Multibaggers: SP Tulsian bets on Kovai Medical & Esab India

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com picks two stocks as his multi-baggers for the day. Tulsian chooses Kovai Medical Center and Hospital and Esab India. Tulsian predicts target price of Rs 200 and Rs 500 respectively, in the next six months.

Also read: Market will follow weak global cues today says Udayan Mukherjee Below is a verbatim transcript of the interview: On Kovai Medical Center and Hospital Kovai Medical Center and Hospital is a 657-bed super speciality hospital at Coimbatore and offering medical solutions for all the diseases. In fact, if I go by the financial performance for first nine months, they achieved a topline of Rs 223 crore -- the similar amount they achieved for whole of FY12. If I go by their operating profit margin that has shown a 40 percent increase with operating profit of Rs 44 crore for nine months against Rs 32 crore of the whole of FY12. Because the company has a very low equity base just of Rs 11 crore and if I take the earnings per share (EPS) for first nine months, it has been at Rs 15 against Rs 11 posted by the company for whole of FY12. So that also indicates 40 percent increase in the margin because the nine months turnover and twelve months turnover is same. So, going by the expected earning and the trend, probably FY13 will be having an EPS of close to about Rs 21 and could go to Rs 24-25 for FY14. Even if I take on a historic earning basis, the share is ruling at a price to earning (P/E) of 8 times and on a price to book front at Rs 2.5 because it has a book value of closer to about Rs 70 or so. 657-bed is a big size and if I go by the trend, the per bed cost works out at about Rs 50 lakh and going by the low equity base, even the debt is not very high at about Rs 100-175 crore, which gives an enterprise value of close to about Rs 350 crore translating the enterprise value per bed at about Rs 50 lakh. So, the stock looks quite good. You have a scope of improvement in the margin, which can make the company to post an EPS of Rs 24-25 for FY14 and if that happens, the share can see a P/E also in double digits in the next one year or so. So, in one year one can expect a price of Rs 250 or so but in six months, I expect the stock to move closer to about Rs 200. On Esab India Esab India is a multinational company and they are into welding and cutting products, which is used by diverse industries like ship building, petrochemical, repair, maintenance, energy, offshore and so many other industries where the welding and cutting things are required. The company again for the calendar year 2012 posted a topline of close to Rs 500 crore but the EPS, if I make a comparison on year-on-year (Y-o-Y) basis, has slightly corrected. That is the reason for the share to correct from more than Rs 500 to about Rs 430 or so which it is now ruling at. However, for the whole of calendar year 2012, the company posted an EPS of close to about Rs 25 and of this Rs 25, about Rs 7 i.e. Rs 6.90 EPS has been achieved by the company in Q4. So, probably the trend of the margin expansion or the restoring back to the performance, which company has posted for calendar year 2011, can be seen for calendar year 2013. I expect that company should be able to post an EPS of close to about Rs 30 or so. The promoters are holding 74 percent stake in the company. I do not see any delisting move. This seems a very consistent stock. The company has been paying a dividend of about 75 percent. So, going by the trend, the performance of the company and outlook on the industry -- the engineering, ship building, petrochemical, energy, offshore, all these sectors are showing good traction that is going to give the direct benefit to the company -- one can expect a price of about Rs 500 in next six months or so. Disclosures: I have no holdings in the stocks discussed.