Dear @abhi2525, I appreciate your concern related to 8x return for the year, but won’t there be a good chance of the fundamentals of the company superseding the above concern? I am hoping that, it will, as I have been witnessing it happening at every level for Bhansali since Rs. 37 (even since I invested in this stock). During its journey from Rs. 37 to the recent Rs. 199, stock had corrected to the tune of more than 10%, at least 3 times which I believe was due to valuation concerns, but every time it retracted with increased vigor. I must say that, its last 3 quarter excellent results have been very supportive for the upward journey in its stock price.
Please refer to some of the earlier discussions between myself and @Agarwala on this thread regarding the price improvements of ABS since the beginning of the year. The global price of ABS has increased 40% to USD 2,000 per ton since the beginning of the year till end of September and subsequently increased to USD 2,600 per ton till now, making it an overall increase of 82% since the beginning of the year. Let me disclose that, we have made the best guess of the above figures, based on the details presented in certain news articles and websites.
Please also refer to my earlier posting on the very likely positive impact of Electric Vehicles on BEPL. I believe that, this will be a really big disruption which we will not be able to afford to ignore for the next many years and I believe that, BEPL has already started benefiting from this.
Also, if you really think objectively, how many companies in India currently can claim to have such strong MOAT as BEPL? I feel that, it is a very strong growth-oriented business. I think, what Ambit has come up with is a really excellent report and considering that, Ambit and its very talented CEO Saurabh Mukherjea more often come up with doomsday predictions and conservative/ negative views about the market/ stocks rather than positive, I feel that this report from them must be taken to be as highly positive for BEPL.
Coming to current valuation of BEPL: Current TTM P/E is 45.6 and the EPS for the corresponding period is Rs. 3.62. Between Q1 & Q2 this year, the profit has grown by 49%. I am not assuming that the profit would grow at the same rate over the next 4 quarters, in spite of the positive environment for the company. Let me assume a 20% profit growth Q-o-Q for the next 4 quarters. This translates to an EPS of Rs. 9.73, which is around 2.67 times the current TTM EPS of Rs. 3.62. Even if we assume a very modest 10% Q-o-Q growth rate, the EPS would work out to be Rs. 7.71. For a growth rate of 49% (which it achieved in Q2), the EPS as of Oct-18 would work out to be Rs. 11.09.
The optimism of at least 10% Q-o-Q profit growth over the next 4 quarters is keeping me invested in BEPL, in spite of the stock multiplying 8 times during the last year.