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Last Updated : May 11, 2012 11:09 AM IST | Source: CNBC-TV18

Kirloskar Pneumatic Company a long term bet: Tater

Kirloskar Pneumatic Company is a long term bet, says Aashish Tater, Head of Research, Fort Share Broking.


Kirloskar Pneumatic Company is a long term bet, says Aashish Tater, Head of Research, Fort Share Broking.


Tater told CNBC-TV18, "Kirloskar Pneumatic Company is one stock that we feel is going to reward shareholders who has potential to hold it for next two-two and a half years. Look at this particular business. The company is ruling at a CAGR of almost 20% and their policy is very simple. They go for expansion of their capacity, hold it for two years, again increase their capacity and again two years halt. This is the way the company is shaping out. It’s already been on a halt."


He further added, "Next year we are working with sales of around Rs 750-760 crore and for year after that we are working close to Rs 950 crore odd. The company is right now working within a net profit margin of approximately 9%. That means two years down the line, the company would be doing close to Rs 90 crore odd of profit. Next year the trigger would not be much for the stock because we feel the range should be between Rs 400 on downside and the cap should be around Rs 600, but if someone has a potential to hold it for two-two and a half years the company will be touching that Rs 1,000 magic figure very soon, say two-two and half years and then analysts would rerate the stock."


"Globally we have gone and studied these kind of companies. It normally trades at a decent size of almost 1.4 times market cap to sales ratio. The current market cap to sales is around 0.9 times. Second interesting aspect is that promoter of the company has been increasing its stake with its recent filing of shareholding pattern for this quarter. The promoter has increased his stake by almost 2.5%, taking it to 58% odd levels from 55-56% levels."


"So if you take a call where the promoter is buying into this doomsday, I think this is one stock which definitely warrants a bet from a longer term perspective. Day before yesterday we came out with a buy report on this stock, because we expected very good numbers, but on number front it was not attractive from our perspective. So the stock would definitely would correct to that Rs 420-430 levels either in today’s or tomorrow’s trade and that’s where we feel one should start building positions from a longer term perspective. This is one stock which should definitely be a part of your long-term bet."

Disclosure: It is safe to assume stock has been recommended to clients.



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First Published on May 11, 2012 10:28 am
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