Tulsian picks Excel Indus and Hyderabad Indus

SP Tulsian of sptulsian.com selected Excel Industries and Hyderabad Industries as multibaggers for the day.

On Excel Industries
Excel Industries has posted good a result. They have 65-70 years of presence in the agrochemical and agrochemical derivative business and the financial performance posted by the company has come out well. For FY12, though the bottomline was Rs 15 crore which included the exceptional item of Rs 7.5 crore, on which if you knockoff the tax amount, net amount of Rs 5 crore which they derived from the Jogeshwari property, which is underdevelopment.
In the Q1, they have posted a topline of above Rs 100 crore with a PAT of Rs 7 crore. Going by that yardstick, I think that margin expansion will happen in the FY13 because of some improvement or the additions of the high margin products in their portfolio, coupled with the infusion of the funds, which they have derived from the development of their real estate at Jogeshwari, which has helped to reduced the interest burden for the company.
This looks to be the most undervalued agrochemical stock. Generally, agrochemical stocks rule at a PE multiple of close to seven-eight times but this stock is ruling at a PE multiple of close to about three times. From the posted results, one can expect an EPS of close of 22-23 for FY13. The stock looks reasonably priced and from hereon one can expect a price of Rs 100 in next 12 months. On Hyderabad Industries
Hyderabad Industries has posted a topline growth in the Q1 along with expansion in margin. For whole of FY12, the company had a PAT margin of 7% on the topline of Rs 860 crore. In the Q1 results, they have posted a topline of Rs 330 crore with PAT of Rs 33 crore. So, that indicates that PAT margin has improved from 7% to 10% plus we have seen the volume growth also taking place by above 20% on a comparable quarter of the previous year. For the Q1 the EPS has resulted at Rs 44.
But, I am not taking the same extrapolation, taking Rs 45 as a benchmark that FY13 can result into an EPS of Rs 160-170 or Rs 180. On a conservative basis I feel it to be between Rs 120-125.
For the whole of FY12, the EPS was at Rs 81 and in the Q1 the EPS is Rs 44. On Rs 81, the company declared a dividend of Rs 18.50. So I am hopeful that this time the dividend payout is also likely to improve for FY13 which would be between Rs 22-24, if one expect the same dividend payout ratio of 25% to be maintained by the company, which can also result into a yield of 5% on the stock.
Considering their strong presence in the roofing business and other factors this stock looks quite undervalued going by the expected EPS of Rs 125, ruling at a PE multiple of less than 4 and even the book value is close to about Rs 500. So taking all this into consideration I expect this stock to touch Rs 600 in 12 months with a very minimal downside from here. Disclosure: I have no holdings in the stocks discussed.