Kilburn Engg can provide 100% upside: Rajen Shah

Kilburn Engineering can provide atleast 100% upside in 24 next months, says Rajen Shah of Angel Broking.

Shah told CNBC-TV18, "Kilburn Engineering is a very low profile company. Exactly a year back this stock was quoting at about Rs 70 and today it is quoting at about Rs 24. So, the stock has cracked almost 65% from Rs 70 to Rs 24, it’s a 65% steep correction. The stock has corrected as if the company is going to shut down but that’s not the case, this is not Pentamedia or Silverline that it’s going to go down 90%."
He further added, "Kilburn Engineering is a McLeod Russel group company. It is basically into process equipment and food processing equipments. It has got very good cliental in the process equipment business and some of the clients are Reliance Industries, L&T, HPCL, BPCL, GNFC and GFFC. In the food processing equipment business it manufactures tea dryers. It supplies to Group Company McLeod Russel and most of the tea producers in the country."
"In the food processing business it is also into rice dryers and sugar dryers and supplies to most of the sugar companies in India. So, it’s not any Tom Dick and Harry company, but the way the stock has been hammered it looks like it is. The stock has cracked 65% and there is a reason but the reason is not so big that the stock should crack 65%. The company’s turnover last year came down by about 20% and the profitability by 90%."
"Now this is aberration, last year there were certain exceptional things which happened in the company. One was relocation of its plant from Bombay to Thane because of which the company’s operations were shut for almost about two months. There was almost nil or negligible production and sales. That is the reason the turnover came down by 20%. Profitability was hit because of certain exceptional expenses which the company incurred on account of all this."
"However, the company has very clearly mentioned in the annual report that once this new Rs 65 crore plant gets operational, which is in commercial operation now, the company’s turnover and profitability are bound to shoot up actually."
"Now this Rs 65 crore new plant has stabilized, good days lie ahead for this company. We do own this stock in our PMS. We have estimated this company to report about Rs 120 crore of topline this year and earnings of about Rs 4.5-5, but next year that is for 2012-2013 we are expecting the turnover to shoot up to about Rs 140-145 crore and the EPS to go to as high as Rs 7.5-8."
"The stock is grossly under valued. It should easily provide atleast 100% upside in 24 months if not more. I would also like to mention here that the book value of the company is Rs 80. I wonder how can you get Rs 100 crore turnover company for a market cap of just Rs 31 crore."
"So, marketcap at Rs 31 crore sounds too low. Just 12 months back the market cap was about Rs 100 crore, so the stock is headed for good times. The worst is over and with zero risk; the upside could be huge in this company."