SP Tulsian's multibaggers: JBM Auto and Pitti Laminations

On JBM Auto

This company is involved in making sheet metal component and welded sub-assemblies which are used largely by automobile plants. They have three plants, in Noida, Gurgaon and at Nasik, and cater to major auto manufacturers.

The performance of the company has been quite robust. Even for FY11, they had a topline of close to Rs 750 with EPS of about Rs 20 plus. If I go by their Q1 result for this fiscal, they posted a topline of Rs 200 crore plus with EPS of close to about Rs 5.10-5.15.

Share holding pattern too is quite healthy and respectable, with promoters’ stake being at 62% and five HNIs holding close to 25%.

The share is having a book value of close to about Rs 110-115. At the end of this financial year, it will rise to about Rs 125. So the share is available at a price-to-book of 0.4 times. The PE multiple is less than 3 times. I agree that there are about 8-10 listed sheet metal component companies, but they are all ruling with a PE multiple of close to about 5-6 times.

Taking all this into consideration- the established business, the very strong balance sheet and all that, I think this is a good stock if someone can have it with a view of six months. One can expect a gain of about 25-30% from this stock.

On Pitti Laminations

This is an interesting story. They make electrical laminations which are used in aerospace, defence and power projects. In fact a large percentage of their product is exported. This has very good demand and GE is their main client. If you see the recent developments that have happened in the company, promoters have been issued over 40 lakh shares at a price close to Rs 39.15 and that has led to an open offer. They are making the offer at Rs 41. Since the market price is at Rs 45, obviously, nobody is expected to participate in it and that is seen more as a statutory compliance.

Their main raw material cost has been, apart from the HR coil, copper. Copper prices have corrected in this last month or so.

Also, the export sales of the company which has been at around 33-35% till FY11 is likely to increase because of the demand from GE electric and other overseas buyers. The export figure is expected to go up to 50% in the current year.

That is the reason the FY12 is likely to see a growth of about 60% in topline as well as in bottomline. The company posted an EPS of about Rs 4.50 for Q1 and is likely to post an EPS of close to Rs 16 which was at Rs 9 for FY11.

Taking all this into consideration, the promoters’ confidence gained a major boost and they hiked their holding to 60%. I presume nothing will come in open offer and their stake will remain pegged at 60%.

This should not be bought with a view of four to six months but with a one-year horizon. Then, it can really give a good return of about 50% on the stock price from its current standing.