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Last Updated : Jun 11, 2013 01:16 PM IST | Source: CNBC-TV18

SP Tulsian's multibaggers: Rallis India, Ind-Swift Labs

With the onset of monsoon, Tulsian is bullish on pesticides, seed chemicals manufacturer-Rallis India. He sees the stock to touch Rs 170 in a six months time range and with very limited downside risk.


SP Tulsian on sptulsian.com is picking Rallis India and Ind-Swift Laboratories as his multibaggers for the day.

With the onset of monsoon, Tulsian is bullish on pesticides, seed chemicals manufacturer-Rallis India. He sees the stock to touch Rs 170 in a six months time range and with very limited downside risk.


Also read: RBI fines HDFC Bank, Axis & ICICI Rs 1-5 cr


Tulsian is also bullish on Ind-Swift Labs as the company’s corporate debt restructuring (CDR) package was approved and the promoters are looking at selling their stake in the company. "So, one can look for a short-term angle, maybe for the couple of months and they can also look for a price target of Rs 50 and those who keep a longer horizon can look for a higher level as well, maybe a level of about Rs 55-60 or so," he says.


Below is the edited transcript of Tulsian’s views.


On Rallis India


Rallis is a Tata Group company making agrochemicals, seeds, seed chemicals and apart from that they are supplying the technical and bulk of molecules to the other agrochemical makers also.


If one goes by their financial performance for FY13, they had a top-line of close to about Rs 1,500 crore with EBITDA of Rs 215 crore which translates into EBITDA margin of 15 percent. The company posted an EPS of Rs 6.10 for whole of FY13 on face value of Rs 1. For that year company, it paid 230 percent dividend that is Rs 2.30 per share.


With the monsoon having set on time in the southern and western part of the country, it is expected that pan India we will see the monsoon hitting by end of June or maybe mid July including UP, Punjab, Rajasthan and that part of the country. The Q2 is always best for these companies, because the consumption of the pesticides starts happening for the kharif crop, maybe by the end of August. So if Q1 is marginally good, Q2 is bumper results. Hence, with onset of monsoon we are taking a positive call on the stock and probably yesterday is the indication which we have seen in the form of buying emerging again in the stock at the current level, because these levels are seen to be quite attractive or the stock seems to have bottomed out. So, with six months view one can expect a price of Rs 170 on this stock with very limited downside risk.


On Ind-Swift Laboratories


This company has been passing through lot of problems, but from July 1, 2012, they had their corporate debt restructuring (CDR) package approved. If one sees the company's infrastructure, they are the leading active pharmaceutical ingredient (API) makers with good expertise on the research and development (R&D), they have filed about 40 Drug Master Files (DMF) also and are making the APIs with the Good Manufacturing Practice (GMP) approved facilities.


If one goes by the facilities that have in the northern part of the country, about six months back we heard that the promoters are looking to sell their stake in the company and get out, because of this debt problem. While approving their CDR the company estimated an EBITDA of about Rs 87 crore for 9 months of FY13 which they have surpassed by posting an EBITDA of close to about Rs 90-92 crore.


If one takes the top-line of close to about Rs 1,200 crore and the kind of interest seen in the pharma stocks, we have been hearing the story of Elder Pharma’s promoters selling their stake. Similar is the story here.


The company has the debt in Ind-Swift Laboratories close to about Rs 1,000 crore and if one sees the market cap, it is just Rs 150 crore. So, the enterprise value works to about Rs 1,150 crore against its net worth of Rs 900-950 crore. Virtually, the share is ruling on an EV of one time of the top-line.


Since the EBITDA started improving, I am expecting that EBITDA for FY14 should be at about Rs 160 crore or so. So, even if the stake sale does not happen by the promoters, improvement in the performance of the company can rerate the stocks going forward and as such it is ruling at its lower end. Its 52-week low is virtually at Rs 40 and share is now ruling at Rs 42. So, one can look for a short-term angle, maybe for the couple of months and they can also look for a price target of Rs 50 and those who keep a longer horizon can look for a higher level as well, maybe a level of about Rs 55-60 or so.

Disclosure: No personal holding in the stocks discussed.



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First Published on Jun 11, 2013 01:16 pm
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