Jan 07, 2011, 04.15 PM IST | Source: CNBC-TV18

Check out: SP Tulsian's multibagger stock ideas for 2011

In an interview with CNBC-TV18, SP Tulsian, sptulsian.com, gives his multibagger stock ideas for 2011.

In an interview with CNBC-TV18, SP Tulsian, sptulsian.com, gives his multibagger stock ideas for 2011.

He is bullish on Binani Industries , JP Infratech , Kansai Nerolac and First Leasing .

Tulsian is positive on Power Grid in the long-term. However, he is cautious on Suzlon Energy , Praj Industries and Core Projects .

Below is a verbatim transcript of his interview with CNBC-TV18's Latha Venkatesh and Sonia Shenoy. Also watch the accompanying videos.

Q: Let us start off with Binani Industries, that stock has been on a roll offlate, the last two-three trading sessions have been very smart, what is the story there?

A: There is interesting story developing in this stock. I have covered this stock earlier when it was ruling at around Rs 140. Since then we have seen it moving to Rs 240 and then the market carnage has brought it down to about Rs 165-170 levels. As you have rightly said in last couple of days, we have seen it moving by about Rs 50-60. This is the behaviour, these kind of stocks show, that if you have the conviction that the fundamentals are intact, which I have in this stock, then you see this kind of upmove coming in.

Let us come on the story, the company is now presently holding 70% stake in Binani Cement . Binani Cement is having present capacity of close to about 9 million tonne and they are expanding this capacity to 15 million tonne, which will get completed in year 2011, maybe in the next 12 months. So, they will be having the geographical presence capacity of close to about 10 million tonne in India and the balance 5 million tonne will be spread in Mauritius, China. So, they will be having the global presence.

Now, if you see the Binani Group, they have been very conservative. Apart from that, they have recently initiated a move to delist Binani Cement. As I said, the Binani Industries is already holding 70% in Binani Cement and the promoter i.e. Binani Industries has initiated a move to delist the shares of Binani Cement. If you see the shareholding pattern of Binani Cement, about 24-25% stakes are held by four-five institutional investors. So, I dont think that delisting should be a problem by the company in mopping up all the shares at about Rs 100 per share. So, I am presuming that Binani Industries will be able to delist the Binani Cement. They will be having the effective control of the company with the stake of close to about 95%. The next logical move on part of the promoter would be to sell the cement division because we have seen that companies, which have a capacity of more than 10 million tonne, can fetch very good valuations close to about USD 170-175 per tonne. We only have three-four companies in this space, I am not talking of the larger ones like Shree Cement, India Cement, Madras Cement and the fourth could be the Binani. So, I am taking a call that ultimate intention of the promoter would be to delist Binani Cement, acquire the control of the company by having 95% stake and then go for the sell of the cement division.

If all these things happen, the present enterprise value of the company, Binani Industries, post delisting will be close to about Rs 2,500-2,600 crore. If they initiate this sale of 15 million tonne and if I calculate the USD 175 only for 9 million tonne, they can fetch about Rs 8,500 crore. So, there is huge value upside seen in the stock. I attribute a value of, even if they go for part equity dilution and all that, share has the potential to move to about Rs 800-1,000. Now, it is ruling at around maybe Rs 220-230. But let us not take such a optimistic call and even if the company acquires and it becomes the 95% owner of this Binani Cements then also the share is seen to have huge value. I am taking a call of about Rs 400 atleast in the year 2011.

Q: JP is the other stock you have picked up, JP Infratech, it has seen a fairly decent bump up in the last three weeks itself, it is about 20-25% gain in just three weeks. How much of a multibagger in 2011?

A: This company is implementing 165 kilometer six-lane expressway. But along with that they have the 6,175 acres of land available for development which translates maybe 400 million of sq ft. Now, two news are coming in this stock are that the company is ahead of the completion of this expressway, the deadline for completion is April 2013. But part of this expressway will get commissioned maybe in the month of April 2011. Post that, maybe by end of 2011, maybe by December 2011, we will be seeing the complete starting of this 165 kilometer of expressway patch because even the F1 track is coming in that area which is also likely to get completed by October 11. So, this is one trigger.

Second, we have seen company prepaying part of the debt, which they have availed for the completion of this loan, i.e. largely because of the sell of the premises. Presently company is only developing the first pocket which they are holding at Greater Noida of about 1,200 acres. For FY11, the company is likely to make a net profit of about Rs 2,000 crore which will translate into EPS of about Rs 15. But since that is not the trigger here, the amount which they are mobilising by this development of properties getting used for repayment of the loan, so maybe because company is entitled for 80I income tax benefit, so all their profits are tax free for next ten years. Company maybe next two-three years will try to accelerate the process of development of this land and then mobilise a huge chunk of money. I wont be surprised to see a mobilisation of close to about Rs 10,000 crore as cash flow from development of property by the company in next three-four years because the entire sale proceed is not getting booked into accounts because of the project completion method.

So, taking all this into consideration the completion of the expressway ahead of schedule with concession period of 36 years and the development of the real estate, which they have acquired again at the acquisition cost by the authority and the entire land is in their possession, the entire land is 98-99% paid. So, taking all this into consideration, this is a very excellent play on infrastructure as well as on the realty. Again realty cost, they have not acquired the land at a very high price and share is now available maybe 30% cheaper than the issue price which the company has made last year. So, taking this into account, I think that share is capable to give a return of about 40-50% in 2011 from the current levels.

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