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Last Updated : May 10, 2013 12:31 PM IST | Source: CNBC-TV18

SP Tulsian's multibaggers: Escorts and Cochin Mineral

SP Tulsian of sptulsian.com is bullish on Cochin Minerals and Escorts and recommends the same to investors.


In an interview to CNBC-TV18, SP Tulsian of sptulsian.com recommends Escorts and Cochin Mineral as his multibagger picks. He believes Escorts has a good support at Rs 61-62 and gives a price target of Rs 80 for the next six months.


On Cochin Mineral, Tulsian is taking a price target of Rs 220 on a conservative basis for next six months. He is also optimistic on positive Q4 results and says the stock could see a price of Rs 220 in the next on month itself.


On Escorts


The company's EPS of Rs 3.15 or the higher PAT has come largely because of the tax reversal. So, March is the second quarter for the company and I will not say that that is very exceptional. However, what I liked about the company is that its consistency is now being posted by the company every quarter.


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It’s top-line of Rs 1,000 crore, EBITDA of Rs 55 crore and bottom-line of Rs 30 crore seems to be the call for next four to six quarters and that translates into the EPS of close to about Rs 10 if one just takes the present equity of the company at Rs 123 crore. 


The company should be able to post a PAT of Rs 120 crore. The first half has seen an EPS of Rs 5.5, but it is because of the tax reversal of about Rs 6 crore in the second quarter because of which the results are looking good with PAT at Rs 36 crore. However, if one takes a yearly call, probably FY13 can give you an EPS of Rs 10 and maybe FY14 can give an EPS of Rs 12.50-13. T


he company has been controlling their debts. We have seen a marginal reduction in the interest liability every quarter of about Rs 1-1.5 crore. What I liked about that is the stabilisation. The company is becoming almost Rs 4,000-4,500 crore top-line company and will probably hit USD 1 billion next year.


The kind of feedback or the estimates which we are getting on the monsoon for this season that it is going to be normal and  that will be seen quite positive for the tractor maker. Escorts being a leading tractor maker, having the second-third position after Mahindra and Mahindra and Tafe, I think the company should be able to get rerated.


The share is ruling at a price-to-book of 0.5. The book value is Rs 130 and share is ruling close to about Rs 65. So, taking all this into consideration and whenever we see the renewed buying or the stock comes on focus, we suddenly see the share price start moving up. That is what I am visualizing in the next one month or so. The bottom-side is looking very minimal, maybe a level of about Rs 61-62 that can be taken as a good support and with price target of Rs 80 in next six months one can buy this stock.


On Cochin Mineral
 
We all know that titanium dioxide is used by the pigment & paint industry and in paint industry, 20 percent of the raw material cost is constituted by the titanium dioxide. This company is making synthetic rutile which is the raw material for making titanium dioxide. Apart from that, they have two other by-products also that is ferric chloride and ferrous chloride which is used for water treatment and sewage treatment.


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This company is a 100% EoU. They have plant in Kerala. If you see the performance of the company, maybe Q3 numbers have been little subdued with an EPS of close to about Rs 11-12, but inspite of that, for the whole of nine months, the company has posted really very good numbers with top line of Rs 185 crore, PAT of Rs 45 crore which translated into an EPS of Rs 57 for nine months and it is a debt-free company.


The board of the company is now meeting on this Monday that is May 16 to consider their Q4 numbers. If one sees good numbers coming in from the company, I will not be surprised to see the share moving to Rs 230-240 also maybe in a week to 10 days time. So, the idea of choosing this stock ahead of the results is that on the downside it is very minimal. On the upside, one can see a rise of about 20 percent in next one month or so. If the Q4 numbers are likely to be good and that is what my expectation is, that on a sequential basis things are likely to be good. I expect them to post an EPS of Rs 16-17. So, overall FY13 will give an EPS of close to about Rs 74-75 but going forward, FY14 can have an EPS of close to about Rs 80 plus.


It is a debt-free company. It is a joint venture company. About 55 percent stake is held by the promoter in which 12 percent is held by Kerala State Industrial Development Corporation, 20 percent is held by HNIs and 25 percent is held by the public. Apart from that, this company is holding Rs 12 crore investments in Kerala Minerals which is a natural resource company. We do not know the exact profile of that. Whether that is a strategic investment or a minority stake, but even if one considers some reasonable appreciation in that value, either on monetization or maybe the operational performance of that company, the profits also will start adding. So, if you take Rs 80 EPS for FY14 the share is ruling at a PE multiple of close to 2.5 times. In the past, the share has seen a good run up. So, I am taking a price target of Rs 220 on a conservative basis for next six months. However, as I said, if Q4 results are good, probably the Rs 220 target can be seen in the next one month only with very limited downside risk.

Disclosure: No holding or interest in both stocks discussed.

First Published on May 10, 2013 10:26 am
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