Positive on Panyam Cements, target Rs 125: Tulsian

SP Tulsian of sptulsian.com told CNBC-TV18, "Panyam Cement is a 3,000 tonne per day plant, that is an annual capacity of close to about 9,90,000 tonne. If you really see the performance has really been very bad maybe because of the capacity enhancement, productivity improvement and all that the company has been making. In fact in whole of FY15 the company has produced 2.45 lakh tonne of cement. In fact I am expecting in FY16 the production to be closer to about 8-8.5 lakh tonne and that was the trend for FY14 also. That means they are sold 2 lakh tonne, in FY15 2.5 lakh tonne and in FY16 the company will be selling 8-8.5 lakh tonne because they have been gradually ramping up their capacity.""First they ramped it up to 2,200 tonne per day then 3,000 tonne per day then they had some problem of the productivity and all sort of things. Honestly the exact reasons I have not been able to pinpoint that what was the reason for such a low production in FY15 and all sort of things but if you come on the first half (H1), FY16 they have topline of Rs 120 crore because ultimately you can quickly gauge the impact of the higher capacity utilisation, H1 had an income of Rs 120 crore while whole of FY15 had Rs 90 crore. So, I gave you that reasoning and I am expecting second half (H2) maybe to have turnover of Rs 130 crore or so, about Rs 250 crore," he added. "In H1 they had operating profit of Rs 12.5 crore, in FY15 they had a loss of Rs 8.5 crore. So because we all know cement, steel, they are highly capital intensive, so you have the fixed cost, operating leverages are there with all the companies and all sort of things. PAT in H1 was at Rs 9.4 crore against FY15 net loss of Rs 15 crore; Rs 15 crore net loss has converted into profit of Rs 9 crore in first half and EPS for Q2 alone is at Rs 5.90 which was loss of Rs 9.50 in whole of FY15. I am trying to give you the dramatic turnaround which we are seeing because of the capacity addition and now with the higher capacity utilisation." "If you come on the promoter holding and all that, 52 percent are held by promoters and 30 percent are held by six investors which are mainly the fund and NRIs kind of things. So 82 percent stake is held by the promoters and big investors. Debt is just Rs 50 crore, market cap is just now Rs 140 crore or Rs 130 crore. So, if you take the enterprise value it is sub Rs 200 crore which translates into USD 30 per tonne, so again the enterprise value is USD 30 per tonne. I am quite positive on this stock largely because this a local play in Andhra and Telangana both. However, apart from that financial performance is supporting that, so share is now ruling at Rs 80-81 and I am expecting that it can move to a level of Rs 110 in next six months or maybe Rs 125 in next one year or so," he said.