UB Engg has target of Rs 125: SP Tulsian

UB Engineering has target of Rs 125, says SP Tulsian of sptulsian.com.

Tulsian told CNBC-TV18, "UB Engineering is the engineering arm of the United Breweries Group. The business model of the company is quite strong, they are engaged in EPC projects, infrastructure. They are also catering to the fertiliser, power, cement, steel, desalination plant from erection to commissioning."
He further added, "For, FY11 they had a topline of about Rs 610 crore and posted an EPS of Rs 14.80, close to about Rs 15. The share is now ruling at a PE multiple of close to about 5. FY11 was not a good year because in FY10 they had an EPS of more than Rs 18, because of some contraction of margins in some of their contract. They have only been able to restrict their EPS to Rs 15."
"Last year, there was news that the promoter of United Breweries group may look to exit from the company because this seems to be an unrelated business for them. On that hope the share price move to Rs 220 last year, if you see its 52 week high."
"Going by pure core fundamentals, FY12 should be having a topline of close to about Rs 720-750 crore with an EPS of close to about Rs 18. That translates into a PE multiple of 4. The present book value of the share is at about 75 as on 31 March, 2011, share is ruling at a price to book of one time on historic book value."
"Taking all this into consideration, the kind of valuations which we see in other engineering stocks like GEI , Hindustan Dorr-Oliver , they have all been getting a PE multiple of anywhere between 8-12. So, there is no justification for this stock to rule at such a low valuation."
"I am expecting a price of maybe about Rs 120 in next six months time. If the stake sale news gets revived by the promoter, share could even move pass to Rs 150. One can keep a time horizon of six- eight months for a price target of Rs 125." Disclosure: I have no personal holding in the above stock.