Here are top trading ideas from SP Tulsian

Apart from that, they have a 51 percent subsidiary again making toner of 1800 tonne capacity which is 150 percent or maybe 50 percent higher of their export unit which is making 1,200 tonne per annum. This Uttarakhand unit which is 51 percent subsidiary of the company is making 1,800 per annum of toner and with a tax holiday of next 10 years i.e. up to 2019 in Uttarakhand. Very good market share and the kind of digital things which are happening, the toner consumption which is a consumable for printers and all that is going to see happening on a very high level.

If I take first corporate move having initiated by the company, company is merging five companies with itself. One is its Indian subsidiary 51 percent which has a plant in Uttarakhand and apart from that, there are four investment companies which are already promoter of the existing company. So, what will happen, 51 percent equity which is held by this company will get extinguished in its subsidiary and there will be a very small equity increase. Even on the post equity dilution in spite of the share ratio being 10 plus share for every one share held in this subsidiary, the equity will not rise more than from Rs 8 crore to Rs 14 crore, but it will be EPS accretive.

As I said that 51 percent equity will get extinguished, those four investment companies will get the share, existing shares, so, that is just a simple swap with virtually no increase in the equity by less than Rs 10 lakh on the paid up equity. So, this is the equity structure. Already Allahabad branch has approved this merger order, principal branch NCLT at Delhi has also passed the final order subject to one or two riders. So, effective from April 1 2017 this merger will get effected and because of that the EPS which was sub Rs 17 in FY17, I am expecting that probably for FY18 company will be able to post an EPS of Rs 21.

If you see the financial performance for FY17, they had a topline growth of about 16-17 percent at about Rs 125 crore. However, bottomline grew by about 28-29 percent on year-on-year (YoY) basis. Excellent product profile. So, if I take Rs 21 EPS, cash surplus company, company has about Rs 30-35 crore as the investments in cash and cash equivalent. If you knock that off, share is available at a P/E multiple of 11 times on FY18 estimated EPS of Rs 21. I don’t think that these stocks which has entry barrier, such a good market, excellent growth prospects, needs to have a P/E multiple of at least 18-20 times.

If I compare it with Control Print kind of stock which is not a direct comparison, but still Control Print is ruling at a P/E multiple of 17-18 times where again we are bullish on that stock as well. So, I am expecting excellent growth prospects on the stock. Expect a price of Rs 325 in six months, but I am expecting that share has an excellent long term potential even if it is held in the portfolio for couple of years as well.

Latha: Would you want to make any disclosure on this?

A: We have given the buy call to our client’s couple of days back, when it was ruling at about Rs 190 and we are also having personal investments in this.

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