>Bombay Dyeing (ANGEL BROKING)

Bombay Dyeing (BD) in its attempt to prune operational costs has shifted its Home Textile operations from Mumbai to Ranjangaon and Patalganga. Post this shifting, the company proposes to capitalise on its prime land thus available. We believe its foray into the Real Estate business will drive its future revenues. BD has also forward integrated into polyester staple fibre (PSF) by setting up a plant of 1,65,000 tonnes capacity. In CY2008, the company's business was adversely affected by rising crude prices and its inability to pass on the same. However, now with crude correcting, its PSF plant fully operational and decent performance by its Real Estate Division, BD is a good bet at current valuations.

* Good play on Mumbai's Real Estate Sector: BD has a huge land bank at the prime locations of Worli (20 acres) and Dadar (40 acres) in Mumbai, which is being developed. We have valued BD's existing Real Estate business at Rs196/share on NAV basis. We have assumed that the projects would be completed over the next six-seven years as against our earlier estimate of four years and management's estimate of two-three years in wake of current slowdown in the Real Estate sector. Nonethless, we believe that BD is a safe bet on Mumbai's Real Estate Sector.

* Textile Business to turn-around: BD has shifted two of its textile mills out of Mumbai to Ranjangaon and Patalganga as part of its restructuring exercise, consolidate its manufacturing facilities and prune operational costs. Post shifting of these textile mills, BD proposes to exploit the land thus available at prime locations in Mumbai. We have valued the company's Textile business at 3x FY2010E EV/EBIDTA translating into Rs34/share.

* Maintain a Buy… 1.We see underlying value in BD's assets and believe that these would be Earnings accretive in the long run. 2. We believe Mumbai is one of the better Real Estate markets in the country, and if there is any revival in the Sector it would first happen in Mumbai. 3. BD is placed in an advantageous position as it has historically owned land.

To see full report: Bombay Dyeing