Wendt has potential to go upto Rs 2500: Rajen Shah

Wendt (India) has potential to go upto Rs 2500, says Rajen Shah, Angel Broking.

Shah told CNBC-TV18, "If you see the last 9-10 years performance of Wendt (India), this company has been growing its topline at a CAGR of about 16-17% and the bottomline has been growing at about 18-19% for the last 9-10 years. But it has been rarely spoken about on the media."
He further added, "Last year I think on the 30th of May or 31st of May I had recommended this stock, the price then was Rs 1,200 and we had said that this stock will double in two years. The stock went up 70% in a market which gave no return actually."
"If you see last 12-15 months the market has not delivered any kind of major returns, but this stock went up 70% to touch a high of Rs 2,050 and now it has come back to this level of about Rs 1,675-1,700 levels. We feel that at this level it has given a decent correction and holds very good prospects."
"This company basically manufactures super abrasives and non-super abrasives, which are used in variety of industries, automobile, engineering, cutting tools, steel and a variety of other industries. This company last year reported Rs 100 kind of earning. This year due to what is happening in the economy, we don’t expect any major growth. We expect the earnings to be at Rs 100, but next year we are expecting the earnings to go up to about Rs 125."
"The reason is that the company has launched a number of new products and to showcase these products the company has launched a very new initiative called Wendt-On-Wheels (WOW) wherein it goes to the customers and displays its products, shows the superior quality of its products and how competitive it is vis-à-vis other players in the industry."
"The management is expecting very decent revenue from these new products because of the superior quality of the products and at Rs 125 kind of earnings which we are expecting for next year even if you give a 20 kind of PE multiple which this company deserves the reason is that the equity of the company is very low, just about Rs 2 crore and 40% of the equity is held by Carborundum Universal, which is basically a Murugappa Group Company, a very clean group and 40% of the equity is held by 3M US. So the floating stock in the market is very low just about 20%, Rs 22 crore which is just about 4 lakh shares in the market."
"I believe that the stock has potential to go up to Rs 2,500 and there are various other reasons. One is that most of the Murugappa Group Companies have split the stock. This stock is a 10 paid-up, so I am expecting the stock to split from 10 to 1 which will increase retail participation and fancy for the stock. Secondly, last time the company delivered bonus was in 2003 and the third and the most important thing is that Winterthur Technology Group of Germany held 40% stake in Wendt. This was taken over by 3M US and as per the SEBI guidelines 3M has to come out with open offer for 20% for the shareholders of Wendt."
"What has happened is that Carborundum Universal says that it has the first flight of refusal and hence it has gone to Company Law Board (CLB). If the Company Law Board rules in favor of Carborundum probably it will try to takeover 3M stake and then again come out with an open offer for the retail shareholders. If it doesn’t rule in favor of Carborundum then maybe 3M may come out with an offer to buyout Carborundum and shareholders of Wendt. 3M India which is a listed company in India is trading at 60 times the earnings. So what I mean is that either way the company has got in a very decent upside. So I think it’s a quality company." Disclosure: I have no holding in the above stock.