SP Tulsian of sptulsian.com feels Sangam (India) can move to about Rs 50 in next six months.
SP Tulsian of sptulsian.com feels Sangam (India) can move to about Rs 50 in next six months. The robust numbers posted by the company for whole of FY13, he reasoned.
Tulsian told CNBC-TV18, "The reason for choosing Sangam (India)
has been the robust numbers posted by the company for whole of FY13. This is a company from Rajasthan and an integrated textile player. They are the largest producer of polyester viscose dyed yarn maker at a single location in all of Asia.”
He further added, “If you see their capacity they have over 2 lakh Spindles, 4,000 Rotors with capacity of over 30 Million meter for weaving, 40 million meters for Denim and processing of 54 million meters.”
“Their profit after tax for FY13 is at Rs 51 crore as against Rs 17 crore for whole of FY12. All the textile companies those who are integrated players having their own spinning, weaving and processing and fabric making; all that are doing well. If they have the overhead cost keeping under control, which we have seen in case of this company and that is the reason FY13 EPS has been at Rs 13 which was at Rs 4.50 for whole of FY12. That means company has given a 3 times jump or 200 percent rise in its bottom-line from Rs 17 to Rs 51 crore. And I am expecting that this momentum is likely to continue because better performance for whole FY13 was back ended. Infact that has come more in the second half and when you talk to the industry where trends are quite good may be because of the lower prices of the raw material, cotton.”
“I am expecting that company should be able to post an EPS close to about 16, so that makes the share to rule at a P/E forward earning multiple of 2.5 times. Price to book is quite low at 0.5. Generally textile stocks are ruling at a lower P/E multiple but they are ruling anywhere between 4-5 times. So if this stock rules at a P/E multiple of 2.5 and even if it rises to 3.5 it has the potential to give a rise of about 30-40 percent. This stock used to rule in the band of Rs 50-55 around six months back. So the share can move to about Rs 50 in next six months or so with a very limited downside. “
Disclosure: No holding or interest in above stock.