Motilal sees 23% upside in Everest Kanto; target Rs 279

MUMBAI: Motilal Oswal has put a ‘buy’ call on Everest Kanto Ltd with a price target of Rs 279. The brokerage has valued the stock 20 times 2008-09 (Apr-Mar) estimate to arrive at the target price.

At current levels, the stock is trading 23.6 times 2007-08 estimate and 16.2 times 2008-09 estimate, the brokerage says in a Sep 6 report.

Everest Kanto is expected to see 43 per cent compounded annual growth rate in revenue and 42 per cent growth in profit after tax through 2009-2010.

The earnings per share on CAGR basis is seen slightly lower at 40 per cent due to 5 per cent equity dilution.

The company's scalable, de-risked business model coupled with high earnings visibility rule out any significant valuation de-rating.

“We believe our estimates are fairly conservative and there is room for positive surprises. For instance, the company expects to commission its first China unit in December 2007. However, we have considered commercial production only in April 2008. Likewise, economies of scale could lead to upside in our margin assumptions,” the Motilal Oswal report says.

At 12:19 pm on BSE, the Everest Kanto share was at Rs 234.50, up 0.32 per cent from Tuesday.