Chettinad Cement can move to Rs 1100: SP Tulsian

Chettinad Cement can move to about Rs 1100 in next three months, says SP Tulsian, sptulsian.com.

Tulsian told CNBC-TV18, "Considering the volume which we have seen in Chettinad Cement yesterday it seems that the company must have got the permission from the stock exchanges to initiate the delisting move because if we recall three-four months back the promoters had indicated that they want to delist the company since they have the stake of 88.4 percent in the company. And that’s the reason at that time we have seen good activity in the stock when it used to rule at about Rs 750-800."
He further added, "Now considering the volume yesterday on the stock exchanges it seems that the process of delisting will get initiated soon. It has three cement plants with capacity of 11.5 million tonnes with captive power of 105 megawatt also. Apart from that the company is also setting up a two million tonnes plant grinding unit in Solapur which will be operational may be in next 8-10 months."
"If I go by the valuations, the present market cap of close to about Rs 2800 crore and enterprise value of close to Rs 3600 crore, the value per tonne works out to about USD 45 which looks very low. Considering the delisting move purely going by that theme as I said promoters have a stake of 88.4 percent and the public float is close to about 12 percent, so they need to acquire close to about 6 percent from the public."
"If I go by the share holding pattern Tamil Nadu Industrial Investment Corporation Limited (TIIC) is holding 3 percent plus in the company. And definitely being a state industrial investment unit, they will definitely be asking for the correct valuations, they won't be tendering the shares and in that event it will be difficult for the company to mobilize the 6 percent kind of stake inspite that some High Networth Individuals (HNIs) about 300 HNIs are holding 5 percent stake in the company."
"Suppose even if sometimes because of this concentrated holdings the promoters are able to manage, definitely TIIC will take a big objection and they won't allow the company to get listed. Infact I am taking a valuation call of about Rs 1400-1500 per share and that should not be a big problem because the present market cap of Rs 2800 crore. Even if you increase it by 40 percent, the market cap goes up by about Rs 3800 crore and shelling out 10 percent of that should not really be a big problem for the company."
"If you see the financial performance for first half, it had a top line of Rs 1270 crore with PAT of close to about Rs 115 crore, which translates into an EPS of Rs 30. So, one can safely assume that for whole of FY13 company should be able to post an EPS of close to about Rs 68-70 because H2 of all cement companies are always better."
"So taking that also into consideration and purely going on the delisting theme, I am expecting share to move to about Rs 1100 in next three months or so. Though I say that I am holding the higher target but one can safely expect a price of Rs 1100 in three months or so."