Tulsian's top picks: Associated Stone, Granules India

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Tulsian's top picks: Associated Stone, Granules India

SP Tulsian of sptulsian.com has shortlisted Associated Stone Industries and Granules India as his multibagger stock ideas for the day. He sees these stocks have the potential to fetch better returns in the next six-12 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 Assoc Stone BSE | NSE 01/01/70 Are Mutual Funds betting on Assoc Stone? Other Stocks in this news Granules India | Coal India | Hindustan Construction Company | Prakash Constrowell | PG Electroplast | RDB Rasayans |

SP Tulsian of sptulsian.com has shortlisted Associated Stone Industries and Granules India as his multibagger stock ideas for the day. He sees these stocks have the potential to fetch better returns in the next six-12 months .

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

Associated Stone Industries

This Rajasthan based company is engaged in Kota mining. Kota stone has developed good demand and the company has been focusing more on value added items. Their Q1 result has been quite good, they posted an EPS of Rs 9 for FY11 and Q1 EPS was close to Rs 3.

Q1 has traditionally has always been higher but high value items have contributed to their working. For last four-five years they have been consistently improving their financial performance and this is likely to continue.

If I take an expected EPS of close to about Rs 10-11 for FY12 that leads to the share ruling at a PE multiple of 3. Going by the share holding pattern, promoters have a respectable stake of 70%, HNIs or associates are holding close to about 14-15% stake. So the public float is very good.

The accretion that has taken place with the entry barrier for new mining in the Kota Stone space in Rajasthan has been very stringent and tough. This stock once in a year always shows a good amount of upside, so one can keep a horizon of 12 months. This upside could take the stock to about Rs 40 next in six-eight months time. Thus, the stock looks quite safe at these levels

Granules India

This is a vertical B2b company which is makes API, FDS and other pharma ingredients. Their business model looks quite interesting, the company has plants in Hyderabad. The company posted a topline of close to Rs 500 crore and EPS of close to Rs 10 plus. But the best part is that because of high depreciation burden cash EPS has been very high. It has been close to Rs 19-20 for FY11. I expect the same performance to continue for FY12 also.

Promoters hold 41% and institutional investors which includes IFC Washington holds about 10%. Six institutional investors hold close to about 38-39%. Promoters and six institutional investors are holding close to about 80% stake, so that gives a good amount of confidence.

The way their business has been managed and corporate governance excites you that this seems to be a safe and clean driven company. For FY12, with a topline of close to Rs 500 crore, the share is ruling at a PE multiple of close to 5.5 or 6. Generally such companies rule at lower PE of 6-7 times but this stock has potential to see PE expansion happening by 20%. One can expect a price of Rs 80-85 in the next six-eight months.

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