2012 bets: Jigar Shah picks three stocks

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2012 bets: Jigar Shah picks three stocks

In an interview to CNBC-TV18, Jigar Shah, senior VP and head of research of Kimeng Sec India says, Shriram Transport Finance, Petronet LNG and Eros International are his top pick for 2012.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Shriram TransFi BSE | NSE 31/05/12 Are Mutual Funds betting on Shriram TransFi? Other Stocks in this news Petronet LNG Ltd | Eros International Media |

Year 2011 may have hit your portfolio very badly. All that you can do now is plan well for 2012.

In an interview to CNBC-TV18, Jigar Shah, senior VP and head of research of Kimeng Sec India says, Shriram Transport Finance , Petronet LNG and Eros International are his top pick for 2012.

2012: A year of consolidation

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

Q: Shriram Transport Finance is one stock you have picked. What is your view on the stock?

A: Shriram Transport has to face some headwinds in terms RBI's policy in the current financial year. Due to that we saw some increase in the non-performing loans.

Secondly, due to the mining closure in the state of Karnataka, it has taken some losses. That has spoiled H1 numbers. I feel that the H2 numbers should be slightly better. FY13 also should be reasonable given that the demand the used trucks is not as bad as the slowdown which comes into the demand for the new trucks.

I feel that this company over a longer period of time has been able to grow over 25-30%. I don't see a reason why they cannot do it, given that even today a lot of the financing of the used trucks is happening through the unorganised moneylenders.

At one-and-a-half times price to book for next year and at a PE ratio of little over seven times with RoE of over 20%, the stock looks very attractive at the current levels.

The transaction related to TPG Capital, if it goes into another stronger hand, should not concern the investors. So, there could clearly be a strong pick for us for 2012.

Q: There was a lot of optimism showcased by the Petronet LNG management as well on the key moniterables. From valuation standpoint trading, how much more of an upside would you give that stock for 2012?

A: I am happy even if the company is able to grow at 15-20%. The consumption is very sticky. That is a point in favour of Petronet LNG. They are in a sweet spot because the demand for gas is only growing. It's replacing the other fuels that are far more expensive. Reliance's decline in the gas production is only adding to their advantage. So, overall, Petronet is very well placed.

If you look at their capacity addition programme in 2012 and 2013, it will give them almost double the capacity in another two years of what they have currently. That itself will set a stage for a strong growth. So, I feel Petronet may have a little bit subdued H1 FY13, but thereafter the growth is going to be very strong.

Someone, who is looking at a couple of years of bet, is surely going to get good reward from this stock. The valuation can remain high, given this certainty in terms of growth. It has been one of our strong picks for 2011. I am quite at ease repeating it as a strong pick for 2012 as well.

Q: You have picked Eros International as well. What is the story there? What kind of price targets do you have on that stock?

A: On Eros, we are bullish because we think that the consumption for the Bollywood entertainment is reaching new scales, new heights in 2011-12. That's demonstrated both by the box office collection as well as by the satellite and other revenue.

Eros is one of the well capitalised and organised filmmakers. We see them doing atleast another 25-30% growth on the back of a very strong slate of movies as well as their expansion into digital and other medium of revenue. That will give them pretty strong visibility for FY13.

We think that based on our earnings growth, the company should do Rs 22-23 of EPS next year. We have not revised our price target, but it is due for revision. Our current price target is Rs 240. Based on FY13, we will revise it higher after the Q3 numbers are announced.