Stock Review: Fedders Lloyd

The company is providing turnkey air-conditioning solutions to defence, railway and commercial clients. They also are selling air conditioners. This company's ending is June. If we see their first six months' performance till December 2010, the company has posted an EPS of close to Rs 7.20 on topline of about Rs 360 crore.

 

The second half of the air conditioner makers are always better. Considering that, they are likely to post an EPS of close to about Rs 16 for year end June 30, 2011. This will translate into PE multiple of about five times.

 

If we compare it with Blue Star, Voltas or Hitachi Home Appliances, the share is quite under valued. In the past about six-eight months back, we have seen renewed interest coming back in this stock. The profit booking has brought down the share to these levels.

 

At an EPS of Rs 16 with PE multiple of less than 5 and growth in place, it is likely to be seen for the next three years from the company to the extent of about 22-25% on topline and bottomline. I see very limited risk downside. On the upside, it can give a return of 50% in eight-twelve months.