Tulsian bets on Goodyear and Visaka Industries

SP Tulsian, sptulsian.com has picked up Visaka Industries and Goodyear.

Visaka Industries, he says, is an attractive bet. “The stock can touch Rs 175 in 12 months,” he adds.

According to Tulsian, Goodyear can touch Rs 400 in next 12 months.

Below is the edited transcript of his interview to CNBC-TV18.

Visaka Industries is the country's second largest cement sheet maker operating with seven plants with a capacity of 6.5 lakh tonne per annum. In FY12 the company posted a top-line of close to about Rs 750 crore with PAT of close to about Rs 25 crore resulting into an EPS of Rs 22. In the first quarter, the company had a top line of Rs 290 crore with PAT of Rs 19 crore which resulted into an EPS of Rs 19.

I won't extrapolate Rs 19 with 4x4 and get Rs 76 EPS estimated for FY13. Though the EBITDA margins have improved by 5-6%, but I expect the company to post a conservative EPS of Rs 55-56 for FY13.

Other cement sheet makers like Everest Industries and Hyderabad Industries have declared excellent results last week. So, disappointment was not expected from other players which did not happen. So, this confirms the uptrend in the margin of all the cement sheet makers.

Because of environment concerns the share of all these companies were ruling at a PE multiple of 2, 3 or 4, but now the concern is slowly dying down which is good for the companies. Considering the uptrend ahead and EPS of Rs 19 in Q1 the stock can touch Rs 175 in next 12 months. In long term this stock can touch Rs 200. So buy call with a target of Rs 175.

Goodyear

The result of Goodyear for the quarter ending June has been flat. The company is largely into farm and medium commercial tyre manufacturing. The Faridabad plant has a capacity of 14 lakh tyres per annum. The company has been a consistent performer and has been delivering an EPS of Rs 25-26.

The move of delisting is a trigger for the stock. The promoters of the company are holding 74% and have earlier shown their intent to delist. The buzz of delisting move have made many stock quite active in the past and I am expecting similar trend in this company.

With EPS of Rs 25-26 and a conservative delisting PE multiple at Rs 25 it translates into a share price of Rs 600-625. On a fundamental basis, when the delisting was failed the share fell to Rs 280-300 but again bounced back to the current level. Considering these factors this stock is a very safe. Balkrishna Industries and Goodyear are only two companies that manufacture farm tyres and they are enjoying better margins. One can expect a price of Rs 400 in next 12 months.

Disclosure: I have no personal holding in the stocks discussed.