We recommended Banco Products in May'14 at the price of Rs. 81. At the current market price of Rs. 160, Banco Products has delivered 100% returns since our first recommendation. At this stage, we recommend to book partial profits in this stock.

Our investment premise was based on the company's strong domestic business, potential turnaround in its European business and possibility of becoming debt-free post the sale of its stake in Lake Cement. We are yet to get a confirmation on the turn-around in the European business and utilization of the proceeds from the sale of Lake Cement towards debt repayment. We expect to get more clarity post its AGM later this month.

Our partial profit booking call is based on our assessment that P/E ratio of 14x FY14 earnings is no longer cheap (7x at the time of recommendation). Recovery in the automobile and commercial vehicle sector could remain slow and results may disappoint, thus reducing the margin of safety at high P/E levels. We will revise our target price higher (from existing Rs. 150) if we get positive signals from the AGM.

We recommend PARTIAL PROFIT BOOKING at Rs. 160 with gains of 100% in four months.

 

 

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