Multibaggers of the day: Tulsian picks GSFC, Wheels India

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Multibaggers of the day: Tulsian picks GSFC, Wheels India

SP Tulsian in an interview to CNBC-TV18 picked GSFC and Wheels India as multibagger stock picks for the day.

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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

SP Tulsian is betting on GSFC and Wheels India as medium term picks.

In the case of GSFC, Tulsian feels the stock is set to report strong earnings and has ample cash in its books which provides a further cushion for investors. Wheels India has managed to surprise investors by sustaining its growth momentum even on a fairly large base, and at the same time is a potential delisting candidate, feels Tulsian.

Below is the edited transcript of Tulsian's interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

On GSFC

A: The idea of choosing GSFC is the flavour of the current scenario because all other fertiliser stocks have been moving up. I have been positive on all urea makers, but I am not so bullish on complex fertiliser not because there is anything negative but there is no trigger for those stocks.

Coming back to GSFC they are into making both complex as well as urea with capacity of 2 million tonne per annum. Apart from that they are making one lakh tonne per annum of caprolactam, the raw material for nylon. Looking at their financial performance for FY11 the company posted a topline of close to Rs 4500 crore with an earning per share of about Rs 93-94. I think the same kind of performance will be repeated, maybe with a marginal increase in the topline.

But that is not relevant, because the topline increase happens largely because of the trading activities which such companies are into. More relevant for the company is the bottomline and I am expecting an earning per share in the range of Rs 90-95 because half (Rs 45) of it has already come in the first half for the company.

If one looks at the financials, it's a debt free company. They are sitting on about Rs 750 -800 crore, and in addition, they have Rs 600 crore of investments largely into two companies-around 3.08 crore shares in GNFC and about 2.25 crore shares in GIPCL. So the major value of the Rs 600 crore investments is derived from these two investments with a market value of about Rs 400 crore. In fact we are seeing upmove happening case of GNFC also but again that is just cushion.

So even if this Rs 750 crore cash and Rs 600 crore investments are not knocked off, the share is ruling at a PE multiple of close to 4. The pattern of this stock is that it is holding, it has a very strong support or base maybe at a level of about Rs 325-330. But when it moves up it goes linear to one way to the level of Rs 450-500. These kind of trading patterns have been observed in the last 12 months or so twice or thrice. Same pattern is likely to be formed again on the share price chart.

I don't see much downside, one can expect a price of Rs 450 in next six months because of strong earnings and attractive valuations

On Wheels India

A: This is an interesting story, it is a TVS Group company and of the 86% promoter holding, 50% is held by TVS Group and about 36% is held by Titan of Europe. The company is mainly into sourcing of steel wheels for utility vehicles, for commercial vehicles, for off-road equipment, for tractors. Because of this steel business, they have capacity of one million wheels per annum with six plants spread across the country and they are catering to all the auto majors whether be it Tata Motors , Mahindra and Mahindra , Hero MotoCrop etc.

If one sees the financial performance of this company for FY11, the company's topline grew 50% and bottomline by 90%. Seeing FY11 results you may feel this is an end because Rs 24-25 EPS cannot get accelerated from here on.But if we take a call on first half (H1) of FY12 results, they have seen a growth of about 16% in topline but again the bottomline has grown by about 50% that means Rs 18-19 EPS in H1.

If one extrapolates the same and there is no reason not to do that, then H2 also will be having EPS around Rs 35-36 close to whole year of FY12. That means the company is going into the trajectory of EPS of close to about Rs 40 from here on maybe from FY13 onwards, that makes the share available at a PE multiple of close to about 7.

Book value is very healthy at about Rs 272 -275 by March 31, 2012, so delisting could be a big trigger. It would be interesting to see whether both the promoters the Indian and foreign will be willing to trim their holdings down to 75% which they will have to make by June 2013.

So taking all this into consideration, I think this is a long-term stock but one should keep a target of about Rs 350 in next six months or so which I feel is achievable.

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