Tulsian's multibaggers: Ajanta Pharma, Insecticides India

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Tulsian's multibaggers: Ajanta Pharma, Insecticides India

Tulsian finds this stock quite interesting, though the stock had a run-up in the last week; he says one can take a price target of Rs 500 in next six months.

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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

SP Tulsian, sptulsian. com picked pharma company Ajanta Pharma as his first multibagger stock for the day. The company focuses on research and development and has a strong product pipeline. Tulsian finds this stock quite interesting, though the stock had a run-up in the last week; he says one can take a price target of Rs 500 in next six months.

Insecticides India is his second pick for the day. The company has been consistently posting a growth of 25% in its bottom-line. It has a strong focus on agrochemicals. Tulsian is positive on this stock and expects a price of about Rs 500 in next eight-10 months.

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

On Ajanta Pharma

I find this company quite interesting. The share is ruling at a PE multiple of 7. This is an integrated pharmaceutical company having five manufacturing plants. The focus of the company has been very good on research and development. It is employing about 3,200 people and from that 150 people are working in R&D lab. Their product pipeline seems to be quite strong.

For the first nine months of FY12 compared to previous nine months period of FY11, the company posted a growth of 30% in top-line and 48% in bottom-line. This implies that a top-line of Rs 425 crore has been achieved for the current nine months of FY12 with bottom-line of about Rs 42-43 crore, which translated into an EPS of Rs 37. The performance has been continuously improving. That 48% bottom-line growth has been back-ended.

We have seen good amount of growth coming in, in the bottom-line in the third quarter, so extrapolating that one can expect the company to post an EPS of close to about Rs 54. Going by the same trajectory, since their focus on R&D has been quite strong, so FY13 could have an EPS of about Rs 65-66. The financial position is not highly leveraged. The debt position is quite comfortable.

As far as the shareholding pattern is concerned, on a low equity base of about Rs 12 crore promoters are holding about 68-69% stake. The overall growth posted by the company for quite some time has been quite good. The historic book value as on December 31 is Rs 250. So, it is ruling at a price to book of 1.5, PE multiple of 7. I find this stock quite interesting, though it has run-up in the last week, but still one can take a price target of Rs 500 in next six months.

On Insecticides India

This is primarily an agri product company. They make agrochemicals, pesticides and home care products. It has a very strong brand and strong presence in the northern market especially UP and Punjab. Since they have plant in Rajasthan and Jammu &Kashmir, they are largely catering to Punjab and UP, where the demand of agrochemicals and pesticides is quite high.

It has been consistently posting a growth of 25% in its bottom-line, EPS of Rs 25 for FY11 for first six months. They are yet to declare their Q3 results, but for first half they posted an EPS of Rs 20. Generally, the second quarter of the company is always high because in the second quarter people buy pesticides for kharif season. The kharif season gives production of about 55%.

Going forward, in the third and fourth quarter they should be able to have an EPS of close to about Rs 12-13, while it was Rs 20 for first half. So, I am expecting Rs 32 EPS to move to about Rs 40 for FY13. Their turnover has been quite significant because Rs 425-430 crore turnover in FY11 is likely to get increased to Rs 500 crore. The demand for pesticides has been increasing a lot because of good yield of crops mainly in UP and Punjab.

So, I am expecting the company to continue to perform well. The promoters stake in the company is to the tune of 75%. The only disliking for this company is that 17-18% stake held by HNIs and 75% by the promoters, so effectively 92-93% of the float has been held. Sometimes this may act as a negative. But because of their strong focus on agrochemicals, I keep a positive view and expect price of about Rs 500 in next eight-10 months time.

Disclosure: I have no personal holding in any of the stocks discussed.