Bet on Bombay Dyeing, Essel Propack: Tulsian

Stock-analyst SP Tulsian of sptulsian.com explains to CNBC-TV18 that he is positive on Bombay Dyeing due its plans and ventures in the realty sector, and on Essel Propack for its strong financials and likely fall in depreciation.

Below is an edited transcript of the analysis on CNBC-TV18. Q: What do you make of Bombay Dyeing in the light of reports regarding the announcement of a succession plan of the Wadia brothers?
A: I'm positive on Bombay Dyeing because of their realty plans alone. Their product mix of textiles and petrochemicals is not impressive. The company’s 350 exclusive home-furnishing outlets and about 2,000 multi-brand outlets have a very strong brand equity and very good capital value, but contribute nothing to the bottom-line of the company. But I am hopeful as these outlets could start to contribute significantly when FDI is allowed. But the company’s main focus is still on realty.
Their advertisements for launches during the last one month has forced other real estate stocks to catch on especially in Mumbai and Bangalore where the company has a strong presence thanks to a huge land bank and their abilities as realty developers also.
On the lines of Godrej Properties, the company developed the group properties on joint -venture and profit-sharing basis. The company posted a topline of Rs 2,200 crore in FY12 but the performance in Q1 of FY13 was flat and dull.
But going forward, my view is bullish. The company's debt position is close to about Rs 800 crore is not alarming and the land bank comprises 50 acres at Wadala and 50 acres at Lower Parel in central Mumbai. So profits from developing land-banks could keep contributing to company’s the financial performance.
Recently, the company split the face value from Rs 10 to 2. So going by the focus purely on realty and capital value in home furnishing, I think the stock looks a very good buy. Investors can expect a price of Rs 140 in six months, but I am keeping an ambitious target of Rs 175 - Rs 180 in the next 12-15 months. Q: What kind of a target would you ascribe to Essel Propack which has touched a 52-week high?
A: This stock has been moving up since the company posted its Q1 results. Last week, the company posted its Q2 results which were very good. The company is the largest laminated tube-makers in the world with presence in 12 countries and 24 plants that enables them to cater to oral care, pharmaceuticals, personal care, cosmetics and various industrial sectors.
The H1 results show a top-line of about Rs 900 crore a EPS of more than Rs 2 and a very robust the EBITDA margin of more than 17 percent with an EBITDA of about Rs 155 crore because of the increased depreciation burden accruing from the company’s 24 plants. The PAT for H1has been at a low of Rs 32-33 crore.
But going forward, the depreciation burden is likely to reduce and the cash flow on the income-tax computed on the written-down-value basis for income tax purposes will improve could bring down the debt of about Rs 600 crore. So for FY13 overall, I am expecting an EPS of more than Rs 4. But for FY14, I think the company should be able to post an EPS of Rs 5.50 to Rs 6. I think the stock looks quite good and my price target is at Rs 52 in the next six months or so. Disclosures:
I have no holding or interest in any of the stocks analysed above.