Buy Sundaram Brakes: 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.

Below is the verbatim transcript of the interview.

Anuj: What is your stock call?

A: My today's stock is Sundaram Brakes. It is a TVS Group company and they are pioneer in manufacturing asbestos free friction material i.e. brake lining, disc pad, etc. If you really see the Q1 numbers, you can call it a classic case of turnaround for the company. Actually turnaround has happened in FY17 when they posted an EPS of closer to about Rs 4.47 from the loss which they had in FY16. However, if you go by the Q1 numbers, they have posted an EPS of Rs 4.27 for Q1 against Rs 4.47 for whole of FY17. I think this kind of performance is likely to sustain.

If you see, the income for Q1 at about Rs 61 crore, PBT of Rs 2.38 crore and PAT of about Rs 1.7 crore if you go by the equity and the promoter holding and all that. Company is having five plants and all five plants are located in south and they are catering to all the commercial vehicle, passenger vehicle, tractor, and all the auto and non-automotive segments as well as export to about 55 countries, and that too developed countries. They have the advantages of their plants being located closer to ports and from there they are catering to all their buyers and all that.

Equity is very low at sub Rs 4 crore with a face value of Rs 10, market cap is closer to about Rs 210 crore, promoter stake 66 percent, it is a debt free company and if you really take a call because the comparable peer is Rane Brake Lining and when we recommended Rane Brake Lining about a year back at Rs 500-550, it moved to a high of about Rs 1,600. So if you take a call on this, the net present value for this entire five plants works out at about Rs 750-800 crore, depends on the profitability, depends on the performance, and depends on the net present value. So share now ruling at Rs 533 can move to a level of about Rs 640 in next six months as per our targets on the stock.