“Ask and it will be given to you; seek and you will find; knock and the door will be opened to you. For everyone who asks receives; the one who seeks finds; and to the one who knocks, the door will be opened. Matthew 7:7-8

24 Feb 2018


Buy RCI Industries & Technologies: SP Tulsian

Below is the verbatim transcript of the interview.by CNBC TV
Latha: What is your long term bet?
A: My long term bet today is RCI Industries. If you see the interesting business model they have, they are largely making copper wires which are going to get used into the electric vehicles, defence, in fact already they are used into automotive cables, defence, electrical, consumer electronics. If you see, they are making very specialised kind of things, I am not going too technical, but if I just want to say that they are making electrolytic tough pitch and pressurised high phosphorous copper wire which are going to get used into electric vehicles and the defence and applications and all that and because of that, they are increasing their capacity also at their existing plant at Baddi and promoters have already subscribed to the preferential allotments by raising their stocks in the company.

If I quickly go into the financial performance, the company for first half of 2018 had a topline of Rs 1,084 crore with a PAT of about Rs 17 crore translating into an EPS of closer to about Rs 7 of H1. In fact if you see, the second half has always been good for the company because FY17 EPS has been at Rs 27 which was on a comparable basis for this first half, has been at Rs 5-6. So going forward the company is going to be posting an EPS of closer to about Rs 24-25 for FY18.
If I take the financials of the company, it is quite interesting. The market cap is just at Rs 275 crore on a topline which company is going to report of Rs 2,100 crore. So the equity turnover ratio advantage is going to be in favour of the company and as I said, promoters have raised their stake in the company to 64 percent recently. The company is having cash now in their books because of this preferential allotment having made to the promoters which will get used for capacity expansion.
So, if you take on a valuation basis, share is ruling at a core P/E of about 7.5 and if I net off the cash which the company has in its books, it is ruling at 6 P/E. So taking all this into consideration, share now ruling at Rs 205, can move up to a level of about Rs 245 in next six months or so.

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