Vardhman Textiles can move to Rs 275: SP Tulsian

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Vardhman Textiles can move to Rs 275: SP Tulsian

Vardhman Textiles can move to Rs 275, 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 Vardhman Text See messages about Vardhman Text

Vardhman Textiles can move to Rs 275, says SP Tulsian, sptulsian.com.

Tulsian told CNBC-TV18, "Vardhman Tex is a very interesting play I think this is the largest company. They are having into as an integrated textile maker with spindleage of 7.5 lakh, I don't think that anyone has this kind of spindleage capacity plus they have about 900 looms and 4000 Rotors. If you see the financial performance in fact there are divided opinions that probably the spinners may not do well but I take that as a one quarter pain because if you see the June quarter results obviously all are going to post very bad results but I am not expecting that to happen subsequently because maybe the inventory losses, which these spinners were holding of cotton, there is going to be seen a dip. But I don't think that the margins on a sustainable basis in the subsequent quarters can get eroded."

He further added, "As I said this is the largest company, they have 16 plants practically they are all in the vicinity but they have 16 units; yarn making, fabrics, dyeing, processing, garments making. If you take all this into consideration and the financial performance Rs 4500 crore topline, they posted an EPS of about Rs 90 for FY11 with PAT of Rs 525 crore on equity of close to Rs 58 crore."

"If you take the call even for FY12 as against Rs 90 EPS posted by the company, I am expecting company to post an EPS of close to Rs 60 because maybe the June quarter results maybe an aberration but thereafter we will be seeing stable performance in subsequent quarters. So share is ruling virtually at a 3 to 3.2 PE multiple. If I go by the book value 31 March 2012, the book value should be at Rs 400-410, so that gives a price to book of 0.5."

"The only point is that management of the company have been very conservative and the dividend payout ration is very low which we have seen in case for FY11 also dividend being at 45%, dividend payout having just at 5% but maybe largely to conserve the resources, to reduce debts in the books of the company which they are sitting on close to about Rs 2000 crore against the gross block of Rs 6000 crore plus. So taking all this into consideration maybe three months down the line we will be seeing all this spinning and integrated textile companies getting re-rated and I am expecting that share should move to about Rs 275 in next five-six months."