Tulsian's multibaggers: Pick Bharat Bijlee, Phillips Carbon

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In an exclusive interview to CNBC-TV18, SP Tulsian of sptulsian.com picks Bharat Bijlee and Phillips Carbon Black as his top picks for the day.

"Bharat Bijlee is ruling at PE multiple of 4, and the order flows make it a good buy at the current levels," says Tulsian. He picks Phillips Carbon Black, one of the largest Indian manufacturer and exporter of Carbon Black, expecting the company to post an EPS of Rs 50 in FY12.

"The stock is ruling at Rs 137 but can move to Rs 200 in one year," he says. Further, he adds that in investors pick the stock for a four to six months perspective, it should move to Rs 160.

Below is an edited transcript of SP Tulsian's comments on CNBC-TV18. Also watch the accompanying video.

On Bharat Bijilee

Bharat Bijilee manufactures transformers and motors. In FY09-FY10, the company was not that great because of the lower order supply, lower execution at the company's end but in FY11 it posted a record PAT and the EPS has been close to about Rs 135, on a topline of close to Rs 700 crore. 

Going by the present order book positions and the performance the company, in Q1 FY12, the company has posted top-line of close to Rs 120 crore and the PAT improved, which resulted into EPS of close to Rs 148 as against Rs 130-135 for FY11. There has been substantial improvement growth in the PAT margin and it is likely to continue and the EPS will be close to Rs 160 for FY12. 

The company is debt free on a market cap of close to Rs 390 crore. It has investments in two companies - Siemens and HDFC and the market value of both the stocks as of today are about Rs 240 crore. In the past, the company has contemplated selling those shares. Since the company is cash rich, they are not in need of any money and they have kept their investments in both these companies in tact. There is no any kind of binding on the promoters' that they cannot exit from this stock because this is purely a financial investment by the company. 

Overall, if I take a valuation call, if I knock of the value of the investment the market cap is close to about Rs 150 crore but even if I go on the earning potential the share is ruling at a PE multiple of 4. The present book value is at about close to Rs 585-590 which will rise to abut Rs 680 by end of March 31, 2012 and will result in price to book ratio of one. The transformer industries are doing well; the order flows are expected to grow in the next couple of years and this makes it a good buy at current levels. 

On Phillips Carbon Black

This is RPG Group Company and in the last six to eight months they have completed their expansion at Mundra. In the first phase they created capacity of 90,000 tonne, in the second capacity which went operational from April 1, 2011 and they have added another 50,000 tonnes at Mundra. The total aggregate capacity is 1,40,000 tonnes at Mundra alone. 

However, the overall capacity of carbon black with the company is 4,10,000 tonne with matching power generation capacity. In FY11, the financial performance of the company has been quite good with top line of close to Rs 1,700 crore and EPS of close to Rs 35. The new capacity got commissioned in Mundra in the last three months or so the reflection of that has seen in the Q1 results of FY12, where the top-line has improved by 30%. The EPS for the quarter alone has been at Rs 12.50 while cash EPS has been at Rs 17.50. 

The company should be able to post an EPS of close to Rs 50 for the current year and with cash EPS of close to about Rs 70. And that translates share ruling at PE multiple of less than 3 on a net EPS basis, and less than 2 on a cash EPS basis.

The share which is now ruling at Rs 137 can move to about Rs 200 in the next one year. Hence, the share has potential to move to Rs 200 in next one year. However, even for those with a short-term view of 4-6 month, the share should be able to move at a level of Rs 165-170.

On Coal India

I have been maintaining my positive view since it touched that bottom of Rs 316-318 because taking a fundamental call it is not likely to fall below Rs 320 and fortunately it held on to that level, may not be an intraday basis but the inclusion in Nifty is definitely a positive move for the stock.

Whenever we have negative news flows like we had in form of MMDR Act, the stock corrects swiftly maybe to level around Rs 330-335, this time it has corrected to Rs 320 and it bounces back very fast to Rs 355-360. I am expecting the same to happen probably in this week and hence, it can move to about Rs 355-360, this week.

On Sesa Goa

On the news flows, the management says that all these things pertain to the earlier management but ultimately, the liability goes to the company. And this will definitely be negative for which the price has to be paid by the present management. This has been hanging for quite some time but maybe because of technical reasons, the stock is showing an upward movement in last one week or so, which again will take a halt and start seeing the weakness again.

On Pipavav

With the news coming in that the defence ministry has approved the Mazgoan Dock deal, the stock has positive cues for itself. There is some more upside which can take the stock to maybe about Rs 86-87, in next one week or so.