SP Tulsian's picks: Bliss GVS Pharma & Mangalore Chemicals

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SP Tulsian's picks: Bliss GVS Pharma & Mangalore Chemicals

SP Tulsian of sptulsian.com joins CNBC-TV18 to pick out his multibagger stock ideas for the day. He chooses Bliss GVS Pharma and Mangalore Chemicals and Fertilisers.

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SP Tulsian of sptulsian.com joins CNBC-TV18 to pick out his multibagger stock ideas for the day. He chooses Bliss GVS Pharma and Mangalore Chemicals and Fertilisers.

On Bliss GVS Pharma

This is an interesting company. They are into pharma and FMCG, making anti-malaria, respiratory, anti-inflammatory and even dermatology products and some personal care products.

First let me take the financial performance of the company for H1FY12, they posted a PAT of about Rs 32 crore on a top line of about Rs 132 crore. This results into a PAT margin of 27% which is very rare. In fact, these kind of PAT margin is not enjoyed by the larger pharma and FMCG companies too.

Also, they have posted a 23% growth on the top line on a comparable period of FY11 and posted a growth of 24% in the bottom line. That has resulted into an EPS of about Rs 3.50 for the first six months of the year on a low equity of about Rs 10.50 crore.

The share has a face value of Re 1. The book value of the share will be at about Rs 24 by 31 March 2012. That means it is available practically exactly at a book value of Re 1.

If you see the manufacturing pipeline of the company, they have a very strong brand portfolio, reputed products enjoyed by the name of the company, and the plant is located at Palghar in Maharashtra.

The shareholding pattern is also quite interesting - 65% held by the promoter, 13% by HNIs and about 20-22% is with the public. So the share is available at a PE multiple of three times. It's a totally debt free company. Additionally, the kind of profitability on an annualized basis is of about Rs 70 crore which makes it a very interesting bet.

If somebody can keep it in the portfolio for about two years, I think it is capable of giving a return of about 150-200%. Even on a shorter horizon, maybe in six months or so, the share is capable to give 30% returns.

On Mangalore Chemicals and Fertilizers

Let me first take a fundamental call. It's a 1,100 tonne per day urea plant that is about 380,000 per year, and about 800,000 tonne per day complex fertilizer plant with captive 35 megawatt power generation capacity. The equity base is very low for the company at Rs 120 crore and the company posted an EPS of about Rs 4.50 for the first half of FY12.

Apart from that, the company has huge surplus land at Mangalore. If you take the western coast, there are no large fertilizer plants in Karnataka or beyond. In Goa you have Zuari Agro, in Maharashtra, you have RCF. The combination of urea and complex fertilizers is seen in very few like with Tata Chemicals and GSFC . In general, either you have a standalone urea manufacturer like Indo-Gulf, Chambal Fertilizer , or you have a standalone complex fertilizer maker like Coromandel International . But this is a combination of both which in today's time, makes it a very interesting play.

Any capacity expansion now on the cards, and the policy of the government will come very soon in this week, all that make it give it good prospects.

Besides, Mallya Group is holding about 30% stake in the company. Market cap of the company as of today is quite low at about Rs 450 crore. Even if you add the term loan, I am excluding the working capital which is bugged by the inventory, the enterprise value of the company is less than Rs 600-650 crore.

In my view, if somebody wants to acquire this company, the prospective buyer will pay at least Rs 2000 crore for this entire infrastructure which is held by the company.

So I don't think that in the given situation, UB Group will be too keen to continue with this because six to eight months back also, the news was floating was that they are looking to exit from the plant. But there are many suitors for this plant. As I said because of the strategic location, the company catering largely to Karnataka and Kerala, both are the agri-based states.

Take the instance of even UB Group opting to expand stake, they will think of expanding the capacity of urea to 5000 tonne per day. Complex fertilizer capacity which is now at 800 tonne can get enlarged to about 4000-5000 tonne per day with a very lower investment. Urea you need a huge investment. So I think this is an excellent stock available now at a price to book of 0.7 times, PE multiple of four times.

At one time GSFC used to rule at a PE multiple of four which has now increased to about seven-eight times. So again this is a very interesting play available in the fertilizer space. A combination of all this makes it a good buy. But yes, one has to keep a view of six to 12 months on the stock.