Multibaggers: SP Tulsian's picks that can gain over 35%

SP Tulsian, sptulsian.com has picked up Binani Industries and Triveni Engineering as his multibaggers for the day.

Binani Industries, he says, can move to about Rs 175 in six months. According to him, Triveni Engineering can move to about Rs 30 in the next six months. From the current market price, both shares can give over 35% returns. Houseviews: 4 stocks that you can avoid in today`s trade Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Sonia Shenoy. Q: Why have you picked Binani Industries? A: It is a holding company. They are holding 97.5 percent in Binani Cement. I have a positive bias on Binani Cement. If you see their zinc business, they had a very small capacity in Kerala. They earlier used to import zinc ore and process it. But now the time has come to literally wind up those operations. I don’t see any viability. They cannot make money by competing with Hindustan Zinc, which has much larger capacity of about 7-7.5 lakh tonne against 25,000-30,000 tonne of this company. So that is likely to get closed sooner or later. The company now has been focusing more on the fiberglass. They have recently acquired a bit overseas unit. It seems that the management probably would have decided to focus more on the fiberglass business. Binani Cement has presence in Rajasthan. They have two cement plants in Rajasthan with a capacity of 6.5 million tonne per annum with the matching captive power. They have the cement manufacturing capacity in Dubai, Mauritius and Africa. The combined capacity of all these cement units is close to about 10 million tonne. There is an implementation of the increase in the capacity to about 15-16 lakh tonne in the next couple of years. But I am not taking a call on that expansion move at all. Right now, I am not considering that. If you really see the mid capacity cement stocks like Heidelberg, Prism Cement, Mangalam, Kesoram, all of them, who have the capacity of two-five million tonne, have really shown a good appreciation. Companies, which have a capacity of 10 million tonne, there are very few, maybe four-five companies like Shree Cement, India Cement, Madras Cement, somewhere around 10-12 million tonne capacity has a very high appetite by the potential buyers. I am expecting Binani Cement to post a top-line of close to Rs 3,000 crore with a profit after tax (PAT) of close to about Rs 300 crore, which was at about Rs 60 crore last year. That is a very bullish call. The equity of this company is very small, close to about Rs 30 crore. They are sitting on a very huge debt of Rs 3,500 crore, while the enterprise value of the company is close to Rs 4,000 crore, with market cap of close to about maybe Rs 400 crore. I expect that probably the management will initiate a move either to expand and improve the profitability in the cement sector or may even think of selling the cement division because the company cannot carry on with a debt of Rs 3,500 crore for a very long time. Taking a pure fundamental call and the valuations of the cement division, which is a 97.5 percent subsidiary of this company, I expect that share can move to about Rs 175 in six months. But I hold my positive view for next couple of years as well, while the share can move to about Rs 250 in next two years or so. _PAGEBREAK_ Q: What about Triveni Engineering? A: I am focusing more on the UP (Uttar Pradesh) based sugar mill because the crushing season, which will start from October 1, is going to see the increased production of about 15-20 percent for UP state per se. I won’t be surprised to see UP and Maharashtra going neck to neck in terms of the production of sugar for the coming season. Maharashtra and Karnataka are likely to show a de-growth because of the higher base and poor monsoon. If you need to choose any four-five companies from UP, you have Balrampur Chini with a capacity of close to 72-73,000 TCD (tonne crushed a day), you have Bajaj Hindustan with a capacity of 120,000 TCD and Triveni with a capacity of about 61,000 TCD with about 7 mills. Also, they have the matching capacity of Cogen and distillery also. Distillery of 160 KLPD (kilo-litre per day) and Cogen of about 68-69 megawatt with 45 megawatt supply to the grid. If you see their financial working for first nine months, it looks really scary. One may say that the company has posted a top-line of Rs 1,300 crore, posted a net loss of about Rs 90 crore, but the company is sitting on an inventory of about Rs 900 crore as on June 30, 2012. That inventory is having an unrealized gain of about Rs 110-120 crore. That is likely to get sold partly in this quarter and remaining by December 31 by the time the season starts. So, that unrealised gain can substantially reduce the losses. Taking all this into consideration, I am keeping my positive stance on all the sugar mills. One may choose any. Infact you have about may be 12-15 sugar mills available from UP. You may choose any, but it is better to go with the higher capacity and with companies having good inventory as of now. I hope that share can move to about Rs 30 in the next six months or so largely because of the positive stance on the sugar sector per se.