Rajen Shah of Angel Broking is extremely positive on the market and sees the Sensex crossing 21,000 mark by this year end.
He believes recent deals like the Qatar Foundation picking up 5 percent stake in Bharti Airtel, committing Rs 7000 crore, Unilever's voluntary open offer to hike stake in its Indian arum HUL and IKEA getting FDI approval have given a boost to the market.
“India has not lost sheen. I am positive on the markets and by the end of this year we should be beyond 21000,” he says in an interview to CNBC-TV18.
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Below is the verbatim transcript of Rajen Shah’s interview on CNBC-TV18
Q: What did you make of Jaiprakash Associates numbers, how do you think the stock will react to their earnings?
A: The numbers are disappointing. If you see the consolidated numbers, the earnings per share (EPS) is hardly Rs 2.5 and stock is at about Rs 75. It is a richly priced stock, but the sale of its cement units could help the stock sustain at these levels because that would go towards reduction of debt which will bring down the interest burden and increase the profitability. Plus, there is a probability of JP Infratech stake offer for sale so stock should be in the range of Rs 70-75 for a while.
Q: The stock that flew last week was Hindustan Unilever (HUL), up more than 20 percent after the Unilever news. What are your suggestions with respect to that stock?
A: For the time being HUL has done its course. Between Rs 540 and 580 it is trading at around 31-32 times the current year estimated earnings. We are expecting about Rs 18 earnings for HUL in the current year FY14.
So at about 32 times earnings, the stock looks to be fairly priced around Rs 560-580 kind of range. It makes sense to tender the shares in the open offer which could open next month. Or if the stock inches to about Rs 585 levels, it makes sense to exit in the open market itself and deploy that cash into other MNC pharma companies or other FMCG companies.
Q: Both Escorts and Mahindra & Mahindra (M&M) reported quite a good set of tractor numbers in April and both of them rose last week. Would you buy either of them now?
A: Yes, we are buyers in both M&M and Escorts. M&M reported more than 35 percent growth in the April tractor sales figures that came out last week and Escorts reported a fabulous 43 percent growth. So, it is a strong growth in case of Escorts and it is declaring its numbers this week and we are expecting bumper numbers. The stock is grossly undervalued, infact it has moved up from Rs 49 to Rs 61, but we have a target of at least Rs 90-95 for escorts over the next six months.
Q: What about Titan Industries, it has been through a rough phase ever since gold prices collapsed? What did you make of the numbers and what would you do with the stock?
A: Numbers have been okay. We liked the numbers and even for the current year we are expecting reasonably fine growth in its businesses, the watches and the gold and diamond business. The spectacle business is also picking up. This year we estimate Rs 10 kind of earnings for Titan and the stock is at around Rs 270. So, stock is richly priced but if it comes down to around Rs 220 or Rs 200 levels, it makes sense but at 27 times the current year earnings certainly not a stock to get into at this level.
Q: How are you feeling about the market per se, we got a bit of a cut on Friday but generally flows have been quite supportive for this market? How are you calling the rest of this month?
A: Last month, we were at about 18400 levels, we had given a strong call that there is lot of value. Fortunately, the markets have done pretty well, moved up almost 1100-1200 points. It could take a breather or may correct a bit, but I am very positive on the markets. The recent deals like Qatar Foundation picking up 5 percent stake in Bharti Airtel, committing Rs 7000 crore. Unilever talking about taking the stake to 75 percent and committing about Rs 29000 crore, the IKEA getting the FDI-approval are all positive things.
The recent visit by many of the top companies, Japanese electronic giants like Panasonic coming to India, indicates that India has not lost sheen as many of the speakers talk about on many channels. I am positive and plus minus here and there, but net-net we are positive on the markets and by the end of this year we should be beyond 21000.
Q: Bunch of cement numbers that came out through the weekend, anything that you like and are recommending from cement?
A: Cement numbers like ACC, Ambuja Cements were actually disappointing. The profits are because of write back of deprecation and income tax respectively in case of ACC and Ambuja. But because of the slowdown in the economy and construction, the results have been disappointing. However, on valuation basis we like India Cement, 16 million tonne cement company you are getting for about Rs 2500 crore. Even if you add debt of about Rs 2000 crore, you are getting it for hardly Rs 300 crore per million tonne. Whereas other players like ACC, Ambuja, Ultratech, you are getting at between Rs 800 crore to Rs 900 crore per million tonne. So on valuation basis, India Cement would be our top pick at Rs 85-86 levels.