SP Tulsian of sptulsian.com in an interview with CNBC-TV18 gave his views and readings about the market. He also spoke about his multi-bagger stock ideas for the day.
Below is the verbatim transcript of his interview with Mitali Mukherjee and Sonia Shenoy of CNBC-TV18. Also watch the accompanying video. On Lakshmi Machine The company has posted very good results for FY11. This is one amongst the top three global majors engaged in the manufacture of textile machinery. For FY11, they have posted top-line of Rs 1,800 crore plus EPS of Rs 125. if you go by the financials the company is not a debt free but apart from that they are sitting on a cash of Rs 750 crore. This Rs 750 crore is after initiating a share buyback which the company made last quarter. Due to which the equity got reduced close to about Rs 11.50 crore. This cash translates into about Rs 650 per share and the share is ruling close to about Rs 2,010-2,015. Looking at their order book the company traditionally has been sitting on an order book of three years plus. This is because of the kind of demand they have for the textile machinery. Considering the growth of the sector, the same order book is likely to continue. There they should be able to post a growth of 25% on an annualized basis. Apart from that they had the joint venture with Rieter of Switzerland. They are buying back their 50% stake held by Rieter in the present subsidiary of the company. Going forward, the company looks to have the good plans of ramping up their top-line as well as bottom-line. So, with all this they should be able to post an EPS of Rs 150 for FY12 on a conservative basis. If I knock of this Rs 650 per share cash the share is virtually ruling at a PE multiple of close to Rs 10 which traditionally, used to be 20 for the last many years. On the downside it has a very limited risk but on the upside one can expect a price of Rs 2,500 in the next six months or so. Also Read: Investors swaying amid risk on-risk off trade: AMP Cap On Dolphin Offshore This stock has been correcting, if you see in last six months the stock has corrected from Rs 350 to Rs 120. The day before it made its 52 week low at Rs 120. This has been on our radar that the stock now looks very good. The main reason for the fall in the share price has been the poor working for FY11. This is because in FY10 company posted an EPS of Rs 40 while in FY11 it was close to at about Rs 10. Obviously the fall in the share price was expected. But beyond a point when you see such a steep fall, you see is the value buying coming back in these kinds of stocks. Yesterday it could be the act of the value buying, because going forward, the company has two-three notes to their accounts which they have presented. One is in respect of the non-provisionally to the extent of Rs 40-45 crore in respect to the delay damages. But, on the other hand they have got Rs 33 crore billing for the extra work carried out as well. Apart from that, there is an equivalent amount of about Rs 40-45 crore extra billing which needs to be carried out for the work having implemented by them. On a net basis if you see the extraordinary on account of the delays in execution as well as the extra work gets nullified, get set-off. Going forward, FY12 should be a normal year for the company. I am not saying that they will bounce back to an EPS of Rs 40 because if that happens share can easily move to Rs 300 plus. But, considering all the normal factors the list of clientele they have, they should be able to post an EPS of Rs 20 plus for FY12. Because gradually they may ramp up their EPS, their bottom-line in next couple of years back to about 30 plus but at least for FY12 I am expecting it to be about 20. If you take that into consideration share available at a PE multiple of 7 makes the stock a good buy. I am expecting a price of close to about Rs 200 in the next six months or so. On M&M Financial This is the largest NBFC into the rural and semi-urban space with 550 branches and assets under management of Rs 14,000 crore. This is a subsidiary of Mahindra & Mahindra with 56% stake held by Mahindra & Mahindra while the total promoter stake is close to about 58%. For FY11 they have posted an EPS of Rs 48. The company has very robust business profile in place because they are financing all type of cars, utility vehicles, tractor trucks, tractors and even the agricultural other implements and other things. So, going forward the company does not have any problem. I am expecting the company to post an EPS of close to about Rs 60 for FY12. If you take the price to book maybe on FY12 earnings they will be having a book value close to about Rs 330. As I am expecting the EPS to be close to about Rs 62-63 the share is ruling at a PE multiple of 10 and the price to book it is 2. If you take these into consideration I think share is quite cheap available if you compare this with Bajaj Finance or maybe with Shriram Transport. Lately we have seen the renewed interest coming back into these NBFCs. Apart from that the company has the highest PAT margin into the industry which is at 24% plus. Taking all this into consideration, the promoters background, the company background, the financials, the share again looks quite good. Maybe in about next six months one can expect a price of Rs 800 with very limited downside risk from hereon. _PAGEBREAK_ Q: The group of ministers meets today on Cairn-VedantaDiscover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
