May 23, 2011, 12.22 PM IST | Source: CNBC-TV18

Multibaggers: SP Tulsian's 3 picks that can fetch you money

SP Tulsian of sptulsian.com, in an interview on CNBC-TV18, spoke about his top multibagger stock ideas Lakshmi Vilas Bank, Honda SIEL Power Plants and Mayur Uniquoters.

SP Tulsian of sptulsian.com, in an interview on CNBC-TV18, spoke about his top multibagger stock ideas Lakshmi Vilas Bank , Honda SIEL Power Plants and Mayur Uniquoters .

Below is a verbatim transcript of his interview with CNBC-T V18s Mitali Mukherjee. For the complete interview watch the accompanying video.

On Lakshmi Vilas Bank:

The bank has shown a very good performance for Q4. If you take their overall FY11 performance, the bank had posted an EPS in double digits that is Rs 10 plus and their fall in the NPA was at 4% plus as of March 31, 2010 and has fallen to less than 1% to be precise at 0.91%. They have a total 273 branches with presence in 16 states. If you take the marketcap of the bank which is at Rs 440 crore that means each branch is valued at a valuation of Rs 1.5 crore.

If you see the financials or the provisioning coverage ratio which is at 77% against the stipulation of 70% and apart from improvement in working in Q4, the bank will be aggressive in opening more branches going forward. The same kind of profitability is likely to continue and I wont be surprised if I see an EPS of over Rs 12 plus for the bank in FY12. The stock looks quite good at Rs 112. I am expecting that probably it can move to about Rs 145 in the next four-six months time.

On Honda SIEL Power Plants:

Honda SIEL is a bit of a contrarian call because their Q4 performance probably may not get you too enthused. If I take an overall call, however, the company has posted an EPS of close to about Rs 30 with a topline of close to Rs 420 crore. They make Genset engines. Last year, they moved their factory from Himachal Pradesh to Greater Noida. Now they operate two plants - one at Greater Noida and the other at Pondicherry.

If you do a comparison on a YoY basis, you will find that there is a sharp jump of 100% in EPS because in FY10 their EPS was Rs 15 and in FY11 it was Rs 30. In FY10, they had taken a hit of Rs 20 core on account of exceptional item in respect to shifting their factory from Himachal Pradesh to Greater Noida.

Going forward, if you take the financials of the company, their networth of about Rs 220 crore of which Rs 120 crore is lying in the books as cash balance with the company. Honda holds a stake of about 67% in the company and they have quite aggressive business plans. Whenever we see the kind of dull results in any quarter posted by these multinational companies, you see a big dip coming into the share price.

The share is now ruling close to about Rs 400 but if somebody can keep this stock on the radar then the share may correct to about Rs 375-380 or one can start buying in a staggered manner. This is a very safe and comfortable stock and one can expect a price of Rs 550 in the next six-eight months time because I expect them to post better results in the coming two quarters. That will give a good opportunity to enter into the stock at this price.

On Mayur Uniquoters:

This is a very established company which makes synthetic leather. If you see their financials, the company has posted an EPS of close to Rs 45 for FY11 with PAT margin of close to about 10%. Presently, the company is operating with a plant capacity of 1.4 running million meters per month. Now they are raising their production capacity from 1.4 million per month to 1.9 million per month with the increased capacity operational from July.

Their topline has seen a growth of 50% in FY11. Their total income was about Rs 250 crore while the bottomline grew by about 56-57%. The best part is that they are debt free and have a cash balance of about Rs 24 crore in the books. The expansion will get implemented in this cash balance and since their EPS for FY11 is Rs 44-47, I am expecting the expansion to happen by July. That will also contribute for about eight-nine months working in FY12. One can safely assume that they should be able to post an EPS of at least Rs 60.

The product has very good demand and is supplied largely to auto seats and in furnishing. Their customers are Maruti, Honda, Hero Honda which they supply synthetic leather too. The share is viable at a PE multiple on historic earning at about 5 PE multiple. If I take the forward earnings it is ruling at 3.5-4 PE multiple and debt free status with promoter stake of 75%. This is quite a safe and good growth oriented stock. I expect a price of Rs 400 in the next six-eight months time.

Below is a verbatim transcript of his interview with CNBC-TV18s Mitali Mukherjee and Sonia Shenoy. For complete details watch the accompanying videos.

Q: Did you have a chance to look at todays new listing Sanghvi Forge and Engineering ?

A: Yes, I see it as grossly expensive. First, if you see the objective for the IPO to fund the four time expansion right now they are operating with 3,600 tonne capacity in forgings which largely caters to the non-automotive sector. Now they are taking up a project of 15,000 tonne capacity which I dont think has any hope of getting completed.

Even if I see at the EBIT level probably for FY11, I agree that the expansion will not get completed in FY11 but at the EBIT level they should not be having a profit of more than Rs 7.5 crore. Going forward, for FY12 they will have an interest burden of Rs 8.5 crore with a turnover or topline of Rs 26 crore for the first nine months with a bottomline of Rs 3 crore.

Going forward they will carry a debt of Rs 80-90 crore which makes it grossly expensive. I dont think in due course of time if the stock settles at Rs 30-35 level I dont think there is any reward in this stock.

Q: What did you make of that final change in the subsidy sharing mechanism? GAIL will be reporting its numbers today and that was one of the stocks that really got hit last week as well. How would you approach some of these names?

A: I dont find any rationale of this formula because 38.7% is shared by the upstream companies. So, if you take the net burden 32% goes to ONGC and 7% goes to GAIL. If I take the total crude production, if we have 3 million barrel of consumption per day, these upstream companies are producing about 0.7 or 0.8 million barrels. If they have a production of 24-25% of the total consumption of the country, what is the rationale of loading under recovery of 7% on these companies?

With this kind of approach obviously you will be concerned about FY12 as well. FY12 looks to be a more serious year than what has been seen in FY11. I dont think you can expect a realization of more than 54-55 a barrel for ONGC, what we have seen for FY11. So the concern is going to remain. Any upside in the stock should be used as an exit opportunity. On top if it you have the ONGC FPO sword hanging on these stocks.

GAIL is the least affected because you have 7-8% only burden of upstream coming and sharing this. So, maybe that gets least affected by this subsidy sharing.

Q: What have you made of the weakness on the ADAG stocks? What is driving it?

A: If you see people have been losing their investment appetite for all these stocks. We had seen some hope coming-in; in the form of Reliance Capital maybe a couple of months back on some newsflow. But post that people have least comfort. When you see the whole market not having much upside movement, these are the least preferred stocks by any investor.

Even technically, people feel that these are the soft targets. So whether you have a bearish view on the market, just go and short Reliance Capital , Reliance Infra or maybe RComm for that matter and you are going to make money. The same problem is going to maybe continue for next couple of months or so.

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32 public CPSEs to earn Rs 5551cr profit in '10-11

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