Prefer SML Isuzu, may trade above Rs 1400: Prakash Diwan

Prakash Diwan of Altamount Capital Management told CNBC-TV18, "SML Isuzu is a company that has been building market share significantly in 5-12 tonne passenger vehicle commercial side. So it is typically for ambulances, school buses and establishments. The army uses a lot of those for transportation; the new airlines have this for internal movement within airport field. Therefore, I think this is a company that has found niche for itself which is competitive. Pricing wise, affordability for these vehicles is much higher than the buses from Tata Motors or Volvo or Ashok Leyland for that matter. They have started seen a very significant improvement in their margins. The pricing power that they have started yielding has been good, capacity utilisations have gone up with capex also lined up for next three years which is almost like USD 2 billion and that is something which they have factored in with the kind of cash flows that they are generating that is now quite positive." "One more interesting thing is that Isuzu has decided to support the company with few newer products and there is a whole new segment of pickup trucks that they are getting into. There used to be a model called Tata Mobil which is off the market now for a long-time which is the twin cab plus pick up and that is a huge segment in India which is waiting to be tapped. Isuzu has just launched a product there and it has done very well, in fact the waiting is about two-and-a-half months, of course that is because of lower production levels that they have but it is kind of helping then out in a significant way," he said. "My sense is that the earnings will grow almost three times from what we saw in FY'14 by the time it comes to FY'17 to almost 1 billion plus and that augurs well from an earnings per share (EPS) perspective also, probably give an EPS of Rs 79 or something. It would probably trade easily at Rs 1,400 plus."