SP Tulsian, sptulsian.com has picked Punjab National Bank and Brigade Enterprises as his multibaggers for the day.
According to him, PNB looks good on a fundamental basis. "In about four-five months, one can expect a price of Rs 800 with very limited downside," he adds.
Brigade Enterprises, he says, can move to about Rs 60 in the next six months or so.
Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy.
Q: Why have you picked Punjab National Bank (PNB)?
A: The share has hit a 52-week low. The reason for it is rise in the gross non-performing assets (NPA) and net NPA and maybe a marginal fall on the return on assets (RoA).
But looking at the other side, they have the highest net interest margin (NIM) for the June quarter amongst all the public sector banks. They have NIM of 3.6%. If you go by the status of the bank, this is the second largest public sector bank, after State Bank of India, the largest nationalised bank with 5,700 branches. Because of the good NIM of 3.6%, the company posted an earning per share (EPS) of about Rs 37 for Q1.
The situation is really bad. If you take the call on aviation, telecom, infrastructure, power generations, practically you have defaults and the sticky loans in each quarter. For instance, Kingfisher, if the banks are able to realise the money, which I am quite hopeful that maybe in two-three months we are bound to see that, you may have the write back of the NPAs or the provisions earlier created by the bank.
If I go by the present book value of Rs 815 and if I am expecting about Rs 110 EPS in remaining three quarters and knock off expected dividend payout of Rs 25, that leaves me with a book value of Rs 900 as on March 31, 2013. The book value, as of today, is Rs 815. So, share is ruling at a price to book of 0.75. We have not seen this kind of price to book for the larger PSU banks.
Even if you take a call as the second, third and fourth largest bank like Bank of Baroda (BoB) and Canara Bank, if I compare this bank with BoB then BoB even today is ruling at a price to book of 9. Wven if take the expected EPS of close to Rs 120-125, even that is virtually ruling at the same level of Rs 625-630.
Taking all this into consideration, I think the stock has very limited downside. The Bank Nifty is playing little trick or maybe the technical play is happening on the Bank Nifty. Till expiry, it may remain weak. I am expecting the Bank Nifty to hold at the level of 10,000, but again expect the upmove in Bank Nifty in September series where we may see Bank Nifty moving back to 10,600-10,700. In that, the larger PSU banks like PNB, SBI, BoB will also be contributing.
Taking all this into consideration, I think PNB looks good on a fundamental basis. In about four-five months, one can expect a price of Rs 800 with very limited downside.
Q: What about Brigade Enterprises?
A: I have been keeping my positive view on the real estate stocks. If you see in each pocket, whether you talk of Mumbai, NCR region or Bangalore, Brigade is termed as a very quality developer in the pockets of Bangalore. Though they have presence in the southern parts of India, Mysore, Chikmagalur, Chennai, Bangalore, but about 80% of their projects, in terms of value or in terms of area, are concentrated or located in Bangalore.
If you see for the year from 2007 to 2011, the company used to be in India’s top-10 builders. That means they have been keeping the pace with a size also and with the quality also. Going by their land bank, if I take the net present value of the lands, though it is very difficult to take a call because of the diverse land parcels held at various locations, but rough calculation indicates that the net present value works at about Rs 92-100 per share.
If you go by the debt positions, which has been the main reason for fall of all the real estate stocks, this company has a debt of about Rs 600-650 crore on a net basis. I am seeing that it is not as such a big threat for the company of this size, which is expected to have a top-line of close to about Rs 600 crore with bottom-line of close to about Rs 60 crore and EPS of maybe about Rs 6 or so.
If you go by the shareholding pattern, 58% is promoter holding, 32% is held by the individuals, the HNIs who are holding the stock in the company for quite some time, maybe for last three-four years. So, taking all this into account, I think the stock looks to have bottomed out and can move to about Rs 60 in the next six months or so.