GSFC may rally to Rs 450, says SP Tulsian

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GSFC may rally to Rs 450, says SP Tulsian

Gujarat State Fertilizers Company (GSFC) may rally to Rs 450 in next 6 months, says SP Tulsian, sptulsian.com.

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Gujarat State Fertilizers Company (GSFC) may rally to Rs 450 in next 6 months, says SP Tulsian, sptulsian.com.

Tulsian told CNBC-TV18, "All the fertiliser stocks have been moving up and I have been keeping my positive view on all the urea makers, I am not so bullish on the complex fertiliser not because there is anything negative but there is no trigger for that stock."

He further added, "Gujarat State Fertilizers Company (GSFC) are into both making complex as well as making urea with capacity of 2 million tonne per annum. Apart from that they are making one lakh tonner per annum of caprolactam, which is in fact the raw material for nylons. Looking at their financial performance for FY11 the company posted a topline of close to Rs 4500 crore with EPS of about Rs 93-94. I think same kind of performance is going to get repeated maybe marginal increase in the topline. But that is not relevant because the topline increase happens largely because of trading volumes which these companies indulge into. So more relevant for the company is the bottomline and I am expecting the same bottomline to happen maybe in the range of Rs 90-95 because Rs 45 EPS has already come in the first half for the company."

"If one looks at the financials, it's a debt free company, they are sitting on a cash close to about Rs 750- 800 crore and apart from that they have Rs 600 crore investments largely into the two companies, one is GNFC holding over three crore eight lakh shares and hold close to about 2.25 crore shares in GIPCL. So the major value of the Rs 600 crore investments is derived from these two investments with a market value of about Rs 400 crore. In fact we are seeing upmove happening case of GNFC also but again that is just cushion."

"If this Rs 750 crore cash and Rs 600 crore investments are not knocked off, the share is ruling at a PE multiple of close to about 4. The pattern of this stock is that it is holding, it has a very strong support or base maybe at a level of about Rs 325-330. But when it moves up it goes linear to one way to the level of Rs 450- 500. These kind of trading patterns have been observed in the last 12 months or so twice or thrice. Same pattern is likely to be formed again on the share price chart. I don't see much downside, one can expect a price of Rs 450 in next six months because the share has the entire positive or plus features like PE multiple of less than 4 and all sort of things."