Published on Wed, Mar 28, 2012 at 09:58 | Source : CNBC-TV18
Updated at Wed, Mar 28, 2012 at 11:04
Article from Money Control
Hindustan Zinc is looking good for investment at current level, says SP Tulsian, sptulsian.com.
Tulsian told CNBC-TV18, "Hindustan Zinc is the largest integrated producers of zinc and led in the world plus also a significant player of making silver in the world. If you see their capacity, zinc has a capacity of 8.8 lakh tonne per annum and led has 1.85 lakh tonne per annum and silver 200 tonne per annum."
He further added, "If you see the company's fundamentals, out of net worth of about more than Rs 27,000 cr they have cash and cash equivalent of more than Rs 17,500 cr and the share is now ruling at a P/E multiple of close to 9 if I take the present financials of the company and if I take an EPS of about Rs 13.50 or maybe Rs 14 for FY12 extrapolating the first nine months' results."
"The stake sell or the residual stake sell which is being contemplated by the government. If you see - as I said - out of net worth of Rs 27,000 crore in cash and cash equivalent of Rs 17,500 crore, cash works out to Rs 42 per share and I don't think that it will be prudent on the part of the government when they have been so miser in selling their residual stake via auction route at such a high price that means they are expecting premium."
"I don't think that what is the reason for the government not asking for a premium of maybe 15-20% or maybe 25% from the current prevailing market price because as I said if you have Rs 42 cash lying in the books of the company, that is your entitlement, you are holding about 30% stake to be precise 29.5% and if you take the core operations, it results into an EPS of - even if I knock off the income being earned on the investments the core operations are giving an EPS of close to about Rs 11. So work out a P/E multiple of maybe 12-13 in case of a residual stake sell, so that gives you a value of maybe about 140-145. So in total if you take the value in my view works out to at about Rs 165-180 per share."
"I don't think that there is any reason for the government to divest this stake below this rate. That is the situation. If you now take the case of 65% held by the Vedanta Group and 30% held by the government, 95% makes it also a delisting candidate, I don't know what will be the situation in that case whether the Securities and Exchange Board of India (SEBI) will be agreeing for delisting of the company to take care of the interest, to protect the interest of 30,000-35,000 retail shareholders."
"So combination of the fundamentals plus the residual stake sell, how it pans out gives lot of opportunity in the stock even in the short run though I have taken a target of about Rs 160 in 12 months that is purely on fundamentals. But if the developments on the residual stake sell pans out faster, I think share can see that level of Rs 160 maybe in next three-four months. So from both the angle, the share looks quite a good investment at the current price."
Disclosure: No holding or interests in above stock.
Article from Money Control