Wheels India has potential to move to Rs 500: SP Tulsian

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Wheels India has potential to move to Rs 500: SP Tulsian

Wheels India has potential to move to Rs 500, 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 Wheels See messages about Wheels

Wheels India has potential to move to Rs 500, says SP Tulsian of sptulsian.com.

Tulsian told CNBC-TV18, "Wheels India is a TVS Group company. They make wheels for cars, buses, utility vehicles and tractors. About 50% of stake is held by TVS group, 36% is held by Titan Europe; so 86% combined stake is held by the promoter. The promoters have to bring down their stake to 75% by June 2013. I don't think promoters will be keen to opt for disinvestment."

He further added, "I am talking about the long term picture; June 2013 looks quite a long time. The market cap to turnover ratio it is at 12-13%. Their annual turnover is Rs 2,000 crore and market cap is Rs 300 crore . So, the promoters will be structuring some strategy like merger with some other group companies or delisting which could be big value unlocking for the stock."

"The company has already declared their Q2 results. It has posted close to Rs 970 crore topline in the first half of FY12 with an EPS of about Rs 19. The equity base of the company is low and stands at Rs 9.9 crore.  The debt of the company is largely for its working capital because it has a very high working capital intensive."

"The enterprise value can be taken between Rs 450 to Rs 500 crore. The expected EPS is about Rs 40. The capacity of the company is quite high at 10 million wheels per annum. They have six plants scattered all over the country. All plants are logistically catering to different requirements of different user. I find this stock quite undervalued. From a two-three years view, the share has potential to move to Rs 500. But the six months target on the stock is Rs 350."