Bullish on Ester Industries, Man Industries: SP Tulsian

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Bullish on Ester Industries, Man Industries: SP Tulsian

SP Tulsian, sptulsian.com is bullish on Ester Industries, Man Industries and Lakshmi Vilas Bank.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets

SP Tulsian, sptulsian.com is bullish on Ester Industries , Man Industries and Lakshmi Vilas Bank .

Below is a verbatim transcript of his exclusive interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: Your first pick is Ester Industries, what is the story there?

A: Ester Industries has posted very good results for Q3. The company makes polyester chips and the packaging film. The company has recently increased its metalising plant as well as the BoPET film making capacity by over two times. The production at the expanded capacity has already commenced.

If you see Q3 performance, the top-line is close to about Rs 200 crore, while the bottom-line has been at about Rs 55 crore, which is translating into a net profit margin of over 27-28%. This translates into an earning per share (EPS) of about Rs 8.50. FY11 performance is likely to have a top-line of close to about Rs 720 crore with EPS of close to about Rs 25.

If we go by the present market price, the share is ruling virtually at a PE multiple of two-and-a-half times. The expanded capacity will help the company in showing better results in FY12, on top-line as well as a bottom-line. I wouldn't be surprised to see an EPS of over Rs 30-32 for FY12.

So, if somebody can keep a view of about maybe six-eight months time, I won't be surprised to see the share going up 60-70%. Infact this is found to be the cheapest, when compared to the other peers available in the sector. So, I am quite positive on the stock.

Q: The next one you picked out is Man Industries, what is the story there?

A: Man Industries makes large dia carbon lined pipe lines which are used for high pressure sectors like oil, gas, petrochemical and water. This is a Rs 1,500 crore top-line company. If we take the financial performance of nine months and if we extrapolate the same trend, the company should be able to post a top-line of close to Rs 1,500 crore with EPS of about Rs 25 and cash EPS of close to about Rs 36-37. The present book value of the share is about Rs 100.

The company had some issues, differences between the promoters and operational difficulty. But all this seems to have sorted out. Going ahead, the company is quite confident, management is quite confident. If we go by the financials, share is available at a PE of less than three with a price to book of maybe about 0.7 times. The kind of growth, which we are expecting in the sector with the huge pipeline network being laid for the oil and gas sector as well as the water pipeline, the company has very good potential. I expect that share can breach three-digit mark maybe in next eight-ten months time. It is likely to be a consistent stock having very limited downside risk from here on.

Q: Some banks have started doing well over the last few days, in the midcap banking space, you have picked Lakshmi Vilas Bank, why do you like it?

A: Lakshmi Vilas Bank looks a good bank amongst the private sector. This bank is having about 273 branches in 16 states with focus largely on the southern part of India. If you go by the financial performance for FY10 because of the larger provisioning of the bad loans, the bank had posted an EPS of less than Rs 5. But if we go by the present nine months financial performance, the EPS stood at Rs 7.55.

There has been sharp improvement in the recovery of the non-performing asset (NPA). The net NPA, which was over 4% as on March 2010, has reduced to about 2% as on December 2010.The bank's focus has been on providing good quality loans as well as the recovery of the loans.

The present book value of the stock is close to about Rs 85, the EPS for FY11 is likely to be over Rs 10. While FY12 is going to be very good year for the bank and it won't be surprising to see an EPS of close to about Rs 14-15, if we go buy the present financial performance. So, the stock has the capability of giving about 30-35% return in next six-eight months time.