Multibagger stocks: Tulsian bets on HDIL, BOC India

SP Tulsian, sptulsian.com picked real estate player HDIL and specialty gases producer BOC India as his multibagger stocks for the day. He expects these stocks to earn better returns in the time span of six months.

Below is the edited transcript of Tulsian’s interview with CNBC-TV18. Also watch the accompanying video. On HDIL The company specially focuses on Mumbai based real estate properties because in the last one month it is seen that renewed interest is coming into projects. Earlier projects had long gestation projects and were getting completed in 3 to 5 years so people were very wary of buying properties in those projects. But now the difference between ready possession properties and under construction properties has gone as high as 40%, so considering that as the basic theme I am picking up HDIL. The company is one of the largest developers in Mumbai and Mumbai suburbs. They have a huge parcel of land at Vasai-Virar belt, which is also catching up very fast. Apart from that, the SRA projects which they have undertook for Mumbai Airport, they have completed a big chunk of alternate accommodation at Vidyavihar. Around 75,000-80,000 families will get accommodated there and once the transfer starts happening, there will be huge value unlocking for the company. If you see their Q4 results company has not sold any TDR (Transfer of Development Rights) in that quarter because DCR (Development Control Rules) came in the middle of January and the real takeoff or the demand for TDR has started coming in the month of April. In spite of not having sold any significant quantity of TDR in Q4, overall FY12 results have been reasonable. They posted a top-line of Rs 2,000 crore and cash profit of close to about Rs 900 crore, which translated into an EPS of Rs 19 in Q4. Though EPS is not too material for any real estate company, but if I take the net present value of their properties, it works out to about Rs 17,000-18,000 crore on a conservative estimate. The market cap of the company is Rs 3,000-3,500 crore and debt is about Rs 4,000 crore. If you take the Net Present Value per share it works out to about Rs 300 plus and the share is now ruling at Rs 75. I am not saying that the stock can move to those levels, because real estate stocks are ruling at 30-40% of its present value of the properties held. But, I feel that stock looks to have bottomed out. Renewed buying interest or anything which starts accelerating in the stock can make it move to about Rs 100 in next six months or so. BOC India Delisting is the theme for this company. They are into the industrial and specialty gases. The promoters of the company are Linde Group, which is a 14 billion euro company having presence in 100 countries. They hold a stake of 89.5% in the company. In the past also we keep hearing that the promoters are likely to initiate a delisting move. Last week when SEBI chief has said that no further extension is likely to be given beyond June 2013 for delisting, I think this stock can come as a delisting candidate maybe in the near future. If you take a valuation call, the financial performance for calendar year 2011 has been quite good with top-line of Rs 1,200 crore. They have been consistently maintaining a PAT margin of about 10%, which was for calendar year 11 also with a PAT of close to about Rs 120-122 crore with an EPS of Rs 14. If you go by the past record I am not taking the Alfa Laval which was delisted at a PE multiple of 56-60, but I presume that any delisting of the multinational companies has to happen at a PE multiple of 40. I don’t think that at less than PE multiple of 40 any promoter of these multinationals can really expect to garner the favor or the support from the minority shareholder. If I go by the expected EPS of Rs 15 for the calendar year 2012 the expected delisting price works out to about Rs 600 while the stock is ruling at Rs 400. So, one can play on this theme. The downside looks very limited unless and until the delisting deadline gets extended, which is unlikely to happen in next six months. With that theme and this kind of financial performance and promoters’ background, I think the stock can move to about Rs 500 in next six months. Disclosure: I have no personal holding in the stocks discussed.