Limited downside seen in Engineers India: SP Tulsian

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Limited downside seen in Engineers India: SP Tulsian

Limited downside seen in Engineers India, 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 EngineersInd See messages about EngineersInd

Limited downside seen in Engineers India , says SP Tulsian, sptulsian.com.

Tulsian told CNBC-TV18, "Engineers India, government is holding close to about 80%. They are not obliged to reduce this stake since the PSUs have all been allowed to have the stake of the government up to 90%. But if you take a pure fundamental call on the company, this is Engineering, Procurement & Construction (EPC) consultant for refinery, for offshore platforms, for pipelines. In fact they are the exclusive EPC consultants for all PSUs. In fact we all know that PSUs have a larger presence. Eight refineries are coming either in the joint venture or alone by the refineries for which this company has been consultant. Apart from that the offshore platforms, the pipeline, for all this work this company is acting as an EPC consultant."

He further added, "If one take the call on the financial performance, share is likely to post an EPS of close to about Rs 18. That means this consulting company now ruling on a historic PE multiple of close to about 12. Generally the EPS consultants, they are able to take an increase of 20-25% every year on their topline-bottomline in respect to the fixed contracts and all that. So probably next year they should be able to post an EPS of close to about Rs 21 if I take a call on FY13. So share is ruling at a PE multiple of close to about 10. On historic earning it is ruling at close to about 12 PE multiple. Apart from that, the company has cash of about Rs 1600 crore which translates to Rs 50 per share. So that also is extra sweetener in the stock. Tomorrow if the government thinks of declaring some special dividend of maybe about Rs 15-20 also - that can just be extra sweetener because company doesn't need that cash. It's a debt free, it is generating every year that kind of money which is lying in the books of the company."

"So on the downside, this stock has a very limited downside. Whenever we have seen that, once this stock starts moving up, it grows or it goes up by 100% in no time, maybe in four to six months time. So probably a very good stock for the long term portfolio if somebody can keep a view of three years. I am expecting share to move pass Rs 500. But three years is really very long period to talk in this market. But even if somebody can keep a view of six months, price of Rs 260 is very much feasible. So, good stock from short term as well as from a longer horizon of maybe even three years if somebody can take a view on the stock."