See 30-35% upside in Prakash Industries: Aashish Tater

See 30-35% upside in Prakash Industries, says Aashish Tater, Fort Share Broking.

Tater told CNBC-TV18, "Before I take a call on Prakash Industries, let me give you a cautious note on Prakash Industries itself that interest is getting capitalized but it is because of the active expansion that is going on spree and that is why this is one small area of concern."
He further added, "If I take a call from fundamental aspect and I take a call on enterprise value rather than just on equity call, we feel the stock is under priced by at least 30% and would get re-rated once there is sentiment improvement into the market. If you see this is one player, which is vertically integrated and thanks to the mining licenses that it got for iron ore and also because of coal mines that it has near Chotia and also in Orissa for the iron ore, we feel the fair value of this stock is at least Rs 65, so roughly 30-35% upside onto the stock from current levels."
"What interests us in this particular stock is that if you take a proper integration call, the company has also gone for capacity expansion in the power space from 100 megawatt (MW) they are planning for almost 725 MW of which 100 MW has been added in 2012 itself. Another 100 MW of expansion is going to come next year. Also the forest clearance for the iron ore has already come in, so now what will happen is that in the first half of the next fiscal, the company would be able to save on iron ore as well as power cost, which is the main cost of production."
"If someone tries to take a all and see what will be the next year potential in terms of enterprise value, we feel that the stock would give you a decent reward of almost 30-40% and even higher if there is marginal improvement. We have been taking a negative call on steel sector and now with global capacities onto the entire area with production cuts, we feel that steel cycle is going to get bottomed with another 10-15% pain on the downside. So there is lot of things that would happen during next three months where we feel midcap stocks with vertical integration would be better to get re-rated along with few largecap stocks and that is why we have picked Prakash Industries for today." Disclosure: It is safe to assume that the stocks discussed have been recommended to clients.
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