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Buy Swelect Energy Systems: SP Tulsian

Buy Swelect Energy Systems: SP Tulsian


In an interview to CNBC-TV18, SP Tulsian of sptulsian.com shared his readings and outlook on the market and specific stocks and sectors.

Below is the verbatim transcript of the interview.

Anuj: This is a stock that you had recommended earlier as well, Swelect Energy Systems, in June, still good at these levels?

A: I recommended this stock on June 5 at Rs 424 and post that, in couple of months the stock moved to Rs 658; that means giving a return of about 60 percent. However, maybe because of this weakness or maybe because of the profit booking, the stock has now corrected to Rs 507. When the recommendation was given earlier at Rs 424, the theme was excellent, FY17 numbers posted by the company and the same thing continues because the company has posted robust Q1 numbers again.

If I just quickly take a call on the standalone income, income is at Rs 53 crore and PAT of Rs 7.3 crore. If I make a comparative valuation of year-on-year (YoY) basis, PAT has almost doubled. EPS has increased to Rs 7.20 from Rs 3.80. I think that this momentum is likely to continue. If you take a call on the consolidated numbers, probably the company should be able to post an EPS of closer to about Rs 35-36 for whole of FY18.

At that time also I said, now again I am repeating, that if you take a call on the net worth of the company, it is Rs 700 crore translating into a book value of Rs 700 core. Of the Rs 700 crore net worth, Rs 310 crore are lying in the cash and cash equivalent which translates into Rs 310 per share. That means you are getting the company at a core valuation of Rs 200 which translates into a P/E multiple of just 6 times net of cash, or if you take the entire, it is at 15 times.

Again, the company has a very robust business model. They are providing solar power solutions and they are also making iron and aluminimum alloy foundry casting. So, taking overall perspective and overall view on the results and on the company looking to the cash rich status, very good expected EPS of about Rs 35-36 for FY18, I think the stock qualifies a good buy at Rs 507 with a target of Rs 610 in six months or so.

Latha: I wanted to ask you about the bunch of smaller stocks that came out with numbers. One was not expecting SML Isuzu, and then in another category Shipping Corporation of India (SCI), all these to do so badly. Is there anything in the midcap stocks that came in the last 24 hours that looked good to you?

A: I think SML Isuzu was expected to post bad numbers looking to the monthly sales numbers but, yes, you are right, the worst results which we have seen was worse than what was expected to be. However, taking a call on some of the good results which have come, in fact I have taken on the post market close because majority of the results have seen coming in the market hours, but if I take a call on some of the results which have come after market hours, one stock which looks very good is Stovec Industries.

The company has posted really excellent numbers with EPS of Rs 40 for Q1 against FY17 EPS of Rs 107. That result looks good. Spicejet, also pleased with the results. If you take a call, maybe Rs 175 crore PAT against Rs 149 on the YoY basis. One result which has really come out very good, in fact two results from the sugar space, Dwarikesh Sugar, posted the results during market hour with EPS of Rs 31 in Q1.

Triveni Engineering again has posted excellent numbers with PBT of Rs 84 crore against Rs 62 YoY. However, the best part is that Triveni Engineering has sold sub 19 lakh bags in this Q1 while still they are holding 33 lakh plus bags to be sold in Q2 and Q3. So what is the visibility on the Q2 and Q3 is very important and probably Q2 numbers is going to be seen better than Q1 which is always seen to be a dull quarter because of the non-operations seen at the sugar mills.

So, these are the few results, Dwarikesh Sugar, Triveni Engineering, Stovec Industries, and Spicejet, they are looking good.

Anuj: What is the advice on Prakash Industries and J Kumar Infra now that they will start trading today?

A: The fear amongst the retail investors are that probably again some relief from the Supreme Court will come, it may again go into freeze and all that. So there are weak hands or maybe weak hearted investors who will definitely be looking to exit. However, I don’t think that both the stocks, because both have a price band of 20 percent. So I don’t think that both should really hit at the lower level, but if someone is really holding them, I don’t think that there is any reason to worry.

I am not honestly expecting any kind of relief coming in from the Supreme Court because these are not the matter to be taken by the Supreme Court, definitely the restoration of the trading will continue in the stock. Difficult to predict for the day on both the stocks, but on a fundamental basis, it does not deserve a 20 percent lower circuit but definitely both will be seen in the weak territory for the day.

Source: moneycontrol


Anand Gupta Editor - EQ Int'l Media Network


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