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Last Updated : Sep 04, 2017 11:30 AM IST | Source: CNBC-TV18

Buy Rajratan Global Wires: SP Tulsian

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com in which he shared his readings and outlook on market and specific stocks.


In an interview to CNBC-TV18, SP Tulsian of sptulsian.com in which he shared his readings and outlook on market and specific stocks.

Below is the verbatim transcript of the interview.

Reema: Rajratan Global Wires, you have spoken about it in the past, the stock has not done too much, and in fact it is down close to about 10 percent in the last one year. How do you see it performing from here on?

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A: That is right, in fact if you see, I would say that probably it has corrected by about Rs 300 from its top. We gave a buy call about one year back and then thereafter it has almost doubled in 45 days, from Rs 400 to about Rs 800-850. However, if you go by the three triggers, one is the better auto sales numbers which we have seen for the month of August, two is the tyre stocks; the way they are doing well, and third is this being an auto ancillary, they are making bead wire and this is the bead wire which is used by in all the tyre, by all the automobile industry.

In fact bead wire holds the tyre on the rim and this is used by all the automobiles, off the road vehicles, aircrafts, and all that. It is a very critical auto ancillary component. The company is the second largest auto bead wire maker in the country. They have customers like MRF, Ceat, Apollo Tyre, Balkrishna Industries, Bridgestone, etc. and they have one subsidiary in Indonesia also having capacity of 26,000 tonne per annum; 36,000 tonne in India, and 26,000 tonne in Thailand. So taking this total capacity, because of this bit dull working for the last maybe couple of quarters, because of the rising metal prices, their raw material is the steel and because of that and having long term contracts, the performance of the company has not been to the mark.

However, if I take a first, Q1 numbers for FY18 on a consolidated basis, the company has posted an income of Rs 76 crore, PAT of Rs 3.6 crore with an EPS of Rs 8.23. So even if I extrapolate this into four, it gives me Rs 32-33 per share. However, I am quite confident that going forward they have revised the rates upwards and I am expecting that probably we can see an EPS of closer to about Rs 40 for FY18 on a consolidated basis. If you take that call, I think the share ruling at a P/E multiple of about 14 and it is a debt free company having no long term debt or whatever debt the company has is purely for the working capital, very low equity of Rs 4.35 crore with a face value of Rs 10, book value of Rs 200, promoter stake of 62 percent.

So, whenever these stocks gets rerated, or comes in the limelight, they swiftly move up again as well. As I said, the fundamentals of the company is intact, critical auto component is being made by the company. So taking all this into consideration, share now ruling at Rs 575, can move to a level of Rs 690 in next six months or so.

Anuj: What next with AB Capital, do you see more circuits and in that case do you think Grasim stock there could be some more profit taking here as well or could Grasim be looked at buying at the lower levels?

A: Two points, first I think if I take on AB Capital, as I said on Friday, there was over exuberance in the market and the price discovery in the pre-open has come to an unrealistic level. So taking that into consideration, probably AB Capital should settle anywhere at around Rs 200-210. If you really take a call on any newly listed stock, its presence in T2T category or because it is in a B category on National Stock Exchange is seen as negative as well. So maybe for next two to three days, at least today and tomorrow, I am expecting the stock can remain in the lower circuit. It is difficult to say -- on Wednesday maybe or Thursday it should stabilise at a level of around Rs 200-210. That seems to be the fair value for the stock.

Coming to its effect on Grasim, I don’t think that that will be having much reflection in spite of Grasim holding 57.3 percent of Aditya Birla Capital, because as I have been keeping my extremely positive stance on Grasim, they have their other business verticals, and in fact the kind of corrections which we have seen in the share price of Ultratech Cement, and if you take the valuations even at a 40 percent discount to 51 percent or major subsidiary that is Ultratech and Aditya Birla Capital, I think is giving huge value and huge comfort.

As I have been saying, even the standalone business of Grasim of viscose staple fibre and that of chemical i.e. caustic soda with an independent or maybe standalone EPS of closer to about Rs 33-34 are also -- even the correction on Friday in Grasim was justified to an extent, but again, this was more sentimental that because of the destruction of lower circuit of AB Capital, you make Grasim to correct by Rs 60-70 I think was again an overreaction. So, Aditya Birla Capital should settle anywhere around Rs 200-210 and Grasim is giving a buying opportunity now at the current levels.

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First Published on Sep 4, 2017 10:25 am
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