Multibagger picks: Tulsian bets on Vesuvius, Voith Paper

282 Investors following Voith Paper Fab. Share this News with them.

0

Like this story, share it with millions of investors on M3

Multibagger picks: Tulsian bets on Vesuvius, Voith Paper

SP Tulsian of sptulsian.com selects Vesuvius India and Voith Paper as multibagger stock picks for the day.

Post your opinion here

 

0

Tweet

Share on Tumblr

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 of sptulsian.com selects Vesuvius India and Voith Paper as multibagger stock picks for the day.

"The September quarter of Vesuvius has been on the rising trend. The company has been able to maintain its PAT margin at 10.5%. Its networth stands at Rs 200 crore. It is expected to post an EPS of Rs 32 next year, one can expect the stock to touch Rs 500 in the six-eigth months, Tulsian said.

"Voith Paper is a small cap company. The financial performance of the company has been consistent. The company has a cash balance of Rs 150 per share in its books. The company is seen posting an EPS of Rs 30 for September 2012. Price of Rs 320-330 is seen on this stock in six to eight months," he added.

Below is the edited transcript of Tulsian's interview to CNBC-TV18. Also watch the accompanying video.

On Vesuvius India 

Vesuvius India makes high performance specialty refractory products. The company has already announced results for September quarter. The results have been more or less on rising trend. In calendar year 2010 they had a top line of Rs 445 crore. They have been achieving a net profit margin of close to 10.5-11%. For first nine months also the same trend is seen in its performance. The PAT margin is maintained at 10.65%.

The best part is that company is improving top-line. We have already seen 20% growth on a comparable basis for nine months. This has resulted into a top-line of close to Rs 395 crore for first nine months of the calendar year 2011 against Rs 445 crore of calendar year 2010. That translates into an EPS of about Rs 25-26 because Rs 20.50 has been the EPS for first nine months. If one translates that, it rules at a PE multiple of Rs 14.

Traditionally, for the last five years Vesuvius has been ruling at a PE multiple of about 16 to 20 because of their quality and parentage. Vesuvius of UK holds about 56% stake, institutional investors and HNIs hold around 30% stake in the company. The networth of the company comes close to Rs 300 crore, book value of share is at Rs 150. So it is ruling at a price to book of 2.5.

Considering all this, I find this stock quite interesting. I am not playing out on delisting move which cropped a couple of years back. Purely on fundamental basis considering an EPS close to about Rs 26-27 for current year (2011) and next year they should be able to post an EPS of Rs 32. This is a very consistent stock. One can expect a price of Rs 500 in six to eight months time.

On Voith Paper

This is a very interesting play, it is a very smallcap company. They are country's largest makers of entire range of paper machine clothing used in paper, paper board makers, fibres and cement plant. The financial performance of this company has been consistent. They end their financial year in September, 2011.

They had a top line of close to Rs 56 crore but PAT margin has been close to 20-21% which has resulted into very good performance. The best part is that it is 74 subsidiary of Germany company. The company is sitting on a cash balance of Rs 150 per share in the books. They have been consistently improving their performance and profit margins.

Talking the year ended September 2012, they should be able to post an EPS of about Rs 30 for the current year. So that would make the share rule at a PE multiple of about 7-8. If one knocks off the cash balance lying in their books, one can say that the core business is available at a PE multiple of less than 3-4.

Whenever one sees stock hitting a life time high that stock comes into a new orbit. Same thing has happened here. It is not widely discussed stock and it made a 52 week high at about Rs 272 when results were announced. This is gradually coming into the shopping list of the value investor. If one can keep a view of about six to eight months, he can expect a price of about Rs 320-330.

Disclosure: I have no personal holdings in the stocks discussed.