Update on Sanwaria Agro. Results to be out tomorrow. We are positive.
Stock had posted good numbers last quarter that triggered a multi-bagger rally from 7 to 30.
Since it does low margin business and has debt to equity above 2.44, it makes it a risky investment.
Last quarter the EPS was .29 and stock is trading at 25x annualised last quarterly EPS.
The stock can quote any EPS between .14 to .60 tomorrow. Which makes the target fair price very risky between 14 to 60 considering PE to remain at 25x.
The risk to reward ratio is at 1:2 with a risk of 50% and a reward of 100%.
We are expecting a better results with closer to .45 to .60 EPS. Which makes our target price 45 to 60.
Being a risky investment with risk at 50%, we recommend investors to reduce allocation to less than 5% of their portfolio.
Earlier call on Sanwaria: