Buy Liberty Phosphate around Rs 170, says SP Tulsian

Buy Liberty Phosphate around Rs 170 for a target of Rs 220 in next six months, says SP Tulsian, sptulsian.com.
 
Tulsian told CNBC-TV18, “Yesterday Liberty Phosphate was frozen on the down circuit. You are right that may be we have been seeing the excitement on the stock for the last couple of weeks or so largely on the rumor that company is seen as a take over candidate and there are talks that Coromandel International which is the largest complex fertilizer maker are looking to acquire the stake in the company. But just a word of caution that since the stock yesterday was frozen down circuit and inspite of that my buy call has been given on the stock so I’ll suggest that may be a price of Rs 170 can be looked into for acquiring the stock because I see the fundamental value in the stock.”
 
He further added, “They have a capacity of 826,000 tonnes per annum of SSP and apart from that they are making 165,000 tonnes of complex fertilizer. Apart from that they also have production capacity of 5000 tonnes of Magnesium Sulphate. What I liked about the company is that they have six manufacturing plants and of these six manufacturing plants they are all spread in five states Rajasthan, Maharashtra, Madhya Pradesh, Karnataka and Gujarat. In fact they cater to all the western region and in Rajasthan they have two plants and those plants are also catering to the agri states like Punjab and also practically they have strong reach in the entire western region, part in northern and part in the southern states also. If you go by their financial performance for first half they had a top line of close to Rs 260 crore with PAT of close to Rs 20 crore which translated into an EPS of close to Rs 13.50.”
 
“The second half of the company is always good because for FY12 the EPS of Rs 37, of that about Rs 24-25 came in the second half. I expect the same kind of performance to get repeated. So may be an EPS of Rs 35 is not ruled out for FY13. And the takeover rumor which has been floating in the market, if for some reason that happens that can really be a very big trigger because Coromandel International indeed has been seeing an aggressive buyer and they want to consolidate their positions and remain as the number one with a gap of the second producers to be as high as may be 20 percent of their capacity. So I won't be surprised to have that expectation also remaining alive but pure on fundamentals if I say that expecting an EPS of Rs 35 for FY13 which can easily move to about Rs 40-42 for FY14 the share is ruling at a PE multiple of close to about 4.5-5 times. Even on the debt position it is a debt free company, very nominal debt which has again been availed for the working capital and promoter stake of 61 percent is also very respectable. So taking all this into account the stock can move to about Rs 220 in next six months.”