SP Tulsian bets on two stocks for 20-27% returns

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com says he is betting on MCX India and APL Apollo Tubes for good returns. He pegs MCX India's target price at Rs 1,250 and APL Apollo Tubes' target price at Rs 225 in the next six months.

Also read: Nifty to remain choppy; buy on dips says Sukhani Below is a verbatim transcript of the interview: MCX India Multi Commodity Exchange of India (MCX India) has corrected quite a lot, a month back it was ruling at Rs 1,300 and now ruling at sub-Rs 1,000. The main reason for that has been firstly the fear of imposing commodity transaction tax (CTT), which has come in this Budget but on the non-agriculture products. Going by the same trend, the stock seems to have seen much more correction than what it deserves. From Rs 1,300 to sub-Rs 1,000, I do not think it justifies that kind of a correction because the CTT seems to have got absorbed by the market. They have a commodity exchange which enjoys 85 percent of the market share plus presence in about 1,600 cities with 3.5 lakh terminals and 2,200 members. If I go by their operational performance for first nine months, they had a topline of close to Rs 400 crore with profit after tax (PAT) of Rs 222 crore translating into an earnings per share (EPS) of close to about Rs 44 for nine months. If you see, in FY12, the company had an EPS of Rs 56. So, probably the same kind of EPS is likely to get posted by the company for FY13 also maybe about Rs 57-58. However, going forward for FY14, one can expect an EPS of closer to Rs 65-66 because FY13 seemed to be more a flat year for the company. Shareholding pattern is quite robust. 26 percent is held by the promoter i.e. Financial Technologies, which is also a listed stock and 59 percent is held by the overseas investors, institutional investors. So, in all 85 percent float is with the promoter and the institutional investor. So, going by the trend and the trading pattern, we see the stock swiftly moving back to the old levels. In the past also, looking at the chart patterns, the stock corrects by about Rs 200-250 and bounces back maybe in very quick time. So, taking that into account, I expect that stock can move to Rs 1,250 though the longer time horizon is - as set by me - of about six months and the downside seems to be very limited or virtually very low from hereon. APL Apollo Tubes APL Apollo Tubes is a very interesting company. They have five plants. They are making mild steel, black galvanized tubes and hollow sections plus cater largely to airports, metro, infrastructure. In fact, they are into so-called decorative kind of products used in the mild steel space where the cost is quite low and the usages are quite high. In fact, the usages are building up a lot. The nine months performance for the company has surpassed the whole of FY12 performance on all the fronts, on the topline, on the operating profit level as well as on the bottomline. Topline for nine months has been at Rs 1,450 crore while for FY12 the topline was Rs 1,400 crore. The operating profit for nine months was at Rs 109 crore while it was at Rs 106 crore for whole of FY12. The PAT has been at Rs 52 crore while it was at Rs 49 crore for whole of FY12. Company posted an EPS of Rs 24 for first nine months against Rs 23 for whole of FY12. The profitability posted by the company is equal exactly. Practically broken in all three quarters equally with maybe gradual increase of about 1 percent, so Rs 32 EPS against Rs 23 EPS having posted by the company for last financial year i.e. FY12 augurs well for the stock. Going by their plant locations, they are scattered all over India. Two plants are in northern India, one in the western part of the country, one in the southern part of the country, so it is very easy for them to cater to practically PAN India for all the projects because we all know that the airports, metro and all the projects are coming up all over. So, share is ruling at a P/E multiple of Rs 6. I expect the EPS of close to about Rs 38-40 for FY14, that makes the stock an interesting buy with a price target of about Rs 225 in six months or so. Disclosures: I have no holdings or interest in the stocks discussed.