Buy Kalyani Steel for 50% gains in 6 months: Anand Rathi

MUMBAI: Anand Rathi has recommended investors to buy Kalyani Steel as the scrip is expected to surge 50 per cent in next 6 months.

“The recovery of Auto, Auto ancilliary & forging sector, to boost the demand for Kalyani Steel's products, which in turn will push utilisation levels and sales as well as profit margins. Improvement is visible in current year's working. Still this year may be the year of consolidation and next year growth will be more remarkable, particularly on margin front, which will boost the sales & profits significantly.

The immediate value un-locking for stock will happen due to de-merger of its investments held directly as well as in subsidiaries worth much more then its present market cap. Against present market cap of Rs 900 crore, value of investments alone is around Rs 1200 crore.

Looking to better core business outlook for FY 10-11 as well as immediate value unlocking due to de-merger of investments in to a separate company - Kalyani Investments [share holders will get 1 share of Kalyani investment for 10 shares of Kalyani steel]; the scope for appreciation is significant. On combined valuation basis, we expect a 50% appreciation in next 6 months. Buy,” the report said.