SP Tulsian of sptulsian.com cherry-picks his favorite stocks for the day on CNBC-TV18 and answers queries on Coal India and the Cement sector
SP Tulsian of sptulsian.com cherry-picks his favorite stocks of the day on CNBC-TV18. He sees value in Ajmera Realty, Suashish Diamonds and Bilcare. Tulsian says that these stocks are poised for a good growth in the near- to medium-term. Ajmera could go up to Rs 240 and Suashish, once the delisting move is initiated yet again, the stock could bounce up to Rs 200, Tulsian says. As for Bilcare, the stock has a lower downside and could breach Rs 550 in 10-12 months, he says.
On Coal India, he says that stock will most probably slip further to around Rs 340, just on expectations of PAT being affected because of the Mining Bill. Until then, Tulsian says that he is bullish on the stock, but advices investors who hold the stock to exit at the mentioned levels.
Prices correcting negatively in the cement sector, additional woes from monsoon and fear of action from the competition commission makes cement stocks unattractive, says Tulsian.
Below is the verbatim transcript. Also watch the accompanying video
The idea of picking up a real estate stock was that we have been seeing renewed interest in the sector. Taking a call on Ajmera Realty, if I go by the land bank held by the company, I find the all the land held are fully paid, that means, nothing has to be paid on the land account. Apart from that, majority of them are under development, except for a tranche of 67 acres which the company is holding at Kanjurmarg, Mumbai. The net present value (estimated) is about Rs 3000 crore, and on that, a composite development plan of residential, commercial, shopping, multiplexes, hospitality is expected. 72 acres of land will translate into developable of about 10 million sq feet, so that is going to take place maybe in the next 6 months.
They have a second project at Wadala, with about 2 million sq feet of land bank. The net present value of that is estimated at about Rs 2,000 crore. They also have presence in Bangalore and suburbs of Mumbai at Kalyan. If I take a call on these land stocks held by the company, the net present value works out to about Rs 5,000-6,000 crore while the market cap is just Rs 600 crore.
Since the company does not have any debt obligations, no unpaid land, no controversy with respect to ownership or possession of land, I think they are in a superior position to take advantage of this situation. Going forward, they should be able to monetize these land assets which will reflect in the working of the company. Taking that into consideration, the share has a potential to move to about Rs 240-250 in the next 12 months.
We see that gems and jewellery are again in focus now. All the companies have been doing well. Apart from this company being a gem and jewellery player, it is a site holder for DTC as well. The performance for FY11 has not been bad. They posted an EPS of close to Rs 33 with a top-line of Rs 1100 crore. Comparing FY11 performance with FY10, they have been subdued. Their delisting move which the company initiated last year failed because if you go by the shareholding pattern, the promoters hold close to 89.5% and maybe, the mutual funds, NHIs and the close associates hold about 6% to 7%. The way we are approaching March 2013, which is a deadline for all the companies to go for the stake dilution to about 75%, I think there is going to be a second delisting move by the company that can see a huge value creation for the stock. If I go by the financials, I say Rs 33 EPS; it is a debt free company on a net basis. Apart from that, it has a book value close to Rs 320. If I take the expected EPS of about Rs 35-36 for FY12 the book value will rise to Rs 350. So it is ruling close to 0.3 or 0.35 of the book value and the PE multiple is less than four. Taking all this into consideration, I do not think there is any downside for the stock. However, once the delisting move is initiated, or once the stock comes in the limelight, I think the share can move to about Rs 200 in the next 6 to 8 months time.
This is a company engaged in providing packaging solutions to pharma companies. Bilcare acquired the global film business of INEOS last year, which has given them top-line of Rs 1500 crore. Generally, we see that whenever these companies goes for this kind of big acquisitions, their bottom-line takes a hit because of the interest and depreciation burden. However, that has not happened in case of this company.
The top-line of the Bilcare was placed about Rs 2400 crore for FY11 and company posted an EPS of close to about Rs 63 on a low equity base of about Rs 24 crore. I am expecting that because if you see the film business, whether you talk of food packaging or beverages packaging, or even pharma packaging, the pharma growth across the globe is expected around 15% over next couple of years.
The book value of the company is quite high now at Rs 440, so that translates in price to a book of 0.9. I am expecting the company should be able to post an EPS of about Rs 70 for FY12, so that translates into a share price ruling at PE multiple of about Rs 6 with a price to book of about 0.8. Generally, these companies have been ruling in a multiple of about 9 to 10 because there are couple of other companies in the same space. So the stock of Bilcare looks quite good at the current price with lower downside and it can move to about Rs 550 maybe in the next 10-12 months time.
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