2012 bets: Aashish Tater picks two stocks

In an interview to CNBC-TV18, Aashish Tater, head of research of Fort Share Broking says, Tilaknagar Industries and Sahyadri Industries are good long-term bets.

For Tilaknagar Industries he has a target of Rs 70. For Sahyadri Industries he has a target of Rs 100.

Also read: Nifty may test 4200 soon, says Darashaw & Co

Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: Your first pick is Tilaknagar Industries. What is the story there?

A: Some time back in April 2011, the company was facing litigation on its two brands— Savoy Club and Mansion House. The case is resolved. The court order is in favour of the company.

The stock was hovering around Rs 70 and has now cracked down to Rs 32. All the negative news that we could foresee has already been priced into the stock price. It is available at the PE multiple of less than eight times one year forward.

The company is expected to do a modest growth of 22% in terms of top-line and 24-25% in the bottom-line. The company is right now foraying into the northern and the eastern part where they are looking to expand their product portfolio. They are also entering into high margin end business in whisky.

Globally not a single company, which is selling brandy or any other wines, except United Spirits, Tilaknagar Industries and Radico Khaitan, are available at a single PE multiple. On PE growth ratio, we felt that these are lucrative business to look into.

Markets can be irrational for a period of six-eight months. But when it comes to brand valuation, you are getting best brandy business at a market-cap of close to Rs 390 crore odd and Rs 400 crore of debt that means Rs 780 crore.

The company may clock growth of 20% CAGR over next two-and-a-half to three years. That means in less than 18 months you will be finding an EPS of close to Rs 5 for the company. So, on Rs 5 EPS, the stock is right now around Rs 32-33 mark. The promoters have been accumulating.

If you see the last 100 days chart, the stock has been making higher high and higher low in terms of stock prices, Rs 27.50 in September, Rs 27.70 in October, this time it is Rs 30.10. That’s means that chartically also the stock price is getting revived.

There are positives that are getting built in. The worst is already factored in as the ruling has been in favour of the company. Thus, it is a good bet from a medium-term perspective. We have a target of close to Rs 70 on a PE multiple of 14 times for one year forward. We feel even at that level the company would be available at a very lucrative valuation.

Disclosure: It is safe to assume that the stocks may have been recommended to clients, but no individual position.