SP Tulsian of sptulsian.com in an interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy gives us some multi-bagger stock ideas.
Below is a verbatim transcript.
Q: Mahindra Satyam, post the Muhurat session; has fallen all the way from Rs 100 now to Rs 62. Do you think it is a good pick at this point?
A: Yes, it is a good pick. If you see the correction which had taken place in the stock, mainly after their Q2 results as there had been concern on the margins. Except for that, I don't think that there is any problem. It has a marketcap of Rs 7,500 crore and if I knock-off the cash which the company is sitting on of about Rs 2,500 crore, the net EV is close to about Rs 5,000 crore.
You have the topline of the company in place, the new management is ramping up the business but maybe at a compromised margin because their first and foremost job is to retain clients while their second concern has been the high employee cost as they may have to even give out a higher increment to retain the employee strength of about 25,000-27,000 people.
Taking all this into consideration, the topline of close to about Rs 8,000-9,000 crore on an annualized basis, even if I take of the current year is a multiple of 0.6 on the topline. Looking at the value of 5,000 crore on a net EV basis, I don't think there is a further downfall because the correction, which was triggered by the disappointing Q2 results continued with the bad market sentiment as well.
Technically, if you see all the long positions are squared off. Those who bought the share with a short-term view exited from the stock. From hereon, this looks like a very good stock to buy which can maybe give a price of Rs 80 in the next couple of months.
Q: The banks corrected quite a bit as well over the last fortnight. Do you think Vijaya Bank corrected enough?
A: Due to the banking scam fear, we have seen the large stocks correcting because three banks, the names which appeared in the CBI probe which are PNB, Bank of India and Central Bank have been showing some concern. There is some profit booking seen in Bank of Baroda and Canara Bank. Even SBI took a beating.
IOB, Dena Bank, Vijaya Bank, UCO Bank - I don't think there has been any concern, inspite of all of them going through a correction. The maximum correction we have seen is in Vijaya Bank which is purely on the technical factors. The bank recorded a price of Rs 120 in the last month itself so I don't see any reason why this cannot move back to those levels of Rs 120 in the next couple of months.
Taking all this into consideration probably the maximum upside which I am seeing amongst the midcap PSU banks will probably come from Vijaya Bank because if you go by the EPS of 15, it is ruling at a P/E multiple of 6. Taking all this into consideration probably Vijaya Bank looks the cheapest amongst the midcap PSU banks.
Q: What is the rationale behind choosing Hindustan Motors because this is a stock that has been in slumber for long, it has virtually moved nowhere in the last six months?
A: That is true. But again for the stock, the main trigger is regards to the stake sale by the management. I have heard they have been deliberating to exit from two assets, one is their Chennai car plant which can fetch them about Rs 400 crore or alternatively they are deliberating on selling 49% stake which hold in Avtec.
Avtec is an engine and transmission equipments maker and has a very good presence. We don't have much of the financials but we learnt that this 49% stake can fetch about Rs 400-500 crore and if that happens taking a debt of less than Rs 100 crore in the books of the company because the problem with the company is they do not have the legacy of debt.
If they get out of this 49% stake from Avtec, this can get cash liquidity of about more than Rs 250-300 crore. If you go by the present marketcap, it is close to about Rs 400 crore. Then they are left with their core business of making cars as well as the auto ancillary and they can then take a call on the Chennai car plant also.
The company is quite rich if we value all the assets but except for the BIFR problem out and curtailing the current year's losses, if things happen then the share can move back to close to about Rs 35-40 levels maybe in the next two-three months time.
Q: Of the non-index real estate stocks which have got hammered, HDIL and DB Realty, all of which are trying to claw back, which one would you have the most confidence owning at this point?
A: On a pure fundamental basis, DB Realty holds the largest value where their present marketcap is Rs 5,000 crore. Yesterday, their management clarified that they have a debt of Rs 400 crore only and considering the land bank they have been holding, their total land bank as of date is over 65 million sq ft.
I am referring the saleable area of which 45 million sq ft saleable area is in Bombay alone. When you compare this with HDIL, and their land bank of a similar quantity, they have presence in the extreme suburbs while DB has presence in Mahalaxmi, Central Mumbai, Goregaon and Borivali.
On top of it they have close to about 16 lakh sq ft of TDR holding with them, the present value of that is easily encashable which is about Rs 500 crore. If I just knock off the debt with this TDR value, which can easily get realized, this company with a marketcap or enterprise value of 5,000 crore looks quite reasonable. I have not factored in the Bandra project which they have recently bagged in this 65 million sq ft.
Q: A quick comment on Reliance Industries and what kind of investment strategies should anyone have? Do you think after the dip that we saw yesterday, it is good to accumulate at these levels?
A: Maybe on a further fall of about Rs 10-15. I think at Rs 965-970 because generally Rs 950 seems to be a strong value seen in the stock. Maybe Rs 970 could be the level because the drop in the bottomline due to the expected fall in the gas production has already largely been factored in the price.
Q: What is your favourite pick in the entire auto space now for a medium-term to a longer-term outlook?
A: In the four-wheeler I will go with Tata Motors and in two-wheelers I would prefer to go with TVS Motor because of the low value and because of the continuous improved performance posted by the company month-on-month. It still has quite a good upside and can hit to about maybe three digit levels in the next four-five months.
Q: You have picked Swan Mills which is trying to get out of the real estate business - why do you like that story?
A: Swan Mills had two properties one at Sewri and second at Kurla. If you see the Kurla property that was totally developed. Earlier they leased that premises to two-three corporates but now they have decided to sell the property and completely exit out of that.
The same thing is happening to their property at Sewri. They had a JV with Peninsula Land in which Peninsula was entitled for 22%. Now that project is also on the verge of completion. Maybe in the next 12-months time, they will be able to handover the possession of the property at Sewri also. They will be making a huge gain of maybe about Rs 2,500-3,000 crore from both these projects and they have taken a conscious decision to move this entire amount into their power generation company.
They have already taken a stake of 49% in a gas based power project, which is coming up at Pipavav with a joint stake held by GSPC and Gujarat Industrial Power which is at 700 megawatt and expandable to 1,000 megawatt with an eventual target of about 3,000-3,500 megawatt of capacity over next three years.
Apart from that, they will be entitled for carbon credit to the extent of 70% of whatever is generated from that project. This is becoming more a power generation company with very less leverage in the books because they are using the entire proceeds of real estate which that they will be realizing by the sale of their property into this power project. Maybe if somebody keeps a view of about one year, I don't see why the price cannot move to around Rs 250 levels.
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