Tulsian's top picks: United Breweries, Aunde Faze

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Tulsian's top picks: United Breweries, Aunde Faze

SP Tulsian, sptulsian.com in an interview to CNBC-TV18 picked United Breweries and Aunde Faze as multibagger stocks ideas for the day. He sees these stocks fetching better returns ahead.

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SP Tulsian, sptulsian.com in an interview to CNBC-TV18 picked United Breweries and Aunde Faze as multibagger stocks ideas for the day. He sees these stocks fetching better returns ahead.

United Breweries is one of the leading brewers in the county and hold 50% market share.  The company is a beer maker with Heineken brand in India and hold the Kingfisher brand abroad. Tulsian has a target of Rs 600 in six months.

Aunde Faze is a joint venture between Aunde, Germany and Faze Three. The company makes automotive fabrics and seating system. Its net worth stands ar Rs 30 crore and the promoter hold 86% stake. Tulsian has a target of Rs 100 in 18 months.

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

On United Breweries

The company is a beer maker and they have 50% market share in the country. The foreign promoter, Scottish & Newcastle had been acquired by Heineken about 18 months back. They are foreign promoters along with UB Group. Till December 2010, both of them collectively held about 75% stake, with both partners having 50-50% stake of that 75%. Some closely held companies and one or two sick breweries got merged with the company, so the shareholding pattern has changed. Now the UB Group holds close to about 38.5% and Heineken Group or Scottish & Newcastle, the company which they have acquired holds about 35.5% stake.

Looking at the present market cap of the company, I don't think profitability can be a big kicker for the company. Their EPS is close to about Rs 6-8 on an annualized basis. It is Re 1 face value share and is ruling close to Rs 475. In the past also the foreign partner had shown interest to acquire the whole company, but UB Group was not willing. Huge valuations were demanded. Even now there are talks that UB Group is looking to dilute a part of their stake (they hold 38.5%) or they might exit fully.

They will require close to Rs 4,000-5,000 crore for reviving Kingfisher Airlines because 11-12% stake of this company is also pledged to bankers through their holding company UB Holdings Ltd. In a nutshell, the idea is that change of management at a hefty valuation is likely to happen. It is learnt that market cap of close to about Rs 18,000 crore (current market cap plus 50% valuation) is being demanded by the group.

If the foreign partner increases their stake that will be seen as a positive for the stock. In these last couple of months also when all UB Group stocks took a beating, this stock was holding steadily. The positive trend is likely to continue and I am expecting a target of about Rs 600 in six months.

On Aunde Faze

This is very interesting story. Aunde India is a Germany company and they are leader in the automobile fabrics and seating systems. This promoter or this foreign company has a trend of holding the 100% stakes in all their companies, but this is probably one of the few companies. They might have two or three collaborations in the world where they are a joint venture partner. Aunde Faze was created by carving it out from Faze Three Exports Ltd maybe about four or five years back. Aunde Germany is holding 43% stake in this company and Faze Three, the Anand family is are holding 43% stake.

I don't think the financial performance of the company will look so exciting. Their top-line is close to Rs 150 crore and on equity of Rs 10 crore plus, they are posting an EPS of Rs 3. But having spoken to some big investors or going by the way auto sector is evolving now with more focus more on mileage increase and reduction of CO2 emission norms, it is estimated that fabric content in the car which is now at 18-20kg will increase to about 35 kg. So, that will be a big booster for this company.

This company has the collaboration with Aunde Italy and Aunde Brazil. They have also introduced new type of technical textiles which will be used in the times to come. About 86% stake is held by these two promoters where the foreign promoter holds 43% and the Indian promoter 43%.

One has to eye this as a delisting candidate, come June 2013 when all promoters have to comply with the shareholding pattern to bring it down to 75% I don't think that both the promoters are in mood to dilute their stake and go ahead with reduction to 75%. So, obviously they might go for delisting. That 14% stake is not held by any large investors so it will be very difficult for them to acquire that kind of valuations.

The indications coming form the management are that they are valuing this company close to about Rs 200-250 per share. At one point of time Indian promoters wanted to dilute their stake in favour of the foreign promoters. Insiders say that they are asking for a price of Rs 200-250 per share.

But apart from all these things, even if I take a conservative view and if someone can keep a view of 18 months I won't be surprised to see a price of Rs 100. Yesterday, fortunately we saw huge volumes taking place in this counter. Those who are entering into the stock should not look for day to day moment. They must have a time horizon of till June 2013 by which I am expecting share to move to Rs 100.

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