Tulsian picks 5 multi-baggers from his basket of ideas

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 Symphony BSE | NSE 29/05/12 Are Mutual Funds betting on Symphony? Other Stocks in this news Kernex Microsystems (India) | Shree Renuka Sugars | Balrampur Chini Mills | Bajaj Hindusthan Sugar & Industries | Innoventive Industries |

SP Tulsian, sptulsian.com, in an interview with CNBC-TV18's Mitali Mukherjee and Udayan Mukherjee, spoke about his reading on whether the assembly results affect market sentiments and gave an outlook on his top picked multi-bagger ideas for investments.

Below is a verbatim transcript. Also watch the accompanying video.

Q: Do you think the assembly results will tilt sentiment for the market at all?

A: I do not think so. If we take a wider perspective or call on this, it will strengthen the centre as we might have BJP's absence in all the states and tally of the UPA led by Congress and Trinamool Congress which will give them some strength.

It is mainly the question of the initiation of reform moves whether it can get accelerated post these elections or not. The centre will get some stability or strong hands post these state elections.

Q: There was so much news flow on fertilizer which has completed died down. Is the NBS policy awaiting the assembly results or has that gone in cold storage for a bit?

A: I do not see any justification for the urea decontrol or Nutrient Based Subsidy (NBS) scheme in case of complex. It is a waste of time in most cases when the committee of secretaries meet and move the proposal.

Unless and until we have the feed stock migration and plans approved for capital expenditure, there is no way to subsidies that. I do not think NBS can come in urea.

The government, while having the nutrient based pricing scheme for complex last year, has allowed that companies will have freedom to fix the pricing from April 1, 2011.

Even now, we have seen the centre for all these companies interfering to not increase the price beyond a certain amount. When the complex of fertiliser scheme of NBS has not being implemented in a full scale, it cannot happen in case of urea where the consumption is to the extent of 60-70%. It is difficult to accept the move of heading towards urea decontrol or the NBS scheme being implemented for urea.

Here are Tulsian's top picked multi-bagger ideas.

On Symphony Comfort Systems

Symphony Comfort Systems is world's largest air-cooler company. They have their presence in about 2,300 cities and towns with 600 retail outlets. This company has been consistently posting good profits year-on-year.

The company has its year ending in June. March and June quarters have always been the best quarters for the company. If we take nine months results of the company into consideration in March quarter, the company has posted an EPS of about Rs 30. We are extrapolating the same trend for June quarter as well.

For the year-ending FY11, the company should have an EPS of close to Rs 85. The company is now presently having two manufacturing plants - in India and overseas. They have been setting up a third SEZ unit in Surat to augment their export share, which is at about 18% of their total turnover.

For nine months, they have a topline of close to Rs 175 crore. They will be ramping up their export turnover in the next twelve months' time once the Surat unit goes on stream. They can rise to about 30% of the total turnover.

In FY12 June ending, company should be able to post an EPS of close to Rs 115. The shareholding pattern is quite interesting. Promoters are holding 75% stake and a few long-term investors are holding 10% stake. There is a very low float.

The stock looks little expensive because of the high price. It is presently ruling at about Rs 1,170-1,180. This stock has a quite good potential, if somebody can keep a view of about six months' time. They should be able to see a price of Rs 1,500.

On Kernex Microsystems

We have seen interesting indications coming in from Q4 results of the company. Q4 has contributed about 40% of the top-line of what the company has posted for whole of FY11. The bottom-line is about 45% posted alone in Q4. The company has given indications to execute 1,360 electronic gates projects for the Egyptian railway. The team from Egypt will come for inspection of the project in the month of June. They should be able to execute that order in next six months time. The second company is aggressively working on restoration and maintenance on the North frontier railways where they have fixed the anti-collision devices two-three years back. They are also working with their technology partner Konkan Railway for finalisation of version I and II of ACD. All of the restoration, maintenance and up-gradation of the anti-collision devices of version I and II are likely to get completed by October this year. The railway order for anti-collision devices would start flowing in from the month of October or maybe the year-end which will augment the top-line and bottom-line of the company over the next three-five years. The order size will be of about Rs 4,000-5,000 crore which will be spread over next seven years. The company is enjoying 40-45% of debt free status. All this can be a big trigger for the company, though investors have lost a lot of money. There has been a lot of time lag in the receipt of this order. The Egypt electronic gate order and anti-collision order expect to flow in from Indian Railway which will take the share on a different trajectory. In one year's time, the share would move to about Rs 150.

On Shree Renuka Sugar

There has been a big disappointment from Renuka Sugar. If we look at the scenario of the India as a whole, the best performance has been posted by the Karnataka sugar mills in terms of the higher recovery. The fall on the bottom-line as compared to the December quarter was not expected.

There has been increased depreciation and interest burden to the extent of Rs 220 crore of the overseas Brazilian company, which will start contributing to the operations of Shree Renuka Sugar from this quarter as they start their crushing in April.

On Balrampur Chini

Bajaj Hindusthan results have been quite good. The worry with the UP mills is that they will not be carrying the larger part of the inventory beyond June quarter. So, the results will come in the March and June quarter. Definitely, March quarter will be quite good for Balrampur Chini just like Bajaj Hindusthan. Still, it won't be a comfortable indication to take a call on the stock for the next two-three quarters.

On Innoventive Industries

The company has been discovered at a lower band of Rs 117. There has been a lot of confusion if we see the capital raising history by the company.

In comparison to this company, Lumax Auto Technologies has had better financials with an EPS of about Rs 30 ruling at a PE multiple of 5. I do not know whether Innoventive has any justification to rule at a PE multiple of close to 9 times.

If we take their expected EPS of close to about 13.50-14 for FY11, I doubt on whether the company be able to hold the price beyond or even at the three digit levels.

The stock cannot be compared with other IPOs, but ultimately, the stock should settle between a range of Rs 85-90 in next one month or so.