Rakesh Jhunjhunwala bought shares of Visaka Industries as reported by us in August 2010 (see Rakesh Jhunjhunwala is buying Visaka Industries!!). Since then, knowing Rakesh Jhunjhunwala‘s skill in picking winner-stocks, we have been eagerly waiting for Visaka Industries to magically turn into a multi-bagger overnight. To our acute disappointment (and probably that of Rakesh Jhunjhunwala), Visaka Industries has only been going downhill and lost 21% at the CMP of Rs. 119.
In Q1 FY 2011, Visaka Industries had already shown a weakening trend (see Visaka Industries: Poor Q1 FY 2011 results but holds promise!). Visaka Industries continued this in Q2 FY 2011. Visaka Industries‘ sales increased from Rs. 120 crores in Q2 FY 2010 to Rs. 134 crores in Q2 FY 2011. However, Visaka Industries‘ EBIDTA plummeted to Rs. 16.18 crores from Rs. 24.01 crores in Q2 FY 2010. Visaka Industries‘ Net Profit fell 37% from Rs. 10.78 crores to Rs. 6.77 crores (see Visaka Industries Q2 FY 2011 & Rakesh Jhunjhunwala).
Visaka Industries‘ results were not impressive even on a Q-on-Q basis. In Q1 FY 2011, Visaka Industries‘ sales were higher at Rs. 187.44 crores while the Net Profit was Rs. 20.70 crores.
Visaka Industries was chilling proof of the fact that a share need not go up only because the great Rakesh Jhunjhunwala has bought into it! Well, Who Knew?
Now, CRISIL has come to Rakesh Jhunjhunwala‘s rescue and issued a research report dated 18.1.2011 in which CRISIL has assigned Visaka Industries a fundamental grade of 3/5 and a valuation grade of 5/5. In what will certainly bring a smile to Rakesh Jhunjhunwala‘s lips, CRISIL has said that Visaka Industries has “strong upside” from the current level of Rs. 119.
CRISIL has said:
“Valuations – the market price has ‘strong upside’ from current levels
CRISIL Equities has used the discounted cash flow method to value Visaka and arrived at a fair value of Rs 151 per share. The stock is currently trading at Rs 119 per share. The fair value implies P/E multiples of 4.7x FY12 EPS of Rs 31.9 and 4.2x FY13 EPS of Rs 35.6. We initiate coverage on Visaka with a valuation grade of ‘5/5’.”
Of course, the great Rakesh Jhunjhunwala does not need any endorsement of his stock pick from CRISIL but lesser mortals would certainly be encouraged by the fact that their investment in Visaka Industries has a good chance of earning a reasonable return if not of becoming a multi-bagger!
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