In an exclusive interview to CNBC-TV18, SP Tulsian of sptulsian.com spills out his multibagger picks —Cummins & Ruby Mills .
He finds Cummins strong business model, health order pipeline and consistence on margins lucrative to acquire the stock with a time horizon of about six to eight months. He sees vast rerating for the Ruby Mills stock and says, he is positive on the stock from both short-term and long-term point of view.
Below is an edited transcript of SP Tulsian’s comments on CNBC-TV18. Also watch the accompanying video.
On Cummins
Cummins may fall at about 1.5% to 2% in the EBITDA margin. It is likely to get offset by the volume increase of the company. In FY12, the company posted an EPS of Rs 30 and has been a consistent performer with top line of close to about Rs 4,000 crore. In FY12, earning the EPS of Rs 30 is likely to increase to about Rs 35 to Rs 36, which is a PE multiple of 15.
The stock has been ruling into a PE multiple of close to about 25. They are into power generation, automotive business and manufacturing of diesel and gas based generators, which have robust demand into the industrial segments. They have a strong business model and a strong order pipeline. The company has always maintained its margins.
One can acquire the stock at a price of Rs 700 and within a time horizon of about six to eight months he can get a price of about Rs 750.
On Ruby Mills
Ruby Mills is an interesting play. The company owns about12,200 square meters of land at Dadar in Mumbai. They have leased the land for joint development in which the ownership, building and the land will remain with the company. The huge inflow from this property has started flowing in into the books of the company.
In FY11, they booked an income of about Rs 70 crore from this company. About four lakh square feet has been leased out and by end of 2011, and the entire property will get leased out through the lease rental or the advance premium. The company is recognising the income from this property on the cash flow basis.
The company also has their existing real estate property developed on the same plot. It has the balance FSI of close to about 5-6 lakh sq. ft that is likely to get developed in the next six months or so. The valuation of the Dadar property estimates to about Rs 2,000 crore. The company should be able to have a PAT of close to about 75-100 crore every year, on a sustainable basis, which will give them an EPS of close to about Rs 300 to Rs 350 starting from FY13.
There is going to be a vast rerating of the stock. The stock is likely to be move to about Rs 1,500 in next six to eight months time. I am quite positive on the stock from both short-term and long-term point of view.
On JSW Steel
In the near-term there is not much of an upside until there is clarity on the mining issues and production. The company recently raised their production to 10 million tonne and the interest and appreciation burden is to be booked by the company in the financials. Hence, with all this into consideration, I don’t think that one can really take comfort or safe call for at least for this quarter. One has to wait for another 10-15 days to find out how the events shape up. In the near-term, I don’t think much weakness is seen from hereon.
On Lanco
There is no general comfort on most of the infrastructure stocks — GMR , IVRCL , Lanco or GVK . One cannot say if the trend applies to Lanco or if Lanco has bottomed out at Rs 16, however, there is renewed interest with the kind of up moves seen Unitech, which has also been deceptive.
I won’t be using this as a fundamental call but for the technicals, one has to play with the trend. One has to take a day to day call but for the fundamentals one can see shares coming back to Rs 15 to Rs 16 level where he can contemplate buying.
On Power Grid
Power Grid has a strong project pipeline but they all seem to be back ended. Their project with Tata Power was expected to be complete in FY12 but not much has been flown in. The Q1 result has been a bit disappointing and Q2 is unlikely to have any positives. Therefore, taking all this into consideration, the stock has been moving in a range post its FPO holding — 95 on its bottom and 110 on its top. Hence, maybe that was a broad range and it will continue to remain within that range. One can take it as a stock likely to move in a range of Rs 100-110 in next couple of months or so.
On IVRCL
IVRCL earnings are quite bad and in fact the IVRCL Prime, where the company has majority stake has been seen as the culprit. Going by the standalone performance of IVRCL Infra, I don’t think that there are any concerns. However, on a consolidated basis, the market is going to be nervous on the stock because of the results.
On the listing of Inventure
It is unfortunate because to see de-growth in the business of the company. The client business fell by more than 50% in FY11. The company’s debt stands at 50 crore, expected market cap is Rs 250 crore, EPS was Rs 4.44 in FY12 and it translates to a PE multiple of 25 plus. I don’t see a value of more than Rs 30 but you never know what will be the speculative element. Instead of looking to the fundamental one has to watch whether the operations will go on for a week or a month or ten days and when it will subside. However, ultimately the issue has to come and settle at around Rs 30.
On Reliance Infra
The developments have been positive but I don’t know how long it will get reflected into the share price. Whenever we see the kind of these positive news flows or maybe the short coverings or some informed buying coming in and you see these stocks moving up by Rs 25 to Rs 30 in one go. Hence, probably it can take the share price to about Rs 585 to Rs 590. However, I won’t be taking a positive call on the stock. It can give a trading bump for those who want to look for the trading gains, maybe in next couple of days or so.
Source : moneycontrol.com
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