Multibagger ideas: Tulsian bets on KRBL & Alkyl Amines

SP Tulsian of sptulsian.com picks two stocks as multi-baggers for the day. He bets on KRBL and Alkyl Amines Chemicals with targets of Rs 35 and Rs 200 respectively.

Below is a verbatim transcript of the interview: On KRBL KRBL has posted good numbers for Q3. However, if I just focus on the nine months number, the company posted top-line of close to about Rs 1,600 crore with operating profit margin of 15 percent, operating profit being placed at Rs 240 crore. The profit-after-tax (PAT) has been quite remarkable at Rs 110 crore. Comparing this with FY12 numbers, FY12 had a PAT of sub-Rs 80 crore while they have already reported Rs 109 crore PAT for nine months of FY13. Yesterday, they have also announced a buyback of the share price up to a maximum Rs 35 and Rs 35 crore has been allocated for that. Going by their net worth of Rs 850 crore or so, I do not think that Rs 35 crore will be a big squeeze. The price of Rs 35, which they have given also coincides with the book value, which is placed at Rs 34 as on December 31. If you go by their business model, they are the largest Basmati rice exporter. They are catering to the entire world. Their premier brand is India Gate, plus they have 17-18 other brands, which have been created for each market like Gulf, Australia, Canada and US. So, they have a very good marketing strategy. Apart from that. they also focus on the integrated operations like milling, storage, seed development, the processing facility, sourcing and the coordination with the farmers – all this has been of the latest technology and very well integrated, all that is giving them an upper hand. Taking all this into consideration and maybe the track record of about 30 percent dividend last year they paid, share is ruling at a price to earnings (P/E) multiple of Rs 4.5 because Rs 4.50 is the earning per share (EPS) for first nine months. So maybe FY13 will close with an EPS of close to about Rs 6. So you are getting the share at a P/E multiple of 4.5. This share buyback will also create a sentimental effect because now all the companies have to mandatorily go for the buyback. That will also reduce the float and that will also improve the book value. So stock looks good, this is the most reliable and promising stock among the rice space and one can expect a price of about Rs 35 in six months or so. On Alkyl Amines Chemicals This is a company making amines and amine based chemicals, which are used in pharmaceutical, agro-chemical, water treatment, leather chemical processing plus many other uses. The company has posted good results for Q3. If I go by their first nine months working for whole of FY13, that has practically surpassed FY12 on the EBITDA as well as on the PAT front. PAT has been Rs 20 crore for first nine months while the PAT for whole of FY12 was at about Rs 17-17.50 crore. EPS for first nine months is at sub Rs 20 while for whole of FY12 it was sub Rs 17. If I go by the EBITDA, the EBITDA margin has slightly improved because EBITDA of Rs 44 crore for first nine months on the topline of close to Rs 275 crore against Rs 42 crore EBITDA for FY12 on the topline of close to about Rs 295 crore also is showing that the company is improving their margin. If you go by the promoter's 74 percent stake and considering the user industries' demand for amines and amine based chemicals mainly into the pharmaceutical and agrochemicals -- the water treatment and the leather processing takes a small share -- they are all growing quite well and the demand for the products of the company is likely to improve in the time to come. So taking all this into consideration, stock looks quite good because for FY13, company should be able to post an EPS of close to Rs 28-29 and going forward FY14 may see an EPS of Rs 35-36. So, this chemical company on a forward earnings is available at a sub-P/E of less than Rs 5. One can expect a price of about Rs 200 in a longer time horizon of about one year or so. Disclosures: I have no holdings in the stocks discussed.