Angel Broking
Disa India (Buy)
CMP: Rs 2,750
Target: Rs 3,353
Disa India (Disa), an 86.5 per cent subsidiary of Disa Holding AG, is a market leader in manufacturing modern foundry equipment with a 70 per cent market share in India. According to the June 2010 amendment of Securities Contract (Regulations) Act, all listed companies should have a minimum of 25 per cent public shareholding by June 2013. Since the promoters’ stake in Disa is at 86.5 per cent, we believe that the company may opt for delisting rather than diluting its stake considering the company has tried delisting in the past. If the delisting doesn’t get through, still the stock is trading at an attractive valuation of 12.8x its CY2013E EPS, owing to the company’s collaboration with Wheelabrator’s technologies, continuous expansion and improving order book. We expect Disa to post a modest 14.8 per cent and 15.6 per cent CAGR in its revenue and profit, respectively, over CY2011-13E. Disa’s debt-free position and cash reserves indicate its strength in situation of worsening economic environment.