Tulsian's top picks: Suzlon Energy, Zydus Wellness

111000 Investors following Suzlon Energy. Share this News with them.

0

Like this story, share it with millions of investors on M3

Tulsian's top picks: Suzlon Energy, Zydus Wellness

SP Tulsian of sptulsian.com in an interview to CNBC-TV18 picked multibagger stock ideas for the day. He chooses Suzlon Energy and Zydus Wellness.

Post your opinion here

 

0

Tweet

Share on Tumblr

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 of sptulsian.com in an interview to CNBC-TV18 picked multibagger stock ideas for the day. He chooses Suzlon Energy and Zydus Wellness .

"Suzlon Energy, the fifth largest wind power company has been in news for quite sometime now. The company has a cash balance of Rs 2,200 crore in its September quarter. It has 4,800 MW orders pending in its books and new orders are also seen flowing. Their order book gives confidence and this stock can be a multibagger in the next 24-36 months time. I have a price target of Rs 30 on this stock from a time horizon of 12 months," Tulsian said.

"Zydus Wellness is a subsidiary of Cadila Healthcare. Its financial performance has been consistently improving. It has a cash balance of Rs 20 crore. This stock doesn't have much downside. It can move past Rs 600 in 12 months," he added. 

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

On Suzlon Energy

It is a surprise pick. This stock has been in controversy for the last 15 days or so, mainly because promoters have sold their 2% stake in the company. But last week, the management said that he is looking for a debt equity ratio of 1:1 in the next 18 months. Apart from that he has given up that cash balance of USD 1.5 billion.

Their financials as on September 30 shows cash balance of Rs 2,200 crore at a consolidated level. But squeeze out happened after announcing the results and the management gave a cash balance of USD 1.5 billion. This gives a lot of comfort considering their total debt which is at about Rs 13,000 crore plus.

As far as the order book of the company is concerned, 4800 megawatt of orders are pending with the company worth Rs 32,000 crore. Out of this 4,800 megawatts, 1,300 megawatt orders have been secured in the last six months. This means the company has a very good strategy. Suzlon Energy is focusing entirely on domestic market that is India and Repower, their 100% subsidiary is focusing on Europe and US. We have seen orders flowing at an intervals and that gives a lot of confidence.

Apart from that the management has also indicated that they will be able to recover Rs 1,000 crore from current assets. Their net current assets stand at about Rs 8,000 crore. If one takes a total call on this, debt of Rs 13,000 crore plus vis-à-vis cash balance, vis-à-vis net current assets gives confidence.

As far as their performance for six months at the EBITD level is concerned, they have posted a profit of about Rs 650 crore on a turnover of Rs 9,000 crore plus which is a very good sign. The only problem before the company is their interest liability.

They are planning to reduce that in the 18 to 24 months and if they are able to do it then it will be positive. Sometimes one gets a chance to acquire these stocks at such a bad time. This stock can prove to be a multi bagger if one has about 24 to 36 months time horizon. I am expecting a price of Rs 30 conservatively taking a view of about 12 months on the stock.

On Zydus Wellness

Zydus Wellness is a subsidiary of Cadila Healthcare, a Cadila Group company in which Cadila Healthcare is holding 70% stake out of the promoter stake of 72.5%. This is a life and healthcare segment company. They have four strong brands which includes Sugar Free and Naturalite. The financial performance of the company has been consistently improving.

Zydus Wellness was acquired by Cadila Group about five years back when it was in mess. At that time the company had only one product and thereafter Cadila Group has added all these products. For the first half they posted a top-line of Rs 175 crore with PAT of about Rs 25-26 crore which results into a PAT margin of about 15%. It is a debt free company.

The company has a cash balance of about Rs 90 crore which is largely helping them to launch new products and incur marketing expenses. The best part is that they have been able to maintain PAT margins and it has been gradually improving. If I extrapolate Rs175 crore turnover, it gives a turnover of about Rs 350-360 crore for FY12 with EPS close to Rs 14.

But the management has given a guidance that they are expecting top-line to reach about Rs 500 crore maybe by FY13-14. So if I take a call of about 40% growth in next two years it indicates that EPS could reach to about Rs 20 by FY13-14. The share has corrected in the last couple of months. It use to rule at about Rs 500 plus.

One can acquire this stock but not from a near term point of view. If one can keep a view of 12 months I am quite confident that it can move past Rs 600. On the lower side, I do not think much downside is seen from hereon. It may fall by about Rs 20-30 or Rs 40 maximum but from a one year horizon I expect it to cross past Rs 600.

Disclosure: I have personal holding in Suzlon Energy.