PN Vijay's multibaggers: South Indian Bank and BS TransComm

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PN Vijay's multibaggers: South Indian Bank and BS TransComm

Portfolio Manager PN Vijay picks South Indian Bank and BS TransComm as multibaggers stocks for the day.

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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

Portfolio Manager PN Vijay picks South Indian Bank and BS TransComm as multibaggers stocks for the day.

The way the retail participation has been increasing in the market in the last few weeks, Vijay expects South Indian Bank to about Rs 35. However one should be aware that it is small stock with not a great liquidity, so it is prone to operator manipulation.

He also likes BS TransComm from the infra space. Vijay has a target of Rs 200 on this stock but warns about company's fairly high debt.

Below is the edited transcript of Vijay's interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video.

On South Indian Bank

A: South Indian Bank is a very old smallish bank from the south. Their last quarter results have been pretty impressive. The net income went up by about 36% and net profits went up by 34%. Their net interest margin is slightly over 3%, which is slightly better than its usual run rate of about 2.9-3%, its 3.1%. On the balance sheet footing, the growth in gold loans has been very impressive. Gold loans have gone up by about 70%. In terms of capital adequacy they have got a 12, which is not bad, which is not very good.

The gross NPAs which used to be above 2% three-four years ago now down to 0.9 and the net NPAs are 0.02, which means they have practically written off all their NPAs. The balance sheet footings are very strong. In terms of valuation, it is a small cap stock. It is quoting around 23 or so and it is about 6.5 times 2012 earnings.

The price to book is slightly over 1 and the return on equity is also very good. The way the retail participation has been increasing in the market in the last few weeks, South Indian Bank could go on its fundamentals to about Rs 35. A caveat is, it is a small stock with not a great liquidity, so it is prone to operator manipulation.

On BS TransComm

A: As the market changes our view, the stock is also changing and one is nibbling at infrastructure type of plays. BS TransComm is Hyderabad based company, they are an integrated provider. They provide transmission solutions both to the power sector and telecom sector. Unlike other players who are basically manufactures, they offer build operate and transfer type of product. They are technocrats who have gone into the business.

They had a very impressive 2011 with sales going up by about 70% and profits doubling. This year has been fairly static, not to bad but not this type of humongous growth. This company did in the first half about 11.8EPS, I expect them to close at about 25 EPS for FY2012. It has a sudden very sharp rise from about 100-140in the last two months. At this price it is quoting at about slightly less than 6 times current earnings, which is not bad it's pretty attractive for midcap.

Beginning at target of Rs 200 on this the risk here is that the company like most of it sister concern has a fairly high debt in its portfolio. Though the debt has come down substantially last two years. The other thing is material cost; some of their contracts are fixed price contracts, so if steel prices start shooting up suddenly, the margins will get impacted. But there is no stock without risk. Right now the trend seems to be gingerly go into infrastructure and BS TransComm is one of the really good ones in that.