Watch the interview of SP Tulsian of sptulsian.com with Anuj Singhal & Latha Venkatesh on CNBC-TV18, in which he shared his readings and outlook on fundamentals of market and specific stocks.
Below is the verbatim transcript of the interview.
Anuj: Vinyl Chemicals looks interesting stock idea?
A: That is right, in fact Pidilite Industries is the promoter of this company and of 50 percent of the promoter stake, Pidilite is direct holding about 41 percent stake in the company. Let me just quickly give the background that Vinyl Chemicals earlier was making vinyl acetate monomer which is called as VAM in an abbreviated word which is used for adhesive and all that. With their plant at Mahad maybe about three years back they had sold this plant to Pidilite Industries because the entire production was getting sold to Pidilite Industries. And then thereafter promoter because Pidilite is a big consumer of VAM that is vinyl acetate monomer as their raw materials so the promoters of Pidilite probably have thought that let us keep this company as a trading company.
Now the business model of this company is purely a trading company. They import the vinyl acetate monomer and 90 percent of their income is derived from sales to Pidilite Industries. So, one may argue that this is purely a trading company, there is nothing in it, why should we give this kind of multiple. Those arguments may remain valid but if you really take the situation you never know that when these types of companies can get revived if the plant can get sold to the parent company you can always see the new business ideas also getting generated in this company because the financials are seem to be very much in place.
For FY17 company had posted an earnings per share (EPS) of about closer to Rs 5. For H1 FY18 again the things are seen on an improvement because everything is ultimately linked to the import cost and all that and at what price they supply to Pidilite industries. So, financials is going to remain flattish kind of things with an EPS of about Rs 5 for FY18 also which was at Rs 4.50 for FY17 because Q2 has shown the better number than what we have seen for Q1. But coming on the financials the equity is very small at Rs 1.83 crore with face value of Rs 1 that means sub 2 crore equity with net worth of about Rs 50 crore and as I said that promoters are holding 50 percent of which Pidilite is holding 41 percent. Of this entire net worth of Rs 48 crore the entire amount of about Rs 50-51 crore are invested into the investments on which the company is regularly having some kind of income maybe of about Rs 4-5 crore which is seen as their treasury income. So, that in fact largely constitutes the company, so just kind of pedigree and hopes of the revival of the new projects coming in into this company maybe at a future dates all these things makes a stock a good buy at about Rs 103 with a target of about Rs 124 in next six months or so.
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