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Last Updated : Nov 10, 2017 10:09 AM IST | Source: CNBC-TV18

Buy Rajratan Global Wire: SP Tulsian

Watch the interview of SP Tulsian of sptulsian.com with Anuj Singhal, Latha Venkatesh and Surabhi Upadhyay on CNBC-TV18. He shared his readings and outlook on Rajratan Global Wire stock.

CNBC TV18 @moneycontrolcom

Watch the interview of SP Tulsian of sptulsian.com with Anuj Singhal, Latha Venkatesh and Surabhi Upadhyay on CNBC-TV18. He shared his readings and outlook on Rajratan Global Wire stock.

Below is the verbatim transcript of the interview.

Q: What is the stock recommendation?

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A: Stock for the day is Rajratan Global Wire and in fact this is an auto ancillary or maybe auto component company. This has been on our radar, in fact we have given a buy call earlier also on the stock. If you really see the working of the company, for last four quarters have been taking a hit and because of that the share price from its high of Rs 777 corrected to a level of Rs 577 now. However, if you go by the Q2 numbers, the company has released the consolidated numbers.

Firstly, let me just quickly give you that the company is making automotive tyre bead wire and it is a very critical component which holds the tyre with the tyre rim and it plays a very critical role. The company is having two plants; one is in India of 36,000 tonne per annum and one in Thailand of 26,400 per annum. They are supplying to all tyre makers whether MRF, Ceat, Apollo, Balkrishna, Bridgestone, Continental -- they are their clients. However, if you just go by the Q2 performance, let me just quickly come to the bottom line only, H1 FY18 earning per share (EPS) is at Rs 21.50; of that, Rs 13.50 has come in Q2 which was at Rs 8 in Q1 of FY18.

In fact if you see, because of this, as I said for the last four quarters the company has shown bit lower performance, so I think that the old glory of the financial performance seen to be returning back and the kind of EPS having posted of Rs 21.50 one can safely assume that FY18 will be seen with an EPS of closer to about Rs 45. If you take that kind of call, the share is now ruling at a PE multiple of maybe 13-14 if I take it on the current year's earnings. The growing margin expansion growth potentials are very high because of the entry barrier into the product which the company is making.

Equity is very low at Rs 4.35 crore with face value of Rs 10. Promoter stake is at 63 percent, while HNI's and SBI Capital in their mid and smallcap fund is holding 6 percent, while HNI and SBI Cap taking together holds about 17 percent. So, 63 promoters, 17 these HNI's makes very low float of 20 percent. Market cap is very low at about Rs 255 crore. If you really take a call on the topline, closer to about Rs 400 crore, even on a topline to market capital ratio, because virtually it is a debt free company, so taking all this into consideration I think the share now ruling at Rs 579 can move to a level of Rs 695 in next six months or so.

Q: Your thoughts on Aurobindo Pharma?

A: Excellent numbers I would say and in fact the kind of performance which the company has shown, not going into too many details, the EPS of Rs 13.33 against Rs 8.85 in the Q1 is a clear indication that the company is not affected by any kind of - because the company keeps getting the abbreviated new drug application (ANDA) approvals from the USFDA on a regular basis for their small products. The pipeline is very strong and in fact we have been on number of occasions recommending Aurobindo Pharma as our first pick amongst the pharmaceutical space.

Those who want to go for buying it, though we are not giving a strong buy call, but three pharmaceutical stocks which we have been choosing for all along were Aurobindo Pharma, Glenmark and Divis Laboratories. In fact two of them have really come out with good numbers. However, these particularly from Aurobindo numbers, I think probably they are the best which we have seen in the pharmaceutical space for this Q2 till the results having got announced. 

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First Published on Nov 10, 2017 09:59 am
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