Here are fundamental trading ideas from SP Tulsian

Coming on South Indian Bank, I am bit disappointed on the asset quality though the management has clarified that the entire watch list assets have been provided for. However, in spite of that, an increase of almost 50 percent in the net NPA is going well. The kind of run up which we have seen in the share price of South Indian Bank, in the recent past, probably we will see the profit booking.

So, on the expected line from IndusInd Bank and disappointment from South Indian Bank.

Anuj: What is your top recommendation for investors?

A: My recommendation is GNA Axle. This is an auto ancillary company and they are making rear axle, shafts, spindles for commercial vehicles, tractors and construction equipment. This company went public in September 2016 and this company is having two manufacturing plants in Punjab and the customers are – because they are supplying as I said to commercial vehicles, tractors and construction equipment so they have the customers like Mahindra and Mahindra (M&M), Escorts, Eicher Motors, Automotive Axle, ZF Steering, who are all tractors makers and construction equipment.

What I liked about the company because we have been keeping the positive stance on all the auto ancillary stocks and one thing which I liked about the company for FY17 that once the company has gone public, sometimes post public issue, you have a better or maybe the stringent disclosure norms and all that. So, inspite of the topline remaining constant at about Rs 510-515 crore because same kind of topline was seen for FY16 also at Rs 506 crore which was at Rs 515 crore in FY17, the PAT of the company has risen by about 14 percent from Rs 26 crore to close to about Rs 30 crore which has translated into an EPS of closer to about Rs 14.

Looking to the product profile and looking to the customers demand, the kind of growth which we have been seeing in the tractor market because if you are taking a call on the positive bias seen building up on the tractor sales, which we are seeing having reflected into the performance of maybe VST Tillers, M&M, or maybe Escorts kind of things, this company is seen to be quite a big beneficiary and I won’t be surprised to see company posting an EPS of closer to about Rs 17 for FY18 which translates into a P/E multiple of 14-14.5 times.

If you see, the company is having debt free status, promoters are holding about 71 percent, 16 percent is held by the institutions and all that. So, taking a market cap of Rs 500 crore or maybe Rs 520 crore with a very low float of about maybe 15 percent in the public and the kind of growth which we are going to see from the performance in the current year, that is FY18, as I said EPS of closer to about Rs 17, I am expecting this share to move to a level of about Rs 305 in the next six months or so.

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