Aashish Tater's cherry picks: SJVNL, SML Isuzu

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 SJVN BSE | NSE 31/05/12 Are Mutual Funds betting on SJVN? Other Stocks in this news SML Isuzu | Eicher Motors |

Aashish Tater of Fort Share Broking picks SJVNL and SML Isuzu as his top bets for the day. He sees these stocks having potential to earn handsome returns ahead.

According to him, "SJVNL is one stock which is very defensive for investors who are looking for portfolio bets. The company has been very liberal in terms of paying dividend. This year they have announced 80 paise dividend which is 4%. With this same projection we feel that in the next 2-2.5 years the company would be paying out close to Rs 1.5 of dividend. One can expect to earn a return of 40-50% in 2-2.5 years time horizon."

"SML Isuzu is one stock which is a definite portfolio bet. It should be kept into portfolio rather than buying huge quantity it is better to buy and forget this stock. They paid a dividend of Rs 8 which includes 15% special dividend. For this year our estimate is around Rs 31.50 and I would not be surprised that the company do somewhere around Rs 33.50 for this year."

Check out: Brokerages call on ONGC, Cairn, HUL, MOIL

On SJVNL

SJVNL is one stock which is very defensive for investors who are looking for portfolio bets. If I take a call in terms of valuations right now the company is having 1,500 megawatt project which is on stream and is expected to add another 400 megawatt in Rampur area which is expected to commence in the first quarter of 2013 or latest by second quarter Its current market cap is around Rs 9,000 crore. By any valuation matter, hydro power company deserves a valuation of 7.5 crore per megawatt.It is right now trading at 6 crore megawatt.

Looking at their other MoUs for the company. The company is also having understanding with Nepal and Bhutan where they are having on stream projects of 900 megawatt and two projects which is combined at 1400 megawatt for Bhutan. So there is a lot of things that are going to shape out in the days to come.

The company has been very liberal in terms of paying dividend. Last year they paid 60 paise which works out to be 3% dividend yield. This year they have announced 80 paise dividend which is 4%. With this same projection we feel that in the next 2-2.5 years the company would be paying out close to Rs 1.5 of dividend.

A PSU stock giving you 5% dividend yield or 6% dividend yield I do not think the stock would languish at Rs 20 or Rs 22 odd mark. But even if I assume the same 3.5% dividend yield the stock could be languishing somewhere around Rs 40 to Rs 44 plus you have this under value strategy with 400 megawatt actually adding on into the current market cap

I assume that Rs 2,400 crore is added in the next two years, even if there is no valuation expansion, investors can make 40 to 50% return if they invest for two - two and half years perspective. It is a defensive bet but it is for people who would like to take safe bets into a space.

On SML Isuzu

SML Isuzu was known as Swaraj Mazda Limited. This is one stock which I feel is a definite portfolio bet. It should be kept into portfolio rather than buying huge quantity better to buy and forget this stock.

It has a promoter name Sumitomo Corp- 1.54 trillion Japanese Yen market cap, it is a leader in its space. Recently Isuzu also acquired 4% stake as given in the shareholding pattern. There are lot of stories that is going to come up for this particular stock.

I was trying to go through what kind of synergies that Sumitomo or Isuzu can come in for India. I felt that they offer tremendous opportunity for us because we are lacking in each and every space where these companies have expertise - aerospace, railways they are the pioneer into this especially Sumitomo Corp.

If I look into their profitability perspective they posted an EPS of Rs 25 for last year. They paid a dividend of Rs 8 which includes 15% special dividend. For this year our estimate is around Rs 31.50 and I would not be surprised that the company do somewhere around Rs 33.50 for this year.

The company with Sumitomo parentage is not available at 12 times forward, it is a surprise for me. It is one bet where I would like to take a year on year call with their performance and business that they are trying to work out for India. This particular company has got tremendous potential from two perspective. One it is also a candidate where the promoters along with other partners would increase their stake close to 75-76%.

There is hardly any float into the market. If someone wants to buy 5000 shares he has to actually go and bid for Rs 30 higher to get that stock because this stock is hardly traded on the exchanges. We have been suggesting that add on daily basis, add a small quantity and accumulate. If you have got patience this stock is one stock where I feel in the next three years the EPS could be shown close to Rs 50 mark.

Given a PE multiple that we normally try to assign to Japanese company it works out around at 18-19 mark. The company would be paying you dividends which will work out close to Rs 30-35 on cumulative basis for the next 3-3.5 years. From every perspective this is one bet which should be looked on from a portfolio perspective and should be added and accumulated at these current levels.

We have got a target of Rs 1,000 saying that a three figure stock to four figure stock from three years perspective. I won't be surprised that the stock do even better from thereon. We took a similar call for Eicher Motors and we feel that they have done tremendously well from the similar space.

Looking into various school buses I think SML Isuzu has got contracts where they are supplying in terms of school buses. Their ambulance and other things these are brands which should be kept and it is current traded at very low valuation given to its potential.

Disclosure: We have recommended the stocks to our clients and the firm might also have positions. No personal holding.