SP Tulsian of sptulsian.com is of the view that Srikalahasthi Pipes may test Rs 350 in six months and may even test Rs 400 in the next 12 months.
SP Tulsian of sptulsian.com told CNBC-TV18, "Srikalahasthi Pipes makes the ductile iron pipes which are mainly used for the water supply. They have their plant closer to Tirupati and has recently bagged one order from Telangana Water Board for about Rs 850 crore in the month of December and the supply for that water project has already started. The total order inflow in the month of December alone is Rs 1,050 crore and that is going to be the very big growth driver for the company because Telangana Water Board is a Rs 37,000 crore project and that is going to get completed maybe in the next couple of years for which the international funding has come. It is their main business."
"Recently, the company has completed Rs 100 crore expansion and they have taken up the second expansion of Rs 100 crore as well, which will increase the mini blast furnace capacity as well as for the low ash metallurgical coke capacity, matching capacity because that is a backward integration and that will eventually take the pipe making capacity to 2,85,000 tonne which is now at 2,20,000 tonne. So, maybe in the next six months, you will be seeing the capacity increase of maybe about 30 percent," he said.
"The operating profit margin has jumped from 15 percent which was in FY15 to 21 percent in the first half of H1, FY16. If I just quantify that with the number, on the topline of Rs 555 crore in the first half against closer to Rs 1,100 crore, in the whole of FY15, the operating profit is at Rs 116 crore against Rs 155 crore for whole of FY15. That is the reason, the earnings per share (EPS) for the first half has been at Rs 18 against Rs 21 for FY15. So, I am expecting and always because of this supply of this Telangana having started, maybe the full FY16 will be having an EPS of closer to about Rs 38."
"Going forward for FY17, I am expecting the company to post an EPS of Rs 45. If you go by the equity pattern and maybe the book value, it is closer to Rs 91, equity is about Rs 40 crore while net worth is Rs 365 crore. The debt which is there in the books is largely for the working capital, because we all know that these are all highly working capital intensive industries."
"With promoter stake of 51 percent, high net worth individuals (HNI) and the bodies corporate are holding 35 percent, I see this stock quite having a good potential to move up from here. I am giving a target of Rs 350 in six months, but maybe one can look for a target of Rs 400 plus as well in the next 12 months," he added.The Great Diwali Discount!
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First Published on Jan 6, 2016 11:58 am