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abhishekbasu
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Joined: 07/Sep/2008
Location: India
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   Posted: 24/Dec/2009 at 10:03am |
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The ad in business standard (last week, I think) was for 16,000 per sqft for the office space in their building.
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praveen
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Joined: 09/May/2008
Location: India
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Posts: 543
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Posted: 27/Dec/2009 at 11:32am |
This is one of the better companies out there. Management track record is excellent. Core business is good. Andheri property sale would provide the top up. Currently trading at reasonable valuations (See below)
Crude valuation :-
Based on management guidance, Core business FY10 (June ending) EPS should be around 30-32. Long term ROE expectation around 25%. FY09 BV 110. Expected FY10 BV is 130/- (FY09 BV + FY10 EPS - DPS of 12/-)
Core business fair value per share - 130 * 2.5 = 325.
Post tax valuation per share of the Andheri real estate = 75 - 100.
Final fair value estimate - ~400-425
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abhishekbasu
Senior Member
Joined: 07/Sep/2008
Location: India
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Posts: 335
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Posted: 28/Dec/2009 at 4:55pm |
Are you estimating a PE of 2.5 for FY10? If so, what are your reasons?
Originally posted by praveen
...
Core business fair value per share - 130 * 2.5 = 325.
Post tax valuation per share of the Andheri real estate = 75 - 100.
Final fair value estimate - ~400-425
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praveen
Senior Member
Joined: 09/May/2008
Location: India
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Posts: 543
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Posted: 28/Dec/2009 at 6:25pm |
Originally posted by abhishekbasu
Are you estimating a PE of 2.5 for FY10? If so, what are your reasons?
Originally posted by praveen
...Core business fair value per share - 130 * 2.5 = 325.
Post tax valuation per share of the Andheri real estate = 75 - 100.
Final fair value estimate - ~400-425
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No I am estimating P/Book at 2.5x which is fair estimate given the longer term 25% ROE estimate
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abhishekbasu
Senior Member
Joined: 07/Sep/2008
Location: India
Online Status: Offline
Posts: 335
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Posted: 28/Dec/2009 at 6:46pm |
Oh, right. Thanks for pointing it out. But, I am not sure the EPS nos are correct. FY09 (June) is 38.33. Sep quarter EPS is 7.82 compared to last year's 3.75. Last year Q2 there was a loss which is unlikely this year. Conservatively, there EPS may end up in the 40-42 range. Putting a PE of 10, your fair value of 400-425 seems reasonable on a standalone basis. The kicker would be the real estate, but that would be a one time gain.
Originally posted by praveen
Originally posted by abhishekbasu
Are you estimating a PE of 2.5 for FY10? If so, what are your reasons?
Originally posted by praveen
...Core business fair value per share - 130 * 2.5 = 325.
Post tax valuation per share of the Andheri real estate = 75 - 100.
Final fair value estimate - ~400-425
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No I am estimating P/Book at 2.5x which is fair estimate given the longer term 25% ROE estimate |
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praveen
Senior Member
Joined: 09/May/2008
Location: India
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Posts: 543
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Posted: 28/Dec/2009 at 8:00pm |
Originally posted by abhishekbasu
Oh, right. Thanks for pointing it out.But, I am not sure the EPS nos are correct. FY09 (June) is 38.33. Sep quarter EPS is 7.82 compared to last year's 3.75. Last year Q2 there was a loss which is unlikely this year. Conservatively, there EPS may end up in the 40-42 range. Putting a PE of 10, your fair value of 400-425 seems reasonable on a standalone basis. The kicker would be the real estate, but that would be a one time gain.
Originally posted by praveen
Originally posted by abhishekbasu
Are you estimating a PE of 2.5 for FY10? If so, what are your reasons?
Originally posted by praveen
...Core business fair value per share - 130 * 2.5 = 325.
Post tax valuation per share of the Andheri real estate = 75 - 100.
Final fair value estimate - ~400-425
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No I am estimating P/Book at 2.5x which is fair estimate given the longer term 25% ROE estimate |
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I looked at little longer term (say last 5 years) in light with management guideline of sales of 2000 cr with 13% operating margin. To me core business EPS of 30-32 looks reasonable and core EPS of 40+ very difficult. Also I like to err on the conservative side while doing valuations. 
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abhishekbasu
Senior Member
Joined: 07/Sep/2008
Location: India
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Posted: 28/Dec/2009 at 9:09am |
Being conservative is better. That way the surprise is likely to be positive . Looking at the stock price, I don't think there is going to be any split/bonus in the near future. Other than that there is no capex in the offing so don't see any reason for equity dilution happening. The FY09 EPS is 38. Also, it has had reasonable growth for the last 5
years. The use of its products are stable, so would like to understand
your reasoning for thinking that EPS will go down from 38 to 30-32
levels.
Originally posted by praveen
..............
I looked at little longer term (say last 5 years) in light with management guideline of sales of 2000 cr with 13% operating margin. To me core business EPS of 30-32 looks reasonable and core EPS of 40+ very difficult. Also I like to err on the conservative side while doing valuations.
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praveen
Senior Member
Joined: 09/May/2008
Location: India
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Posted: 29/Dec/2009 at 12:35pm |
Originally posted by abhishekbasu
Being conservative is better. That way the surprise is likely to be positive .
Looking at the stock price, I don't think there is going to be any split/bonus in the near future. Other than that there is no capex in the offing so don't see any reason for equity dilution happening.
The FY09 EPS is 38. Also, it has had reasonable growth for the last 5 years. The use of its products are stable, so would like to understand your reasoning for thinking that EPS will go down from 38 to 30-32 levels.
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If you see over last 5-6 years, FY09 margins look exceptional. Therefore I have assumed Sales of 2000 cr and a net profit margin of 4% which gives the EPS close to 32. (w/o the impact of Andheri RE development) Under my best case scenario the company may end up doing 5% NPM and cross 40 EPS but I am not counting on it.
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