At the current market price of Rs 243 per share with target 350
we feel Zuari Industries Ltd is significantly undervalued based on sum-of parts theory. Based on the market estimates of its holdings in Various businesses and cash equivalent, it is currently trading at nearly one-third of its intrinsic value.
Based on the current book value per share of Rs 265, Zuari Industries is trading less than its book value per share, while almost all fertilizer companies are trading above 1 time respective book value. Zuari's book value for FY07 has swelled on account of sale of its investments in Zuari Cement to the joint venture partner M/s Ciments Francais. We expect the company's financials to improve during the current year with the sizable cash it has received on sale of investments in Zuari Cement. Possibility of
a larger dividend pay-out this year may not be ruled out. On operating front also, the company has performed well. The OPM has risen by 213 bps from 3.91 to 6.04 per cent for FY07. Zuari Industires is a part of Zuari-Chambal group, owned by KK Birla, which aims to be one of the largest players in phosphatic fertilizers in the country.
Buy recommended from here for 45 trading session.
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