9.5 for FY12."
"If I take into account their solar panel business, they could end up with close to their Rs 20-22 crore. What we are recommending is invest just 20% and give the management another quarter or so. We can even buy this stock at Rs 45-50 rather than buying at this current Rs 34 because I find this stock can easily be available at a marketcap of close to Rs 200-220 crore on the longer-term that means 4-5 times from current levels."
"If there is still an underperformance from the management side and they are unable to deliver, the stock would be hovering around Rs 20-25 mark, which is relatively fair valued, if I see the Nifty levels around 4,700-4,800 levels."
"In terms of dividend, the management has paid dividend for the last three years expect 2010 because their bottomline going into red. With this turnaround and the problem of subsidiaries getting evened out in days to come, the stock could actually give a good return in terms of dividend as well."
"This is a stock with a downside, a shot at another Rs 6-7 but a potential upside of almost 3-4 times from current levels, if the management guidance proves correct. I would like to give another cautious statement that the stock right should not be bought at one go and it should be evened out and spread over the next 30-40 days or even two quarters to actually look into how the management has performed in terms of deliverance."
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