Visit http://indiaer.blogspot.com/ for complete details Bombay Dyeing – Quick take
We believe that Bombay Dyeing (BD) monetising its legacy land bank in a timely manner
will be a key trigger for its stock performance. Moreover, ongoing recovery in its
manufacturing (textile and polyester units) business will act as an additional catalyst for the
stock. BD intends to develop 9.0msf of saleable area (1.0msf already developed) on its
historical mill land located in Central Mumbai over the next 8–10 years. For the
manufacturing business, the company has undertaken cost-reduction measures and
launched new products to turn profitable. Consequently, EBIT loss was lower for the textile
division at `14.4cr in 1HFY2011 v/s `22.3cr in 1HFY2010, while the polyester division
reported profit of `9.1cr in 1HFY2011 v/s loss of `39.6cr in 1HFY2010. The promoters
recently issued 4mn warrants at `527.83/share, which will increase their stake from 47.8%
to 52.7% post conversion. We have valued the real estate business at `940/share and the
manufacturing business at 0.5x of its asset value fetching `112/share. Hence,
we recommend a Buy rating on the stock with a Target Price of `894/share (implying 43%
upside from the current level), which is at 15% discount to our NAV..
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