Asahi Songwon may hit Rs 200, says Prakash Diwan

Prakash Diwan of prakashdiwan.in told CNBC-TV18, "Asahi Songwon has a huge conglomerate. They are into so many things globally but that is where the pedigree was. It is into inks, paints, plastics so many things, auto coatings, textiles and it is one of the fastest growing plays globally because the chemical industry is very well tracked because of the environmental issues.""The company always has been awarded globally, it has been recognised and this pigment manufacture makes up for almost 5 percent of the global industry, which is a commendable thing because it is a competitive high technology business and quietly this company has been doing this is a small plant next to Baroda. It derives 87 percent of its revenues from exports. So it has been quietly doing that and to markets like Japan and the US, has some clients like DEC which is the largest ink manufacturing in the world, it sells to Clariant and to BSF," he said."The company is known for its quality, it has zero product rejection which is very commendable. What is good about this company is that they have kept on advancing the technological promise over a period of time and brought more and more efficiencies environmentally and from a cost perspective into this manufacturing process. To the extent that DIC and Clariant got so convinced with this vendour that they have bought strategic stake into the company. So DIC has about 7 percent and Clariant has 6 percent. So they are very safe from that perspective, they don’t need to go out looking for newer clients all the while," he added."The other interesting thing is the financials. You always worry about these kind of companies whether they can grow when they have just a few big clients but they have been constantly growing and I would expect FY'16 close to March, should be about Rs 250 crore of topline, which is fairly decent in this niche segment.""Last year they have done about Rs 220 crore or something, so they have not grown this year too much because they were into an expansion mode and that too through internal accruals, the debt equity is 0.02 for the long period. They just don’t like borrowing. They have a typical Japanese mindset and the way it is kind of going now, the book value is also close to Rs 100 which is not very far off from where the stock is."He further said, "Going forward, the book value will see much more addition because of the reserves adding up and their EPS of Rs 16 which they could clock, means that you find a stock, which is a leader available at such simple discounting. The new change that I thought is going to make a big difference which is the product mix. They are getting into more environmentally friendly products which are slightly more expensive and all the clients have agreed to buy that. So they have an order book which is going to increase the topline as well as maintain margins or probably improve them also. So if you give 10-10.5-11 discounting to the next year FY'17 earnings, very easily the stock should be at about Rs 200.""I don’t see a downside but of course the caveat is the market is such that midcaps could be volatile. So don’t buy all your appetite in to one single day, stagger it over a couple of sessions and that might make sense."