SP Tulsian's multibaggers: Clariant Chemicals & SpiceJet

SP Tulsian of sptulsian.com is bullish on SpiceJet and Clariant Chemicals given their strong fundamentals. He expects SpiceJet to benefit from newsflow of FDI in aviation and has target of Rs 50 from one year perspective. Clariant Chemicals will benefit from the land sale in Kolshet, he sees the stock hitting Rs 600 in next six months.

Below is the edited transcript of Tulsian’s views on the stock. On SpiceJet
There have been talks of some foreign airlines coming in and picking up stake in the company. The government in hiking the FDI limit did not raise it in aviation. This is probably because they are taking a cautious stance on the Jet-Etihad deal for which the extension shall be sought by the company to conclude the deal by end of November.
I am quite confidence and hopeful that once we have some positive indications coming in on Jet-Etihad in form of clearance going through, then there will be a lot of interest by foreign airlines in this company. If one goes by the status of SpiceJet, they are the third largest airlines with market share of 20 percent after Indigo and Jet Airways and they are ahead of Air India which is the PSU company.
Its debt, Rs 1500 crore with market cap of Rs 1500 crore is not very high and gives enterprise value (EV) of Rs 3000 crore which is almost 16-18 percent of the valuations having given to Jet-Etihad deal.
The financials are very much in place, the promoter stake is also quite respectable. And the institutional investments or the stake is not very high about 14-15 percent. So, from all parameters, even if one sees their root operations they have over 50 aircrafts, they cover about 300 flights per day. Its top line has been quite good, close to about Rs 5700 crore for FY13 on which the net loss was just about Rs 190 crore which largely came in from the interest of about Rs 115 crore.
If one takes the cash loss of Rs 120 crore, that is largely coming in from the interest. So from all perspectives and if we see any news like the one seen in Mangalore Chemicals, the stock moved from Rs 42 to Rs 72 in just a week to 10 days time.
I don't think people will have an opportunity to acquire the share once the news flows are out. The downside is very limited from here on and on the upside the trigger is likely to be induction of a foreign airlines or picking up stake in the company and that can make the stock to move to a level of Rs 50 also in next one year. I have set a price target of Rs 35 in next six months or so. Disclosure: I have personal holdings in SpiceJet


On Clariant Chemicals India
The company’s board yesterday approved the sale of its land at Kolshet, Thane which is about 88 acres of land. We have been hearing that probably the company will go ahead and sell the land which they have in Kolshet and lot of the real estate developers like Peninsula, Lodha and Oberoi have shown interest and the indications which we have been getting for this land parcel is close to about Rs 1500-1600 crore.
However if one takes the conservative valuation at about Rs 1200 crore that is the likely valuation and I think that deal can get concluded may be in next four-six months or so. The company is a leading specialty chemical makers, having presence in pigments, textile and leather chemicals and biocides for paints.
Its financial performance has been very good, Rs 1100 crore top-line for calendar year 2012 where in the EPS was at Rs 38 and cash EPS was Rs 46. What I liked about the company is their distribution policy. The company gave a dividend of Rs 27.50 for calendar year 2012 on an EPS of Rs 38. This means the distribution policy is very robust at about 80 percent of that.
Hence, whenever this land monetisation happens and even if we consider the tax outgo and the dividend distribution tax etc. still the company will be left with a cash of about Rs 750 crore which can again make the company to declare dividend.
In the past also, when they monetized part of their land, special dividend of Rs 40 was given but this time major portion of the amount which I am expecting it to be about Rs 700-750 crore will come in the form of dividend which works out at about Rs 250 per share.
Even after monetizing the land at Thane they will be having three other plants at Roha, Kanchipuram and Cuddalore. All these are doing quite well. So, they will continue to have robust positions. The EPS of Rs 40 can be maintained by the company on an annualized basis, debt free status, net worth of Rs 500 crore of the company of which Rs 250 crore is held in the form of cash and cash equivalent. So, going forward I don't think you have any kind of downside here but yes the target of Rs 600 at least can be expected in next six months.