Goodyear India can touch Rs 380: PN Vijay

Vijay told CNBC-TV18, "Goodyear India is a multinational company. It’s a subsidiary of Goodyear Tyre of USA, which holds 74 percent stake in the company. Incidentally Goodyear group is the world’s largest tyre maker and has a presence in almost every country in the world."

He further added, "Goodyear India as such has not been performing too well. They have calendar year closed in December 2011. The sales did go up by about 16 percent or so but the profits were declined a wee bit and this is mainly attributable to high commodity prices and the start of a sluggishness in the automobile industry."

"The first two quarters of calendar year 2012 has not been great either, typical topline growth and anemic situation in the bottomline. Going forward I am bullish on Goodyear for the following reasons; one, it’s the only tyre company in India which is totally debt free. It has absolutely no debt, in fact it’s sitting on cash, so that’s good in this volatile times. Second, rubber prices have fallen a lot and from this quarter onwards Goodyear will get the impact of good rubber prices going into the bottomline as well. Third, the automobile sector is slowly coming out of the woods as we saw it in the results of Mahindra & Mahindra and so on. So I expect that general uptick feeling in the automobile sector to translate to Goodyear."

"Two specific kickers on Goodyear India; one is it has got huge parcels of land in Faridabad, which is on the outskirts of New Delhi city and this is worth fortune, a bit like Bata situation. So when they sell that and commercialize it there will be a huge dividend for the shareholders. Second, in 2010 Goodyear MNC, US made an offer to delist the company to buyout the rest of the 26 percent. That didn’t go to well because shareholders were reluctant to sell at that price. Going forward they will up the offer because in very few emerging markets they are real estate entity, so they may like to privatize the Indian entity also. So that could be another very big kicker."

 The share trades around Rs 310 with a trailing twelve months (TTM) price earnings of about 12. I expect this share due to these various reasons to go up about Rs 380 in the next 12-15 months. The only risk associated with the stock is that it’s illiquid; it doesn’t trade much so it could be subject to some activity."

Disclosure: I have no personal holding in the above stock.