Tulsian's top picks: SREI Infra, Shriram Transport, Shrenuj

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Tulsian's top picks: SREI Infra, Shriram Transport, Shrenuj

SP Tulsian of sptulsian.com in an interview with Sonia Shenoy and Mitali Mukherjee of CNBC-TV18 picked some multi-bagger ideas for investments. He also gave his readings and outlook for the market.

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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 SREI Infra BSE | NSE 30/05/12 Are Mutual Funds betting on SREI Infra? Other Stocks in this news Shriram Transport Finance Corporation | Shree Ganesh Jewellery House | Shrenuj and Company | Gitanjali Gems | Paramount Printpackaging | Innoventive Industries | Servalakshmi Paper | Orchid Chemicals and Pharmaceuticals | Tata Power Company | Emami |

SP Tulsian of sptulsian.com in an interview with Sonia Shenoy and Mitali Mukherjee of CNBC-TV18 picked some multi-bagger ideas for investments. He also gave his readings and outlook for the market.

Below is the verbatim transcipt of the interview. Also watch the accompanying videos.

On SREI Infrastructure

A: Yes. It looks good but in respect to the managements call they need to improve the NIMs. This is because I don't think there is any trouble as far as the disbursements are concerned.

Also, the merger of Quippo Infrastructure Equipment, has been the cause for fall in share price of company. Quippo Infrastructure got merged with the company with effect from 1-4-2010 and that  resulted in huge equity dilution.

The equity of the company earlier was at Rs 130 crore and thereafter in FY11 the company issued 80% bonus. That is four bonus for every five shares held, post this merger took place. So, there were two equity dilutions, one, by bonus to the extent of Rs 90 crore and second by this merger to the extent of Rs 290 crore. Now the equity has increased to about Rs 500 crore.

I don't think there is any complaint with respect to the sanctions and disbursements. The assets under the management of the company as of today are at Rs 20,000 crore  plus. But the company needs to improve little bit on the NIM, because the Q4 results has been little subdued  may be due to integration problems. Also, sometimes there are bad quality assets in the merged company.

But, I hope that going forward things should look good. Looking at the financials on a price to book it is ruling at about 0.65 but, on a PE multiple it is ruling close to about 10. If the NIMs get improved, the company is able to post an EPS of close to about 5. The share can come to about maybe PE multiple of close to about 8 to 9.

Going forward I see good upside potential. The only consolation for the stock is that there does not seem much downside from hereon. The stock has already corrected. Fresh buying may start emerging from here. If one takes a view of about 12 months time then a return of about 50% can be expected from hereon.

On Shriram Transport Finance

A: The company posted an EPS of close to about Rs 54 in FY11 which recorded a growth of about 41%. But, the stock has been in news for the last one week largely because of its inclusion in the MSCI.

As per the present shareholding pattern as of March 31 the promoters are holding close to about 41% and 41% shareholding is already held by FIIs. Post the MSCI inclusion, we have been seeing the delivery based buying by the FII going forward. I won't be surprised to see the FII holding getting increased to close to 48 to 50% in the next one or two quarters.

Even in the promoters equity 41% it is held by the joint venture company in which the foreign promoter and the Indian promoters are having equal stake. I am quite bullish because the company has about 500 branches and service centers. They are the largest commercial vehicle financers.

Expecting a growth of about 20 to 22% in FY12 the share is ruling at a PE multiple of 9 price to book of 2.3. This looks quite reasonable as compared to any other NBFCs or any other new players who have entered into the capital market.

The stock may have limited downside risk of 5-10%. But, if one takes a call of about one year a price of close to about Rs 850 to Rs 900 can easily be expected. This is a very comforting stock to have in ones portfolio.

Also Read: Nomura cautious on India, finds it expensive to its peers

On Shrenuj

A:  The diamond and diamond jewellery companies have been doing quite well in the last couple of months, whether you take the case of Shree Ganesh Jewellery , Gitanjali Gems and other players in similar space.

The best part about the company is that 63% stake is held by the promoter, 13% by 4-5 investors. So, 75-76% is held by the promoters and their close associates.

The promoters are into this business for last four generations and they have very strong base. The board of the company, is quite strong, they have quite eminent personalities on the board. But, FY12 should largely be very good for all the diamond and diamond jewellery units. There has been margin expansion of all these companies. There has been change in product mix.

Earlier they use to have revenue break-up of more than 50% coming from diamond trading but now the focus is shifting on the diamond jewellery. In case of this company they have eight to 10 brands. They have their own retail outlets, the performance has been quite good.

They have already posted a top-line of close to about Rs 1700-1800 crore in the first nine months of FY11, posted an EPS of close to Rs 580. So, for FY11 they should be having an EPS of close to 8. For FY12 I am expecting the company to post double digit EPS. Taking that into consideration the share is ruling at a PE multiple of 5-5.5 which looks quite reasonable. The stock can give a return of 40% in the next one year or so.