AnandRathi's Quick Pick: Rayban Sunoptics

MUMBAI: Rayban Sunoptics reported very good results for the September quarter and will do still better in coming quarters. It’s a cash-rich company with liquid funds of over Rs 70 crore (= Rs 28 per share) as of FY 2006, and zero debts. Excluding cash, share is available at Rs 61 only, which discounts Dec 2008 estimated earnings by just over 5 times. This looks very attractive for a life style brand MNC company. One can ‘Buy’ for medium to long term around current prices for decent appreciation, says brokerage AnandRathi.

COMPANY

The company is a 44 per cent subsidiary of Luxottica, Italy. The 4.3 billion euro Luxottica group is the world’s leading designer, manufacturer and distributor of prescription frames and sunglasses in the premium and luxury segment. The Indian eyewear market is estimated to be more than Rs 200 crore, and Rayban enjoys a near 50 per cent share of the organised market.

Early this year, Luxottica and Ray Ban Indian Holdings made an open offer for 7,545,200 shares, representing 30.82 per cent, in the company at Rs 104.30 per share. The open offer was revised upward from 4,895,900 shares, or 20 per cent. The offer price for continuing shareholders was Rs 185.25 per share (comprising offer price of Rs 104.30 and interest of Rs 80.95).

TECHNICAL TREND

After the open offer, the stock price zoomed to Rs 126 in May, but thereafter underwent a correction, and touched lows of Rs 73. Since then it’s forming higher bottoms and now is close to third subsequent higher bottom cluster of Rs 86-90. There is strong trendline support around this level and if it takes support at this level, then in next move first target will be Rs 125 and after decisive closing and maintaining above this, it can even touch Rs 165. Buy with stop loss of Rs 85, AnandRathi recommends.