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May 17, 2011, 03.27 PM IST | Source: CNBC-TV18

SP Tulsian's view: Deepak Fertilizers, Suzlon, Muthoot Fin

SP Tulsian of sptulsian.com n an interview with CNBC-TV18 spoke about three multibagger stocks ideas for the day.

SP Tulsian of sptulsian.com in an interview with CNBC-TV18 spoke about three multibagger stocks ideas for the day.

On National Steel

National Steel is a small company having market cap of less than Rs 100 crore. To be precise market cap of close to about Rs 82-83 crore. But, in my view this is very good established company having Rs 3 lakh per tonne per annum of capacity of coal roll. They buy a hot roll coil and make the coal roll plus galvanize color coating sheets from the HR coil.

They have been consistently doing quite well. For FY10, they had an EPS close to about Rs 6.90. They have not yet come out with their Q4 results but for first 9 months of FY11 they have already cloaked in a turnover of Rs 1,770 crore with PAT of close to about Rs 24 crore. Because of very low equity of about Rs 32 crore they have an EPS of Rs 7.10 for the first nine months.

I am expect them to post an EPS of close to about Rs 240-250 for fourth quarter which will translate into an EPS of close to about Rs 9.50 to about Rs 10. We have seen the kind of valuations getting ramped up from for Uttam Galva when the LN Mittal Group acquired a stake in the company. Even going by the financials fundamentals of the company, the book value per share is about Rs 53 which translates into price to book of less than half.

Taking EPS of Rs 9.50 for FY11 and maybe in double-digit for FY12, the share is ruling at a PE multiple of close to about 2.5 times. So taking all these into consideration, the stock has ability to move to Rs 35- 40 in maybe next six to eight months time with very limited downside from here on. So, I like this stock.

On Deepak Fertilizers

Deepak Fertilizers are the largest industrial chemical makers from the natural gas. The best part about the company is that they have been very smart, whenever they have the higher realization in their main products, like methanol and ammonium nitrate they move making into those products.

Their performance for FY10 has not been much into the production of fertilizer. But, with the NBS pricing coming for complex fertilizers they had small contribution from the fertilizers on the top line as well as in the bottom-line.

But, going forward considering the product profile and the margins they enjoy in their industrial chemical products they will be focusing more on these kind of products rather than fertilizers. But, even if their focus remains partly on fertilizers they should do quite well.

Taking their FY11 performance, the company has posted growth of about 22% on topline and about 33% in bottom-line. The company has also completed expansion of many products in FY11 at the end of FY11.

FY12 is likely to see the major contributions coming in from those products. Maybe growth of 22% in topline and 33% in bottomline is likely to surpass in FY12. I won’t be surprised to see a bottomline growth of about 40% with topline growth close to about 25-30%.

So taking all this into consideration, the stock has the potential to move to about Rs 220 in the next six- eight months time considering their product profile.

Also Read: 3-4 positive factors support market at lower levels: IIFL

On Dewan Housing

Dewan Housing has posted very good results. When the company acquired Deutsche Home Finance, Deutsche Postbank Home Finance Company for about Rs 700 crore plus. The market hiked their apprehension that probably they may not be able to post or the integration will take time and the investment may not yield much results but, that has all proved wrong.

Looking at their FY11 consolidated performance, loan sanction grew by about 70% in FY11 while the loan disbursements grew about 68%. And going by the financials, they have posted a growth of more than 100% in topline as well as in bottom-line. The larger portion of the contribution has come from Deutsche Postbank Home Finance.

I am expecting that the company is likely to do quite well. I wouldn’t be surprised to see the company posting an EPS of close to about Rs 40 in FY12. The share is available at a PE multiple of Rs 6 on current earning while the price to book it is at Rs 1.25, taking FY12 earnings into considerations.

The PE multiple of Rs 6 and price to book of Rs 1.25, it is quite cheap when compared to LIC Housing Finance and HDFC in spite of both the companies traditionally have been enjoying higher PE multiple and higher price to book.

Maybe at these levels the share looks to have very limited downside. Once it comes on the radar because of the high institutional and FII stake also seeing in the company close to 40-42% with promoter holding about 36% so, very low float of 15-16% in the market. Once it comes in the investment radar of the value investor share should quickly move to about Rs 300 which is expected to happen in the next four- six months time.

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National Steel Deepak Fert Uttam Galva
Dewan Housing LIC Housing Fin HDFC
Madras Fert Suzlon Energy Muthoot Finance
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