Every investor in stocks is on the lookout for that one elusive multibagger which could transform their portfolio returns for the better. Here we present one research report from HDFC Securities where the potential upside for the researched stock is still more than 100%. Please go through the article and the video below and decide whether investment in this stock is something you would be willing to consider.

Here are some excerpts from the HDFC Securities Research Report

Company Description:

Binani Industries Ltd. is a debt-laden conglomerate having operations, through its subsidiaries, in the cement, fiberglass, EPC, energy, etc. segments. Currently with four major operational business segments, company runs its operations across various countries in Asia and Europe. Company’s most attractive assets include the cement (India) and Fibreglass (Belgium & Norway).

Investment Rationale:

  • Value unlocking of attractive cement manufacturing assets is likely under IBC proceedings.
  • Company’s fiberglass business to continue to impress at the operational levels.
  • Any haircut taken by banks for settlement of loans to Cement subsidiary to lead to hefty value accretion.

Concerns:

  • High risk w.r.t. timing and the result of the insolvency proceedings of subsidiary - Binani Cements.
  • Pending insolvency proceedings on Binani Industries is an overhang.
  • Structure of resolution uncertain under the IBC proceedings.
  • High corporate guarantees and contingent liabilities due to state governments in both BCL & BIL.

View and Valuation:

BIL has been overburdened with debts it had taken to finance its ambitious ventures in multiple industries. Over the past few years, with a Chinese regulatory hurdle and Indian infra spend slowdown, BIL’s major subsidiary, BCL underwent serious financial stress and ultimately defaulted. BCL is right now under Corporate Insolvency Resolution Process (CIRP) and the cement assets are reportedly being bid for by more than 15 interested parties on account of its attractive asset base. We expect a good value unlocking for the shareholders of BIL which is the holding company of BCL by sale of said business. With cement demand yet to pick up and subdued profitability, cement firms are opting for inorganic growth or brownfield expansion as it is both time and cost efficient. From FY14 onwards till Aug 2017, capacity worth 59 million tonne per annum (mtpa) (13% of FY17 capacity) changed hands in the Indian cement industry. BIL’s market value which was beaten down due to multiple shocks faced by it financially leave an opportunity for upside through above expected sale transaction. Also, company has two other subsidiaries which it can operate in a more efficient manner once the consolidated debt burden of company is brought down and all the litigation is done away with. Small equity base of just 3.14 cr shares brings possibility of outsized returns if all goes well.

We feel risk bearing investors could buy the stock at the CMP and add on dips to Rs.87 -91 band for sequential targets of Rs.136, Rs.203 & Rs.269 over the next 4-6 quarters with a stop loss of Rs.77.

Please watch this video to know more

Please remember investing is extremely risky and factors in a very high risk of capital erosion. Please exercise extreme caution while dealing in risk based assets.

HDFC Securities Research Report can be found here.

Standard Disclaimer :: The information in this article has been compiled from freely available information on the internet. None of the stocks mentioned here should be considered as recommendations to buy and one must consult their financial advisor prior to acting on any of the information presented herewith. The author does not hold stake in any of the stocks discussed.

Arbind Kumar Roy

About Arbind Kumar Roy

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