Tater's view on Balmer Lawrie

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Tater's view on Balmer Lawrie

Balmer Lawrie is growing at 13-14% CAGR for almost last four-five years. We feel that the continuous momentum into the earnings will be there for at least the next four years, says Ashish Tater, Head of Research, Fort Share Broking.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Ashish Tater See what other Experts & Brokerages are saying about Balmer Lawrie See messages about Balmer Lawrie Balmer Lawrie BSE | NSE 31/05/12 Are Mutual Funds betting on Balmer Lawrie?

Balmer Lawrie is growing at 13-14% CAGR for almost last four-five years. We feel that the continuous momentum into the earnings will be there for at least the next four years, says Ashish Tater, Head of Research, Fort Share Broking.

Tater told CNBC-TV18, "Balmer Lawrie is one stock that fits a dividend discount model which is traditionally used by investors. This company is growing at 13-14% CAGR for almost last four-five years. We feel that the continuous momentum into the earnings will be there for at least the next four years. This company is also into logistics. They are one of the leading players even in the grease segment, in fact one of the top ten players in Asia."

He further added, "For the next five years, the company will give you a cash dividend of close to Rs 172-180 at current price. That is cumulative cash dividend. The company announced Rs 26 dividend for this fiscal and our projection is that by FY15-FY16 they will give you Rs 40-43 of dividend. Now, if I take a terminal value for the stock in terms of the dividend yields that the company is trading at 5%, that will give me roughly around Rs 950 to Rs 1,000 on conservative side from three-four year perspective. So, Rs 1,000 plus Rs 200 of dividend will mean Rs 1,200 from current Rs 600 odd mark. A 100% jump in next four years. That means 23-24% jump year-on-year. It is an illiquid substantial, but I feel these are best which should be looked upon from a longer-term perspective."

"Apart from this, we have started entering into stocks like Lanco, GVK, GMR because we think these stocks will definitely bottom out. Right now, these companies are available at just Rs 70-72 on combined package value. If I addition RCom to this passage, it is available at Rs 160. Anytime in the revival will happen into these types of industries. Any two of the stocks will give you a return which is higher than the current combo price of Rs 160 for the whole sale stocks. It is safe to assume that we have vested interest even at firm level and at family level for these kinds of stocks which we discussed today."

"I think one can take a very longer-term call into these four-six stocks because these are stocks without which the economy cannot survive. I think we are there to clock at least 7.5% growth year-on-year in terms of GDP for the next four-five years. So, these are definite portfolio bets from a longer-term perspective."