Supreme Infrastructure can test Rs 300: Tulsian

Tulsian told CNBC-TV18, "The reason for choosing Supreme Infrastructure is that we have been seeing surge in all the infrastructure stocks, especially those which have BOT projects. Many of them were seen as negative because of the financial burden they put on companies, and markets were expecting that extra fund infusion in the BOT projects will derail the working of the existing contracts or the pure EPC play also. But I don’t think that that situation is really prevailing in spite of the perception having changed on all the infra stocks."

He further added, "Supreme Infra is into the construction of roads, bridges and power projects. The total order book is at about Rs 5,200 crore, but of that Rs 3,200 crore is the unexecuted one. If you see the break-up of this order flow, it’s very balanced and it seems that the company has been very prudent in mitigating the risk."

"They have 65% of the total order book from the government and 75% of that is from Maharashtra. 35% of the total order book is of BOT projects; the company is having four BOT road projects and recently they have been able to procure funding of USD 61 million into their BOT road projects by giving a minor stake. So I don’t think that overall on the business front there is any problem."

"If you see the financial working of the company, for first nine month they have clocked a turnover of close to about Rs 1,000 crore which is an increase of about 60-62% over a comparable period, because they had Rs 600 crore in the last nine months of the similar period. Apart from that, the profitability has also improved in the same proportion by 40-42% resulting into an EPS of Rs 39 per share for nine months. So if you extrapolate that and take a scenario that Q4 are always best for these companies, Supreme Infra should be able to post an EPS of close to about Rs 58 for FY12 and Rs 70 for FY13. Also, if you see, BOT projects will start yielding the income maybe from the next year onwards."

"So taking all these into account, I think the company looks quite good. It is ruling at a PE multiple of close to about 4.2 on the historic earning and maybe at about 3.5 on the forward earning. So I think the stock is capable to give a price of about maybe Rs 300 in next six to eight months time, which results into a return of about maybe 25%."

Disclosure: I have no personal holding in the above stock.