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HDFC Securities
Bodal Chemicals
(Risk averse exit)
CMP: ₹36.75
Target: N.A.
Based on the fresh conservative estimates, Bodal Chemicals could clock EPS of ₹9.2 and ₹6.5 in FY15 and FY16 respectively. At the CMP of ₹36.75 the stock quotes at a FY16 P/E of 5.6x which is not expensive. However, when the earnings are expected to be on a sharp downhill, the P/E for commodity companies could be as small as 3-4x especially when one of the promoters is selling his shares even at lower levels.
Investors who have invested based on our recommendation (average purchase price ₹47.65) can exit at the CMP to ₹36.2, if they do not wish to see further price fall. There is a probability that the share price could fall to ₹27-28 and then bounce up at the time of Q2FY15 results, but the extent of bounce at that time is uncertain. Long-term investors who are not shaken by short-term volatility can buy/add on sharp dips (between ₹24 and 28) for exiting in sharp bounces later over 3-4 quarters as the current negatives would have been played out by then.
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