Buy Lanco Infratech, says SP Tulsian

Buy Lanco Infratech with a target of Rs 24 in next six months, says SP Tulsian, sptulsian.com.

Tulsian told CNBC-TV18, "Sintex Industries, Educomp, Sterlite Industries and Jain Irrigation have seen a good bounce back. You need to understand whether the stock has bottomed out or not. In my view, Lanco Infra has bottomed out.”
He further added, “Lanco Infra should be treated more as a power generation company. They have the power generation operational capacity of 4,400 MW, 5,000 MW is under construction. That will be operational in next two-three years and 7,100 MW is under development, which probably may or may not take off because of so many permissions and clearances. But even if I presume that happening maybe to the extent of 50%, the aggregate capacity of the company will work out to about 12,000-13,000 MW. That means they will be placed in the more than 10,000 MW capacity.”
“Apart from that, they have the backup of the coal mines acquired in Australia, the litigations are going on. But I think because of the strong case, it seems that even there they have a good edge.”
“They have some small bouquet of road projects, solar power and the EPC, which are largely catered for the in-house power projects only. They have a portfolio of about 450-500 kilometer of BoT road projects. It is learned that probably they are looking to exit from that portfolio and may mobilise anywhere between Rs 3,000-4,000 crore on a gross basis. That will reduce their debt also. The debt is to the extent of Rs 28,000 crore presently on a consolidated basis.
But the best part is if you see their operating profit margins, if you take the associate business carried out for the associate companies also with a top-line of close to Rs 15,000 crore, they have been maintaining operating profit margin of 14-14.5%. That seems quite respectable and quite good.”
“Taking all this into consideration, I think that stock has very limited downside. Whenever we see any kind of re-rating happening or any kind of asset monetisation news coming in, we see a quick upsurge in the stock price. That can make it move quite swiftly maybe by about 25-30%. With this background, I am giving a buy call with a price target of Rs 24 in next six months or so." Disclosure: No holding or interests in the above stock.