Tulsian's multibaggers: See value in PI Ind & GSFC

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

In an exclusive interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee, SP Tulsian of sptulsian.com says the good monsoon this year is opening opportunities to reap from agriculture stocks. His multibagger picks today include PI Industries and GSFC. "I am very positive on agriculture stocks with a one year view," he says.

He sees tremendous value in PI Industries for view of 12-month perspective and sets a price target of Rs 750, while expects GSFC to have a price target of Rs 500 in a year.

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

On PI Industries

PI Industries is into agro-chemicals, specialty chemicals and agricultural inputs like seeds. The company's performance has been good for FY11. The company has recently gone for a stock split. They have three plants, one each in Udaipur, Ankleshwar, and in Jammu.

In the Q1 results of FY12, the company had included an odd gain worth Rs 30 crore through the sale of polymer compounding business because it was unrelated to their core business and hence, they knocked it off. They posted a PAT of Rs 48 crore for first quarter on a lower equity base of Rs 12.5 crore. 

However, traditionally Q2,Q3 and Q4 have been always the better quarters for the company. And the company has been steadily growing its research and development (R&D) arm. It has now set up an R&D center in collaboration with Sony Corporation and they will be ramping it up over the next couple of years. They have recently entered into a distribution agreement with an MNC as well for distribution of agro chemicals.

Hence, taking all these into consideration, the company is likely to post an EPS of Rs 42 to Rs 44 for FY12 on a recently reduced face value of Rs 5. I see tremendous value because of the positive view on the agri inputs company and specifically, on this stock if somebody can keep a view of about one year, they should be able to see a price target of Rs 750.

On GSFC

The monsoons this year have been very good and hence, I have a positive view on most agriculture stocks. GSFC is a very robust and financially strong company.

The company is into making fertilizers to the extent of about 2 million tonne per annum and are also making urea and complex fertilizers seen in very few of the companies like Tata Chemicals or may be RCF. The company has both the product profiles of urea and complex fertilizers and is also making Caprolactam, which is an industrial product, close to about 90000 tonne per annum.

 In Q1 of FY11 the company reported a PAT of Rs 142 crore on the topline of Rs 1200 crore, which translates into an EPS of about Rs 70-75 for FY12, with a PE multiple of close to about Rs 5. The company has a cash balance of Rs 750 crore and that translates into a value per share of Rs 100. It also has major holdings in GFNC and GIPCL. The value of these investments are about Rs 500 crore and translates into a value per share of close to about Rs 55-60. Hence, if you knock off the cash and the discounted value of the investment, core value of the business is ruling may be at about Rs 250 or so.

It is one of the cheapest fertilizer stocks and needs to catch up. This is a very good company and if somebody can keep a view of 12 months, he can expect a price target of Rs 500.

In the recent carnage this stock has not corrected. It has seen a correction of about only 5% in last one month, hence, it can move to about Rs 500 in next 12 months or so. 

On Advanta

Advanta is one of the largest in the sunflower, mustard and corn which are widely used. They also have the global presence in Brazil, Argentina, Thailand and Australia. In FY11 Q2, they posted good results, with an EPS of about Rs 10 plus, while the EPS on whole of the calendar year 2010 was in negative. Therefore, I expect that the company with an FCCB issue of about USD 50 million and 62% stake of which 50% is held by United Phosphorus is an excellent company. If you really see the price behaviour in this last 15 days or so, it has not really fallen below Rs 250 while it had its top of about Rs 300. Therefore, if one can keep a view of about 12 months, I won't be surprised if the share moves to about Rs 400 in this period.

Q: How have you read the news of the raids on Aurobindo Pharma and Ramky Infrastructure ?

A: The news is definitely uncomforting. Analysts have now started differentiating between the income tax raid and CBI raids and the later one is more intensive and has much wider implications. It will definitely create a bad valuation for the stock and we will see corrections. We have seen good institutional holding in Aurbindo pharma. Analysts have been taking a positive call on the stock. Ramky Infra has been falling and since its IPO it has been languishing.

Nava Bharat Venture has been correcting for last six months despite of their robust Ferro Alloys and Ferro Chrome plant, power generations. Hence, these raids create a very bad impression for these companies fundamentally. However, the technical view is that probably at the lower level, it can give a bump but on a pure fundamental basis I don't think anyone would really be comfortable plunging into these stocks, even at the lower levels.

Q: Some of the ADAG stocks are probably the worst losers for this series. Do you see any redemption there from the kind of selling pressure they have seen?

A: Reliance Communication and Reliance Infratel have been facing difficulty since 14 months. They entered into a deal to sell for USD 10 billion but are now asking for USD 5.2 billion or USD 5 billion for 95% stake. Hence, there have been concerns and the market has been taking the seller's valuation and not the buyer's which could be at about USD 4 billion.

We have heard that there has been huge margin selling incase of Reliance Infra which has been offered as collateral by some HNIs or may be some market savvy player who have been operating in the group stocks. The three stocks - Reliance Infra, Reliance Capital and Reliance Communications have been discomforting the market.

Q: Are you surprised at the strength in Petronet LNG ?

A: No, in fact I have been maintaining my view of Rs 160 to Rs 180. It has been perfectly moving in that range and I don't see it breaching below because whenever we see it correcting to Rs 162-160 even in this weakness the renewed buying comes in. One can start profit booking at the levels of Rs 180.

Q: What did you make of DEN Networks numbers? What would you do with that stock since it lost 40% last week?

A: I don't think the numbers are that disappointing. The stock has been beaten much more than what it deserves, so probably, the recovery will start and I won't be surprised to see the price moving back, close to about Rs 55-60 . Rs 50 looks quite possible in the near term but Rs 55-60 is where it should really get settled, may be in next one month or so.