Expect 25% returns in Bayer Cropscience: Tulsian

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Expect 25% returns in Bayer Cropscience: Tulsian

Expect 25% returns in Bayer Cropscience on an annual basis with a very limited downside, says SP Tulsian, sptulsian.com.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by SP Tulsian See what other Experts & Brokerages are saying about Bayer Cropscien See messages about Bayer Cropscien Bayer Cropscien BSE | NSE 30/05/12 Are Mutual Funds betting on Bayer Cropscien?

Expect 25% returns in Bayer Cropscience  on an annual basis with a very limited downside, says SP Tulsian, sptulsian.com.

Tulsian toldCNBC-TV18, "Bayer Cropscience is a multinational company engaged in making agro, pharmaceutical and material science products. If you see the performance of the company in the last nine months, it has surpassed the performance what has been achieved for whole of FY10 with a topline at Rs 1,920 crore with PAT of Rs 148 crore. For the whole of FY10, it was at Rs 1,750 crore with PAT of about Rs 127 crore."

He further added, "The company likely to sell its 108 acre property at Thane for about Rs 1,400 crore because that has been on the block for quite sometime but they have been trying to get better valuations. With MNCs, we have always seen that whenever they have this kind of realization from sale of assets, practically, the entire amount gets used to distribute the dividend because the promoters are holding 71% stake in the company. They want to be the largest beneficiary and take away that money."

"It is not the case in Indian companies where we see assets sold and the entire cash is retained by the company. That windfall of about Rs 200 per share in the form of dividend can be given, with their PAT at Rs 148 crore that translates overall to Rs 50 EPS for FY11."

"Agrochemical is a hot space where the profitability is continuously on an increase, which we have seen in case of FY11. It is showing an upside of about 40%. Taking all this into consideration, with an EPS of 50 and share now ruling at close to Rs 800, it translates into a historic P/E multiple of 16. While these companies are always carrying a higher P/E close to about 18-20 times and if you knock off the expected because land sell is likely to happen soon, so, if you knock off about 150-200 for this dividend distribution the share looks quite attractive and is capable of giving a return of 25% on an annual basis with a very limited downside."