Honda Siel can touch Rs 400: SP Tulsian

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Honda Siel can touch Rs 400: SP Tulsian

Honda Siel Power Products can touch Rs 400 in next six month, says SP Tulsian of 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 Honda Siel See messages about Honda Siel

Honda Siel Power Products can touch Rs 400 in next six month, says SP Tulsian of sptulsian.com.

Tulsian told CNBC-T8, "Honda Siel Power Products is a multinational company. They make generators, engines, farm equipment and operate in two spaces- agri equipments and the power generation space such as water pumps. In fact, these are largely catering to the rural and the agri sector and both are showing signs of improvement in terms of the growth and disposable income. Considering the power shortage situation, I think this is the product which is going to see good offtake in the times to come."

He further added, "If you see the financial performance, Q2 of FY12 has shown some exceptional income of about Rs 20 crore, which company earned when they sold off their Rudrapur plant and the capital gain on the disposal of that plant's land, building etc."

"Even if you exclude that extra gain the company, it is consistently making an EPS of about Rs 30 which was for FY11, and that is likely to be for FY12 as well. Even the dividend payout of the company is quite good at about 75% last year."

"The company is debt free and they have Rs 110 crore cash in the books. The present market cap is Rs 330 crore. So if you take the enterprise value by knocking off this Rs 110 crore, the value comes to about Rs 220 crore on a topline of Rs 500 crore. That means it is ruling at a 0.4 times PE multiple of the topline on EV-basis."

"68% stake is held by Honda. I am not playing strictly on the delisting theme, but in last one month or so, all these multinational companies have come on the radar and largely because of the delisting moves where the promoter stake is over 80% or over 75%. I think this is also a very fit case which can be kept on radar, not from a delisting point of view, but for good growth prospects. Taking all this into consideration, I am expecting that the price can move to about Rs 400 in the next six months with a very limited or virtually no downside risk."