Investment Prospect: Agri auto Industries

I am thinking to buy an investment in Agriauto Ltd. at current levels. I already have some of its shares in my investment portfolio but I believe the stock still has potential. The stock is currently trading at Rs70 and had earnings of Rs7 per share during the half year. Since second half of a fiscal year is better for auto industry owing to farmer income cycle, I expect the company to post earnings of Rs16 per share. Note that the ownership has changed from Habib Group to Al Fataim Group. Al Fataim Group is known for its higher dividend payouts. So if the stock starts paying higher payout, I think the market will re-rate the stock from a PE of 5 to PE of 6 or 7.

One small risk is the selling out of Habib Macro which the company holds at Rs8.2 per share. As per market discussions, Habib Macro will be sold at book value which is around Rs7 per share. This makes up a loss of Rs34mn. This is a small impact but even if I become conservative, I can say that the earnings will be around Rs15 per share. If I assign PE of 6 or 7, the stock should appreciate to Rs90 or Rs 105 per share.
Historically the stock has traded around Rs140 per share as well.

I have been observing past performance which indicates that the stock has been passing on the impact of rising raw material prices to the customers effectively. Sales of Corolla have jumped by 34% in this quarter and is expected to increase further owing to the agricultural income cycle. Tractor sales is on the higher side and will increase in next quarter as well. My vision is bullish about the stock. The float of this stock investment is small so I am looking for a better buying opportunity, which is a better rate!

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