ZF Steering Gear can test Rs 400-425: Tulsian

ZF Steering Gear (India) can move to about Rs 400 to Rs 425 in next six-eight months time, says SP Tulsian of sptulsian.com.

Tulsian told CNBC-TV18, "ZF Steering Gear (India) is making the manual and power steering gear for the commercial and utility vehicle sector. This is a joint venture company of Firodia and ZF Group of Germany and both these promoters are hold a combined of about 74% stake in the company. Generally in auto ancillary wherever you have the pricing power available with the company those companies are traditionally ruling at a higher PE multiple but this company has been showing a lot of volatility. We have seen share price moving to about Rs 500 and again correcting to the present level."
He further added, "In my opinion the company is enjoying the pricing power because if you see their FY10 performance, the topline was Rs 210 crore with PAT of about Rs 30 crore and for nine months they have achieved the similar PAT and similar topline that means the 33-35% growth is very much in place for the company in the time to come."
"For FY11 they should be able to post an EPS of close to about Rs 45 and going by that parameter and if I take a call on FY12, I think they should be able to post an EPS of close to about Rs 55-56 for FY12 and Rs 45 for FY11. Going by the present market price the share is ruling on historic earning at 6-6.5 time PE and on the forward earning it is ruling at a PE multiple of 5. So in my view this looks to be quite attractive stock in the auto ancillary space and supplying having a critical component which is used by the commercial and utility vehicle. So in my view the share has potential maybe to move to about Rs 400 to Rs 425 in next six-eight months time."