Enter Century Enka with target close to Rs 290-300 mark from an eight-nine month perspective, says Ashish Tater, Head of Research, Fort Share Broking.
Tater told CNBC-TV18, "Century Enka is a switch call from our side. We have advised our clients to book profits in Sumeet Industries and enter into Century Enka. Sumeet Industries has seen a steep run-up in the prices. Hence, we feel Century Enka is a better play in terms of valuation though they are not proxy in the same segment."
He further added, "If I take a fundamental call on the company, they are one of the leading manufacturers in the nylon segment with their Nylon Tyre Cord Fabrics (NTCF) capacity of 22,000 tonne mtpa. They are also into polymerization. They have announced Rs 350 crore odd margin expansion plans, which will expand their sales by almost 14-15% going forward."
"The company is doing a net profit margin of close to 7.5-8% year on year. I feel even on a conservative side, they will do close to 7% odd margin. On an expected sale of Rs 1,500 crore odd levels with comfortable debt levels, the bottomline would result in close to Rs 100 crore odd.
"The current year expectation is close to Rs 75-80 crore odd mark which means YoY 25% jump in the bottomline. We feel the stock can easily get re-rated and the stock would get a better dividend payout going forward. It will shift from BK Birla Group to Kumar Mangalam Birla and we would even get better dividends. This is a good entry bet at current levels."
"The company has three plants - one in Pune, other in Maharashtra and the third one is in Gujarat. In these particular areas, they can easily go for brownfield expansion which they have announced. With strong cash flows on operating side, they will not need to dilute their earnings or even reach debt from current levels. There could be an easy upside in terms of bottomline and EPS for the shareholders. Thus, we are comfortable entering into a stock for a target of close to Rs 290-300 mark from an eight-nine month perspective."
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