Vijay Kedia, the ace stock picker, once famously remarked “The worst time in the market is the best time for investment”. Vijay Kedia is talking from experience. During the great sub-prime crises of 2008, he bought truckloads of stocks like Atul Auto and Cera Sanitaryware at throwaway prices and went on to make a massive fortune out of them.
Nobody understands the mechanics of JB Chemicals better than Daljeet Kohli. He first homed in on the stock in October 2013 when it was languishing at Rs. 94. At the CMP of Rs. 202 there is a 100%+ gain from the stock in about 14 months. The journey has been rocky but Daljeet has held our hands throughout, guiding us to buy whenever the scenario looked bleak.
Daljeet’s latest update is on the same lines. Let’s pay attention:
“Currency devaluation may put pressure on Russia business; however, maintain BUY on valuation
JB Chemicals and Pharmaceuticals (JBCL) derives 5-6% of total sales from Russia market. Given the political turmoil, JBCL has been cautious in getting business from Russia market, which led to de-growth in sales from this market in past two quarters.
Currency devaluation added further woes to this business. However, given the volatility in exchange rates, determining the adverse impact would depend on actual realization, assuming no hedging by JBCL. Assuming Ruble INR rate remaining at similar levels, FY16E sales may get adversely impacted by 4% and EPS may get adversely impacted by 3%.
The stock has already corrected by 8% in past one month and we believe that CMP factors the adverse impact fully, assuming Ruble INR rate to remain at similar levels for next two years. At current market price of Rs201, the stock is trading at 11.2x FY15E EPS of Rs18 and 9.8x FY16E EPS of Rs21. The capex program is on track, allaying major concern of investors about usage of cash on books for capex worth Rs1.4bn. We expect sales as well as profitability to grow at higher rate once, this project is commissioned, which could be the trigger for re-rating of JBCP. We continue to value JBCL at 14xFY16 earnings to arrive at target price of Rs295 and maintain BUY on the stock.”
We must also bear in mind that whiz-kids Ashish Dhawan and Ashish Kacholia are sitting pretty in the stock with huge holdings. Sharekhan and Sunidhi Securities have also foreseen a target price of Rs. 250 for the stock (in their reports of August 2014).
Now, the ball is in your court to take an informed decision in the matter.