"FAIR VALUE" OF PSO RS. 471

"FAIR VALUE" OF PSO RS. 471

Current Price: Rs.381.0

Superior dividend payout of 36% in FY08 & 62% in FY’09 is the key investment attraction for this stock. Also the scrip is trading at a low short term forward FY08 PER of 5.46x as against sector’s PER of 6.81x. Besides this, the company has the largest infrastructure & retail network of POL products with 69% of total market share. Going forward the inventory gains witnessed during the last fiscal year are likely to shrink and the profit margins will go down. Net margin of
the company in FY09 is likely to be around 2% Investors are advised to take short term exposure in the stock based on high dividend yield and low forward PER. From the current price of Rs381.0, the stock offers TSR of 27.1% (including dividend yield of 7.9%) from our target price
of Rs471 per share