Multibagger ideas: Tulsian bets on Piramal Glass, Gabriel

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Multibagger ideas: Tulsian bets on Piramal Glass, Gabriel

SP Tulsian, sptulsian.com is bullish on Piramal Glass, Gabriel, Empee Distilleries.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Buy frontline stocks, says Tulsian See profit booking in Rel Capital: Tulsian 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 Piramal Glass BSE | NSE 01/06/12 Are Mutual Funds betting on Piramal Glass? Other Stocks in this news Gabriel India | Empee Distilleries | Reliance Capital | Reliance Communications | Reliance Infrastructure | United Phosphorous | Hindalco Industries | National Aluminium Company |

SP Tulsian, sptulsian.com is bullish on Piramal Glass , Gabriel , Empee Distilleries .

Also read: Forget Nifty, focus on select midcaps, largecaps, says Quantum

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

Q: Piramal Glass, what is the story with that one?

A: If you see in FY09, the company had posted a net loss of over Rs 100 crore, precisely it was Rs 107 crore. Then in FY10 they posted a meager net profit of about Rs 3 crore. Now, if you go by the financial performance of first nine months, the profit after tax (PAT) has already been posted by the company of Rs 60 crore.

Its overseas subsidiaries in US and Sri Lanka have started contributing to the bottom-line of the company. Earlier the Sri Lankan subsidiary was a drain on the bottom-line of the company. The US company was acquired by Piramal Glass couple of years back and it has also stabilised.

Post rights issue, the company has been able to deleverage their balance sheet. Now, it seems that with the debt/equity ratio of close to one-to-one, promoter stake of 73%, with pedigree of Piramal Group, the company is back on track. One can comfortably say that for FY11 the earning per share (EPS) is likely to be more than Rs 10.

For FY12, infact the EPS could jump to about Rs 14-15. If you go by the present market price on a forward earning at 6-7 P/E multiple, market is finding this stock quite interesting. That is the reason for having positive view.

Q: What about Gabriel, you have chosen that stock as well from the midcap space?

A: This company is into the shock absorber and making the front forks for the cars, for SUV, for commercial vehicles, for two-wheeler. The company has six plants in the country and has a technical collaboration with the Japanese company. Recently with the problems, which we are seeing in Japan, it is likely that this company will be used by the Japanese technical collaborator as an export hub. Probably it will cater more to the European market.

If you see the financial performance, there was a slight drop in the bottom-line, maybe to the extent of about 10%. In FY10, it has posted an EPS of close to about Rs 4. FY11 is going to see an EPS of close to about Rs 4 with top-line of Rs 1,000 crore. In FY12, this will be used as an export hub by the technical collaborator. The kind of growth we are seeing expected to see in the auto sector since they cater to all these actions two-wheeler, four-wheeler commercial vehicle, the pricing power is likely to come back to the company.

Five-six months back, the share has moved to about more than Rs 65. So, maybe with better financial indications coming in from one quarter, share could easily move back to Rs 55-56, maybe in next four-six months time.

Q: You have also picked a small distillery stock today, Empee Distilleries. What is the story there?

A: Yesterday, we have seen huge volume in the stock, about maybe over two lakh shares. Generally, this stock has an average volume of about 5,000-7,000 shares daily. If you go by their core business model, they have their presence in four southern states. Earlier they were operating only in Tamil Nadu and Kerala, but last year maybe from April 2010, they have completed their distillery production in Karnataka as well as in Andhra Pradesh. If you see, there is entry barrier in all these four states because state is the distributor. Even if you have your distillery and if you do not get the supply order from the government, you will not be able to do anything.

The company in the current financial year has been focusing more on increasing their bottom-line and keeping their top-line stagnant by moving into the higher brand and moving into the higher margin products.

The reason for sudden, huge volume yesterday in the stock is that the company has its land, the realty development project in Sriperumbudur and it is likely to book a profit of about Rs 100 crore in next six-eight months time. The project is on the completion stage and they are going to book the profit from that project and that can give a cash flow of about Rs 100 crore to the company.

The present marketcap of a company is close to Rs 200 crore with a book value of Rs 125. The share is ruling below book value. Even if you take the EPS for current year, it is likely to be Rs 11. For next year, for FY12-FY13, the EPS is likely to be Rs 12.50-13.

So, the distillery shares are ruling at about P/E multiple of 7, maybe with a price to book of 0.8-0.9 on a forward earnings. All this and the recent interest, which we have seen in the stock, probably can take the share price to move to about Rs 140-150 in next two-three months time.