Here are SP Tulsian's multibagger ideas for the day

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com picks two stocks as his multi-baggers for the day.

Below is the verbatim transcript of the interview.

Latha: What is the big stock idea for the day?

A: We have been talking of these goods and services tax (GST) benefits which have been deliberated by the government or the GST council on Saturday. One sector which has come out or which stood out very well is the solar power because if you see the earlier announcements, the government had said that solar power will attract the GST at 18 percent but there was some confusion because in respect to if you have 5 percent on coal and if you want to have the grid parity, both the raw material generation for power should have the same rate of GST. In solar – sunlight is the raw material and then you cannot help 18 percent GST on solar power. So on Saturday, GST council has said that even solar power will attract GST of 5 percent and that will be seen quite positive.

With this background I picked up Swelect Energy Systems. This is a company having capacity to manufacture 100 megawatt of solar photovoltaic sales and they are also manufacturing the aluminium and iron foundry grade castings but apart from that, if you see the financials, because we all know the huge capacity additions taken place in FY17 in respect to solar power which has surpassed the wind also because solar capacity addition in FY17 was seen at 5,500 megawatt while wind was seen at 5,400 megawatt. So I think in the next three-four years, the capacity additions of solar will keep continuing and even if you see the government’s announcement of 100 gigawatt or maybe 1 lakh megawatt of solar power capacity by 2022, we will be seeing good amount of capacity additions coming in.

If you see the financial performance, capital cost of the solar power or maybe the solar power equipment are falling. So that is evident in the financials of this company for FY17 where the turnover fell by 10 percent from Rs 313 crore to about Rs 218 crore. So obviously if you take the topline then you will probably get disappointed but looking to the profit after tax (PAT), the PAT has increased by 30 percent and that has translated into an EPS of Rs 21.50 for FY17 against Rs 16.50 for FY16.

Coming on the financials of the company where the promoter stake is 64 percent, it is a totally debt-free company and if you take the networth of company of Rs 700 crore, which translates into a book value of Rs 700 per share, Rs 310 crore is lying in the cash and cash equivalent against the market cap of Rs 425 crore. So though you are seeing the share is available at a P/E multiple of maybe Rs 14-15 on the current year’s earning, if I knock off this Rs 310-305 crore from market cap of Rs 425 crore, you are just virtually getting the company at a P/E multiple of Rs 4. The kind of growth potential, debt free status, volume growth, margin expansion, high promoter stake, all these things qualifies this stock as a very good buy and the share now ruling at around maybe Rs 424-425 can move to a level of Rs 530 in next six months or so.

Sonia: I also wanted to discuss a stock that you track very closely, SpiceJet. What did you make of the numbers and given that the trend in terms of passenger growth is looking very good from hereon, would you buy into that dip or would you advise doing that?

A: Numbers are definitely disappointing but that has all happened in respect to the operational -- if you see the lease rental or maybe the fuel cost or maybe the airport charges and that has largely – we have seen an increase of about Rs 150 crore in all this expenses but that has smartly controlled by reduction in the other expenses. So I am saying because the fuel expenses are all in line with the other airlines that we have seen in case of Jet and all that. So optically yes, what you will be seeing – the results are not going to be cheerful or are not seem to be cheerful because the operating profit of Rs 40 crore seem to be quite disappointed but I am happy that the operating expenses have largely been controlled by reduction in the other expenses. So results are definitely bad but if one can look to buy the stock then he should look to enter into the stock maybe at a lower level of about Rs 95 or between Rs 95 and Rs 100. Numbers are disappointing largely because of the three expenses having seen risen on this airline.