Lakshmi Electrical Control may test Rs 500, says SP Tulsian

SP Tulsian of sptulsian.com told CNBC-TV18, "Lakshmi Electrical Control is Lakshmi Machine Works (LMW) group company and they are making the control panel in fact they are making the medium voltage and low voltage control panel for the textile machinery, compressors and other engineering products, that constitutes 85 percent turnover of the company and 15 percent from the plastics engineering products that is again made largely for the textile machinery and all that is catering to the group company which is the largest machinery makers in the world in fact one of the leading machinery makers in the world."He further added, "In Q1 that plastic division has not performed well. They had a negative EBITDA of about Rs 60 lakh, while Q2 has started showing the improvement. In fact that has never happened anytime, I don’t know the reason that, this division has performed such badly because if you see the topline is closer to Rs 200 crore on an annualised basis. If I take H1, it is at around Rs 90 crore and the profit after tax (PAT) is Rs 4 crore, so if you have Rs 60 lakh losses coming in from that division which contributes 15 percent that has taken away or that has brought down the bottomline of the company.""The EPS for first half for this current year was at Rs 16 which otherwise would have been Rs 20, they consistently post an EPS of closer to Rs 40. They have been paying the dividend of Rs 6-7 per share. So I think this problem because in Q2 the engineering plastic division has shown the positive EBIT. So I am expecting that second half will be better. I won't be surprised to see an EPS of closer to about Rs 20 in H2, and H1 in Rs 16, so EPS of about Rs 36.""Coming on the marketcap, it is about Rs 95 crore that means ruling virtually at a book value; book value is at Rs 360-365, maybe by March 2016 it will be Rs 395 at which the stock is ruling now Rs 390. Company is debt free and holding Rs 22 crore cash on a capital of Rs 2.5 crore. That means that it is almost about Rs 100 per share if I take up to March 31, 2016, add Rs 5 crore profit also to that.""Apart from that they are holding Rs 90,000 shares of Lakshmi Machines. The value of which is about Rs 30 crore as of today. Even if you take the discounting, if you take 50 percent discount, it works out to Rs 15 crore, which again gives a book value per share at about Rs 60. So Rs 100 cash, Rs 60 per share then you have Rs 40 EPS of the company consistently dividend paying and then the company has been little reckless. I would say in the past they have invested Rs 10 crore in Harshini Textiles, which is 50,000 spindle company. This used to be a subsidiary but they have gone for expansion and all that, so the stake of the company fell to about 28 percent," he said."Unfortunately in spite of seeing the good performance, Harshini Textiles have just been showing a bottomline in just like Rs 10-15 lakh losses or profits. It is an unlisted company. So management is thinking of exiting from that Rs 10 crore they want to realise from that Harshini Textiles in this Lakshmi Electrical. So if you take that Rs 10 crore -- that makes to Rs 40. Cash Rs 100, Rs 40 in Harshini Textiles and Rs 60 in Lakshmi Machine shares at a discounted value. The market value is Rs 120.""So if you knock off this Rs 200, the real value which you are paying to the stock is Rs 200 with an EPS of Rs 40. I don’t think this deserves a P/E multiple of 5 because this is a mini capital goods type of company, which makes the control panel, they are not affected by any of this slowdown, we cannot broadly put them into the turbine - boiler and generator (TBG) kind of things. It is like mini Siemens or maybe like a mini ABB kind of things. The promoters stake is low at 30 percent but the high networth individuals (HNIs) and big investors are all invested into the stock.""I think that stock has very limited downside but can see a price of about Rs 500 and in fact company has amended the share buyback and bonus, they incorporated in their articles also. So probably they may think going for either promoter stake increase or maybe share buyback kind of things I don’t know, I am not taking any calls on those things, I am not factoring those events but even if you purely see the performance, financial position and the business model, the stock has potential to move Rs 500 in next six months."