Remain invested in Century Enka: SP Tulsian

Tulsian told CNBC-TV18, "Century Enka is making the nylon yarn and the polyester filament yarn. This belongs to BK Birla Group Company having three plants at Pune, Mahad and Bharuch. If you see the financial performance of the company for FY11 the EPS was at Rs 35 and the company declared a dividend of 65%. But going by the first 9 months performance they have been able to maintain the topline but the bottomline has been flat at about Rs 1-1.5 crore. The entire amount, maybe I would say that profitability to the extent of about Rs 100 crore has been eaten away by the higher raw material cost largely because of the higher caprolactum prices which is the raw material for nylon."
  He further added, "This company belongs to BK Birla, yesterday we have seen the Century Textile moving up largely on the combination of the news factor that maybe cement division is getting hyped off, paper division is getting sold or Kumar Mangalam Birla is taking the charge, so this company sooner or later is also going to come in the fold of Kumar Mangalam Birla."

"If you see the present book value of the stock it is at about Rs 300 per share and the share is ruling at Rs 110. In the month of December it touched a new low of Rs 90 largely because of the selling pledge shares having got sold of an HNI, which were placed with one NBFC and that NBFC has really sold about 5-6 lakh shares. Inspite of that share fell and did not go below Rs 90."

"So taking an overall call I don’t think one can really say that the poor profitability or the poor financial performance is going to continue for the years. This is just maybe restricted to about FY12 but FY13 again company should be able to bounce back with an EPS close to about 20 and taking all these into consideration this is a very good stock where one can remain invested but need to have a longer horizon of about 12 months and can expect a price of Rs 116 in one year or so."