BSE ID : 517015 NSE ID : VINDHYATEL
RECOMMENDED PRICE 594.75
PEAK FROM RECO 1472.00 147.50%
CURRENT PRICE 990.05 66.46%
Vindhya Telelink is manufacturer of Jelly Filled Telecom Cables. We initiate coverage on Vindhya Telelink as a BUY with a price objective of Rs 850-1100.
About the company:
Vindhya Telelink is manufacturer of Jelly Filled Telecom Cables. It is one of the largest jelly filled telecom cable manufacturer, power cable, copper cable and optic cable manufacturer. It has manufacturing facility set up in REWA (MP).
The company operates in two segments fibre optics and EPC. Key clienteles include BSNL, Railways, NTPC and all telecom companies. Provides solutions for power and sewerage projects.
a) Consistent Order flows: Expect good orders from Power Sector, Railways Telecom and Defense across companies product profile. Thus earning visibility over next two years.
b) India Going Digital + Smart City Project : India still needs a huge roll out of telecom network as more data requirement demand is set to increase thus ensuring demand from telecom cable players. JV with Portugal’s Visabeira Global for Smart City Project.
c) Unnoticed Investments via 100% subsidiaries . The valuation mismatch Co. owns 33% stake in Birla Corporation( MKt cap of Birla Corp is 5000 crore). Also in Birla and Universal Cables and Pilani Investment totaling to appx. 1900 crs.
Birla Corp Shareholding
Vindhya Telelinks Ltd. - 6380243 - Vindhya Subsidiary
Laneseda Agents Ltd. - 5994680 - 100% - Subsidiary
Insilco Agents Ltd. - 6004080 - 100% - Subsidiary
August Agents Ltd. - 6015912 - 100% - Subsidiary
Total Shares - 24394915
Value at 690 per share - 1683 crores
Together Vindhya Tele along with subsidiaries own 2.4 crore shares in Birla Corporation or appx 1/3 of Birla Corp which is appx 1650 crores other noticeable investments worth 250 crores across Birla Companies totaling Investment to appx 1900 crores vs Mkt Cap of 700 crores of Vindhya Telelink.
Outlook & Valuations:
Company on standalone basis is likely to achieve Sales of 950 crores with PAT of 76 crores Thus, Earning Per Share of close to 70 for standalone business. Even if we value the company standalone biz at 9 PE it means stock along with holding discount should trade in zone of 850 to 1100 zone. There is a significant upside on the stock at current levels.
With Focus of budget to be likely on themes that will ultimately benefit companies enabling technology Defense and Smart City Vindhya Telelink looks an attractive alternative. Strong investment profile of subsidiaries will help the valuation matrix on downside and upside can be roughly 40 to 80% depending on how and when market decides to rerate the stock.
Investments - 1880
less Debt - 125
Standalone Business - 630
Holding Discount - @40% - 752
Holding Discount - @20% - 376
Range of Market Cap Rs 1075-1380
Price Range Rs 850-1100
Disclosure (SEBI Registration Number for Aashish Tater : INA300001206)
Stock Ownership - No
Relationship with Company - No
Stock Recommended to Clients - Yes
Remuneration/Benefits received from company in 12 months - No
Merchant Banking Market Making activities / projects - No
Any arrangement with co. to affect the report write up - No
Disclaimer: Aashish Tater is an investment adviser based in Kolkata, INDIA. At the time of writing this article, he, his firm and dependent family members have no position in the stocks mentioned above. The author invites readers to send him email and welcomes comments, feedback & queries at firstname.lastname@example.org. This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice. Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision. Neither the author nor his firm accepts any liability arising out of use of the above information/ article.