Buy Kesoram Industries, target Rs 200: Rajesh Agarwal

Rajesh Agarwal of AUM Capital has buy call on Axis Bank at a target Rs 200. Kesoram Industries is a BK Birla Group company and is engaged in the manufacturing of tyre, tubes and cement. This company has six cement manufacturing units having a total capacity of around 7.25 million tonnes per annum. Last year the company has sold a part of its tyre unit, not the entire tyre unit as such, a part of it to JK Tyres for a compensation of around 2145 crores and it has divested some of its non-core investments and issued some amount to its promoters also and the entire proceeds from all these activities have been done to repay some of the debts which has come down to around Rs 2900 crore from Rs 5350 crore.

That is clearly saving of around 300 crores on the interest cost. Going forward with government’s focus on infrastructure and affordable housing, we think that the cement unit is going to do well apart from which the traction in auto sector is going to help in tyre division. Both their brands Birla Tyres in the tyre division and Birla Shakti in the cement divisions are well recognised brands in the sector and we think we the savings in the interest cost and not to forget Axis Bank has even restructured the loan given to them with a sort of moratorium which is again going to increase the liquidity. The savings on the interest cost and the improvement in the liquidity is going to help this company do very well in the long term. For a very short to medium term, we have a target of Rs 200, maybe next two to three quarters this target can be achieved.