Stock Review: Surya Roshni

Surya Roshni is our pick because of its marketcap to sales ratio. We gave a similar recommendation for Atlas Cycles . It gave almost 80-100% return in no time. I don't think Surya Roshni will have the same fortune as Atlas Cycle but the downside from here on is locked.

Technically, the stock is into disastrous selling mode breaching all its support levels. But, the promoters of the company have converted warrants even at Rs 111 level. This triggered and open offer at Rs 111 where only 6% of 20% got subscribed. This means people were not willing to sell even at Rs 111. This may be because of  their real estate story.

They have land bank in BahadurGargh which the management wanted to monetise it sometime back, but nothing happened. The promoters converted their warrants into equity. So, there might be a catch that this particular land bank can fetch them much more than their conversion price.

In terms of current valuation, the company is expected to do a sales of Rs 3300 crore and market cap of Rs 277 crore on the conservative side. Even if they do 2% net profit margin and there is no sign of improvement going forward, they will still their consolidated PAT would come around Rs 65-70 crore. That would mean a PE of less than 5.5 times going forward.

Thirdly, what has to see what happens once this particular land bank story materialises. Taking a quant call, the stock has always been a performer near Diwali time. It peaks out for the year at that time. So, if someone wants to invest 500 shares, he can easily bookout 200-250 shares somewhere near Diwali. I am expecting a price of close to Rs 85 levels during that time and forget the rest from a longer-term perspective.

This stock will hog limelight and is a good stock in terms of dividend history. They haven't missed a single dividend for the last 21 years. The technicals are pointing out, the downside risk is around Rs 57-58 levels. The stock will bottom out very soon.