See 20-25% returns in Ion Exchange, says Aashish Tater

See 20-25% returns in Ion Exchange (India), says Aashish Tater, Head of Research, Fortunewizard.com.

Tater told CNBC-TV18, "Ion Exchange (India) is into a water treatment space. It has got very promising prospects. We were studying global peers and M&A deals in this particular space, which has happened in last six-eight months. One mega deal was struck for USD 500 million. It happened at a projection of almost 1.2 time sales."
He further added, "If you see and superimpose the same valuations on this particular stock, the stock will report a sales of around Rs 750 crore. If I adjust with the enterprise value, the value for equity to marketcap to sales roughly works out to be 0.35 to 0.4 times, which is almost at one-third of the valuation of what the global peers are doing."
"Zero B is one brand which is fairly reputed that the company is working with. We feel that whenever Budget time comes, the stock makes a spook of almost 15-20 percent on conservative side from the levels of lows of January, which is roughly around Rs 112 and at least give you 20-25 percent return during the Budget."
"For last five years, we superimpose the entire budgetary spend on water and sanitation space and it has been growing at almost 14-16 percent and that is the time when this particular stock hogs limelight."
"Even on fundamental front, the company has been growing consistently. Because of government’s lack of spending and getting things very fast, the stock has been dwindling at 10-12 percent growth which we feel would get monetized given that government has now started moving in the right direction when it comes to reforms. So, if you take that angle, we feel that the stock would do at least Rs 880 crore of sales for next fiscal. Even if I see the slim margins that the company is working with because right now they are working more on R&D space, so that they get good products into the market, we feel the company is available at mouthwatering levels given to global peers."
"On conservative side, we have valued the company around at Rs 170-180 zone to Rs 220 on the upper band. However, we feel 20-25 percent can be made by Budget i.e. roughly a month because that has been the trend for this particular stock for almost 3-4 years." Disclosure: No personal position but safe to assume stock discussed has been recommended to clients.