Watch the interview of SP Tulsian of sptulsian.com with Anuj Singhal, Latha Venkatesh & Sonia Shenoy on CNBC-TV18. He shared his readings and outlook on market and specific stocks.
Below is the verbatim transcript of the interview.
Anuj: You have chosen a tyre stock today Goodyear India?
A: That is right Anuj, purely on the two reasons one because of the growth which the company has shown in their H1 performance and secondly the valuations because the kind of valuations which the market is giving to the tyre stocks this stock seems to be the cheapest one and if you really go by the financial performance I will just elaborate if you see company have two models business model first they have their own manufacturing of the farm tyres and the truck tyres and the plant is in Haryana at Faridabad.
Apart from that they have been marketing the passenger vehicle tyres of the group companies that is of the parent the global parents Goodyear who have their plants in Aurangabad. So, they get the income from their core business of manufacturing plus the marketing business. If I just go by their first half performance of FY18 the topline has been at about Rs 940 crore against Rs 1,660 crore of the previous full year that is of FY17.
So, you have seen a growth of closer to about 10-11 percent, but the margin has expanded by about 14-15 percent with profit after tax (PAT) of about Rs 70 crore for first half against Rs 127 crore of FY17.
If I just take the earnings per share (EPS) first half which was at Rs 30.50 was at Rs 55 for whole of FY17. But if you see the financial performance March quarter was bit dull for the company because of the huge increase seen in the rubber prices and that quarter gave an EPS of sub Rs 8 to the company which otherwise always was within the vicinity of Rs 12-14. So, we are expecting that the EPS of Rs 30.50 which we have seen in H1 can give a total EPS of closer to about Rs 65-66. If you take that as a valuation call share is ruling at a PE of Rs 13.
The kind of financial performance and the structuring of company is seen to be quite good, equity Rs 23 crore foreign promoter is holding 74 percent, the net worth is Rs 742 crore with a book value of Rs 322 and of this Rs 322 book value Rs 232 per share is held by company as cash of about Rs 535 crore.
So taking all this into consideration and the market cap of Rs 1,400 crore and the consistent dividend payment, last dividend was at 125 percent for the company, so taking all this into consideration share now ruling at Rs 838 can move to a level of about Rs 1,000 in next six months or so.
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