Buy Panama Petrochem on dips: Tater

Buy Panama Petrochem on dips with long term perspective, says Ashish Tater, Fort Share Broking.

Tater told CNBC-TV18, "Panama Petrochem Limited is very small company. But looking at the financial of this company, I feel this could be a sub USD 100 million company in the years to come. Talking about their core business, they are into agriculture spray oil, transformer oil and they have got interest with Petronas of Malaysia to distribute their oil Syntium. Along with that, they also have arrangement with Lubcon from Germany. So, I see a lot of potential for this particular company, which also has manufacturing facility spread over four areas, in Daman, Ankleshwar and two in Mumbai. So, on an Rs 137-138 crore marketcap or Rs 250 current market price, I feel the stock is undervalued given their financial performance." He further added, "The company has been consistently growing year on year. We expect a conservative earning per share (EPS) for this current fiscal of close to Rs 64. So, a company that is available at a PE multiple of less than four times, almost 30% expansion in the next two to two-and-a-half  years. That means in two years the company would be doing an EPS of close to Rs 90-100." "The company is actually volatile to crude oil movement, so this is one concern for the company. We have done a sensitivity analysis for this stock. We feel if crude is hovering around USD 78-110 per barrel mark then our estimate would roughly be around USD 90-100 per barrel mark, but if anything happens to crude on the downside, the earnings potential will go up. The company can easily pass on to the customers if prices go beyond USD 120 per barrel." "Taking all this conservative side, we have recommended to our clients with a target of close to Rs 350-400 on a conservative side from an 18 month perspective. But I feel the market would definitely respect this particular stock where the promoter holding is close to 67-68% and also the stock is having low float. This could be a concept stock in the future. More interestingly about the bottom-line expansion, they have been growing at 40% compound annual growth rate (CAGR). I think this is a multibagger if someone has the potential to hold. One should be buying on dips, on every 5-7% dips from a longer-term perspective."