In an interview to CNBC-TV18, SP Tulsian, sptulsian.com picked Apcotex Industries and Can Fin Homes as multibaggers.
The company has been hived off from the Asian Paints. They are makers of the synthetic latex, which is used in the paper, construction, rubber, etc. They are making synthetic rubber also which is used in footwear, tyre and other rubber products. In terms of performance, for FY13 they posted an EPS of close to Rs 24.7 on the top-line of close to about Rs 400 crore. The growth on the bottom-line has not been much. It is about 10 percent.
Traction in the margin and the application of the synthetic latex mainly into the paper and paint industry and both the industries are doing quite well. So that is definitely going to see the margin getting improved. If one sees the company having declared a 90 percent dividend for this FY13 that means dividend payout ratio is at about 45 percent of the EPS of Rs 24.9.
The shareholding pattern is very respectable, respectable promoter holding. PE is close to about 10. With this kind of pedigree one definitely finds the stock quite undervalued. The plant, which they have at Taloja is very modern, where the capacity expansion can also happen.
Taking all this into consideration one can book a price at 1.65 with dividend yield of close to about 4 percent on the 90 percent dividend. The company has declared if one buys the share now he is going to get Rs 9 dividend also. The company has been consistently raising the dividend, which was last year at 70 percent with EPS being at Rs 22.
So, I expect the company should be able to post an EPS of close to about Rs 30 for FY14. That can make the stock move to about Rs 300 in next six months. Even if I presume the constant PE multiple of Rs 10, which is now getting applied to, the stock remains the same.
Can Fin Homes
The company has come out with good numbers with EPS of Rs 26 for whole of FY13. This is housing finance company promoted by Canara Bank. It has loan portfolio of about Rs 4,000 crore and borrowing of about Rs 3,000 crore. The dividend payout is of 40 percent and in this last one year the company has raised their Pan India presence.
Earlier they had about 55-56 offices across India, which now got raised to about 70 offices with Pan India presence. The kind of growth which we have been seeing for housing finance companies, even in case of this company the EPS for FY12 was close to Rs 21 which now has got increased to Rs 26.40 for whole of FY13. This means we have seen an increase of about 25 percent in the bottom-line. In spite of the higher EPS of Rs 26 company has declared a dividend of just Rs 4 to plough back the profits to earn the interest on the housing finance. This is again a prudent strategy.
So, taking the call if one really sees the re-rating of the housing finance stocks, there are very few stocks available. People do not trust the stocks like Dewan Housing. They have limited choice like HDFC or maybe LIC Housing Finance.
However, even this stock looks quite good with a good parentage of Canara Bank or holding by the High Networth Individuals (HNI). Share is ruling at a price-to-book of 0.8. The present book value of the share is close to about Rs 190. If one sees the expected EPS of Rs 30 for FY14 the share is again ruling at a PE multiple of close to 5, on the historic earnings it is ruling close to 6.
All these things make the stock quite cheap, quite undervalued. One can take a price target of about Rs 190, which is the present book value of the stock at least in next six months.
Disclosure: I do not have holdings or interest in the stocks discussed.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.