Tulsian's multibaggers: Dish TV and Rama Phosphates

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Tulsian's multibaggers: Dish TV and Rama Phosphates

SP Tulsian, sptulsian.com in an interview to CNBC-TV18 picked Dish TV and Rana Phosphates as multibagger stocks ideas for the day. He sees these stocks fetching better returns ahead.

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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 in an interview to CNBC-TV18 picked Dish TV and Rama Phosphates as multibagger stocks ideas for the day. He sees these stocks fetching better returns ahead.

Dish-TV has a market share of 31% and has added 3.5 million subscribers in 2011. Tulsian is positive on this stock and sees limited downside. "Technical and fundamental factors are supporting this stock. The downside is limited, it maybe to the extent of 15-20%, but one can expect a target of Rs 80 in the next six months or so," he said.

Rama Phosphates makes single super phosphates and has three plants in India. "It is debt free company and I expect this stock to move to Rs 60 in six-eight months time," he said.

Below is the edited transcript of Tulsian's interview with CNBC-TV18. Also wathc the accompanying video.

On Dish TV

Dish TV has been an outperformer in the last couple of days and expect it to play out well. After the digitization bill was approved by the Parliament, the entire focus is now shifting from analog to digitization. That would initially happen in metros, but I am keeping positive view on the DTH player. If we see last couple of years data the migration that has happened from analog, 70% of that has moved to the DTH profile. This company has about 31% share in that space, despite six players being active in this space, so I am quite confident.

They have been continuously improving their EBITDA and cash profit also they have been pruning losses. For FY11, they have topline of about Rs 1,500 crore while the net loss was Rs 190 crore. Their EBITDA was close to Rs 320-330 crore, with cash profit of about Rs 150 crore.

If one looks at their six months performance, the topline has been about Rs 900 crore, but the net loss has pruned to about Rs 70 crore with cash profit virtually intact at about Rs 150 crore and EBITDA moving close to about Rs 300 crore. So, the performance they have achieved in FY11 at the EBITDA and at the cash profit level, has come to the extent of 80-90% in the second half, inspite of turnover only increasing by about maybe 30 or 40%.

So, I am quite confident about it because from hereon, their ARPUs and incremental margins will improve. The advantage for this stock is that, it is very active in the F&O space and that gives it a very good bump. I have not seen it falling below Rs 55 inspite of bearish market traits, I hope that level will be maintained. But whenever we see renewed interest coming back, it quickly moves by about Rs 10-12. So, the technicals and fundamentals both are supporting it. The downside is limited, it maybe to the extent of 15-20% and that also will not continuously remain eroded at those levels, but one can expect a target of Rs 80 in the next six months or so.

On Rama Phosphates

This is another interesting play. They are makers of single super phosphates (SSP) which we usually call as complex fertilisers. This company has three plants, one at Udaipur, one at Indore and one at Pune. The aggregate capacity of the company is close to 4,60,000 tonne. Rock phosphate reacts with the sulphuric acid to make SSP, and the process is very simple. You don't need much capital investment for making this.

Post nutrient-based pricing since June 2010, the fortunes of the company have really changed. EPS, which was at about Rs 17 on a topline of close about Rs 400 crore for FY11, that is now placed at Rs 12 for first half. Total capacity utilization of the SSP industry has been about 55% largely because of non-availability of rock phosphate.

Rock phosphate is available only in Rajasthan, or it is imported. So procuring raw material is the main hurdle for not increasing capacity utilization of these companies, but they very smartly have set up their plant at Udaipur where they can source rock phosphate. In fact that is giving them an advantage and capacity utilization of close to about 75%.

Generally, there is an impression that fertiliser companies tend to perform well in the first half because of good offtake in Kharif season. But I don't think that will be the case with this company. I expect that their financial performance will be evenly out at all the four quarters. Also, about 18 months ago, the promoters infused huge funds at Rs 30 per share, raising promoter stake to 82%. In fact that is again a very positive factor for the stock.

If you take the debt portion, it's about Rs 35 crore in the books of the company, which are largely for financing working capital of about Rs 80-90 crore.
So taking all this into consideration, I expect the EPS of Rs 20-23 to be maintained by the company for the next couple of years. The share is ruling at a PE multiple of two times which is the least for any fertiliser company. There are very few SSP-makers like Basant Agro or maybe Khaitan Chemicals, so this is very much comparable for ruling quite low. I expect that the share can move to Rs 60 in the next six-eight months.