Pick MBL Infra, Sundaram Finance, Wheels India: SP Tulsian

SP Tulsian joins CNBC-TV18 to pick out his favorite stocks for today and also gives his outlook of the markets.

On MBL Infra
MBL Infra is a construction major mainly into the EPC business. They deal with road and irrigation projects apart from highway maintenance. As far as their financial performance in FY11 is concerned, the company had good growth alongside margin expansion. MBL Infra posted a top-line growth of about 56-57% and the bottom-line improved about 67% year-on-year. Earnings Per Share stood at Rs 35 for FY11. I expect the company to maintain a growth of about 32-35% in top-line in FY12 and maybe the bottom-line can translate into an EPS close to about Rs 50 per share. Taking all this into consideration, the share is ruling below IPO price of Rs 180 a year and a half ago. The share is also trading at a price to book of less than 1 and PE multiple of less than 4. The kind of re-rating or renewed interest we have been seeing in this EPC stock maybe because of the good allocation into the road sector. Therefore, MBL Infra can move to about Rs 200 in the next 4-6 months time and downside is very limited from here on. On Sundaram Finance
Sundaram Finance has posted very good results. Firstly, they are into financing commercial vehicles, into insurance, into mutual funds and they have a small presence in the software solutions BPO. So, one can call them a multi business company. However, the kicker is in their core business- vehicle finance and insurance with their 50% stake in the insurance arm. On a consolidated basis, the company has posted an Earnings Per Share of close to Rs 70 in FY11, a small gain of about Rs 25 crore. If I net off the exceptional gain made on the investments front by selling in the subsidiary and the dividend received, the net exceptional income is only to the extent of Rs 25 crore. Their NPA is quite low. The company should be able to post an EPS of close to Rs 80, going forward. When there are about 8-10 NBFCs in this space which are much bigger and ruling at a price to book of 1.6-1.8 and PE multiple of 10-12, Sundaram Finance is trading at a price to book of about 1.3 with a PE multiple of about 6 based on FY12 earning. Going by these, the topline is quite robust and they have a very good business model. Shriram Transport is definitely a larger play, but Sundaram is a small version of it, apart from the fact that Sundaram has multiple presence in various businesses. The stock looks good at these levels and I expect it to move to at least Rs 600 in next 2-3 months time. On Wheels India:
Wheels India of the TVS Group is an auto component company largely sourcing steel wheels for commercial vehicles, cars, tractors and other agricultural equipments. They have a robust business model and have shown consistency in performance. Top-line is close to about Rs 1700 crore and bottom-line has been quite good with EPS of about Rs 25. The share is ruling at a PE multiple of about 7-8. Since the TVS Group holds 84-85% stake in the company, there could be a de-listing move or there could be some restructuring move by the company. The bottom-line has improved by 80 to 100% in FY11 and the momentum is going to be very good. Wheels India should be able to post an EPS of Rs 30 for FY12 that translates into a PE multiple of close to 8. On a price to book parameter too the share is ruling quite well. The company could post a sizeable turnover Rs 2100-2200 crore going ahead. This looks to be a very safe stock. One can expect a price of about Rs 315 in the next 6 to 8 months time. Also watch the accompanying video
_PAGEBREAK_ Q: How do you expect the ADAG stocks to open today and how do you see them going forward?
A: We will see a good upside today in Reliance Communication and Reliance Capital largely because of relief coming in from the CBI special court. RComm was ruling quite well in spite of the market not being so positive in the first half of yesterday. Post noon, we saw the stock correcting mainly on fear. I won