Angel Broking bullish on RCF, Shrenuj

11474 Investors following Rashtriya Chem. Share this News with them.

0

Like this story, share it with millions of investors on M3

Angel Broking bullish on RCF, Shrenuj

In an interview with CNBC-TV18, Rajen Shah, CIO of Angel Broking, said that he is bullish on RCF and Shrenuj & Company. However, he is bearish on Ballapur Industries Limited.

Post your opinion here

 

0

Tweet

Share on Tumblr

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS Buy fertiliser stocks on dip: Sukhani Sudarshan Sukhani's top five picks for today's trade 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 Rashtriya Chem BSE | NSE 31/05/12 Are Mutual Funds betting on Rashtriya Chem? Other Stocks in this news Shrenuj and Company | Gitanjali Gems |

In an interview with CNBC-TV18, Rajen Shah, CIO of Angel Broking, said that he is bullish on RCF and Shrenuj & Company . However, he is bearish on Ballapur Industries Limited.

Here is a verbatim transcript of Rajen Shah's comments on CNBC-TV18. Also watch the accompanying video.

Q: Talking about paper stock first, how does Ballapur Industries Limited (BILT) go down with you?

A: It is certainly a miss because the topline was really thrilling--36% topline growth but however the bottomline on account of huge depreciation and about 30% kind of rise in power and fuel cost was under pressure and was up just about 6%. We need to keep in mind the very important things which have happened in BIL. Over the past three years, this company has spent a huge sum of money in expanding its capacity.

In fact, whatever is build over the past five decades has done over the past three years. It has doubled its capacity and the full impact of this will be seen in the coming quarters. Now because of this huge expansion in the capacity, we saw 36% kind of topline growth. The bottomline was under pressure. In December another unit of Ballapur that is Ballapur unit has also started. The expanded capacity has come into play. So we are going to see a significant jump in the turnover of this company.

My interaction with certain people in this industry tell me that paper price have started firming. Obviously, the paper fortunes are very much linked to that of the economy and the focus on the education is increasing. The demand for paper is going to be very good. Ballapur should do exceptionally well next year. We at Angel are expecting about Rs 4.5 kind of earnings for this company and the stock is about Rs 27.

The interesting part is that if you were to set up a company with Ballapur with a capacity of almost a million tonne of paper, it would cost you anywhere around Rs 4,000-4,500 crore where as the market cap of this company is about Rs 1500 crore. That is precisely the reason why two years back the management went in for Rs 1000 crore of buck-bay. They bought back almost about 38 crore shares at an average price of Rs 25 but yet the stock is not performed over the past two years. Recently the promoters holding is at 40%, the promoters are subscribing to Rs 10 crore shares over a period of 18 months at a price of Rs 30 thereby pumping Rs 300 crore. This will take its stake in the company from 40 to 49% and when the promoters are putting in this kind of money Rs 300 crore to raise their stake from 40 to 49% one should not doubt the long term prospects of this company. It is a highly undervalued stock and we are looking at a 50% return over the next 12 months irrespective of which way the market goes.

Q: Did you like RCF's numbers?

A: I have liked RCF and it has not disappointed me because of product prices and raw material the top line was down. The bottomline was about 13%. Mark to market loss of about Rs 18 crore which it suffered on account of bonds are given by government and about Rs 3.5 crore of exchange which it has not taken into consideration the profits would have been higher even more than 13%.

I was recently in Lucknow for the camp and after the camp got over. I had been to the outskirts of Lucknow and met some farmers over there. I was just interacting with them and what I learnt is that they were very happy with the higher food prices in fact they were making a little more than what they were making last year. My interaction with them very clearly told me that the demand for fertilizers, micro nutrients and agro chemicals that is going up, are spending on that so much because realizations were too bad. For the past fifty years, farmers have not made anything. If you see the earnings maybe Rs 4-4.5 is what RCF will report. There will be a day the company is going to post a phenomenal numbers only thing is that maybe if there is a strategic divestment of that sort happens certainly we will see huge excitement in RCF.

The other interesting is that the 450 acres of land most of them claim about 700 acres but to the best of my knowledge it is about 450 acres of land at Chembur. That itself is equivalent to the current market cap of the company. Regarding the fertilizer business absolutely free, I think it is a long term super-duper hit.

Q: Is Gitanjali Gems a good performance this quarter?

A: Last quarter is normally good for the diamond and the jewellery industry because of obvious reasons. Gitanjali reported very good numbers almost 60% kind of topline growth but bottomline was about 35-40% kind of bottomline growth. EPS would be about 20. The management has bought about 8 lakh shares at an average price of Rs 115 pumping in about Rs 9-10 crore. It is quoting at about six times and looks interesting.

In the context, if you look at this numbers from the industry, the numbers are a little disappointing. I was just going through Shrenuj and Company numbers which is one of my favourite stocks. On a 40% kind of topline growth this company has reported 60% kind of bottomline growth.

In case of Shrenuj, the company has bagged 16 licenses. I am expecting this company to treble its turnover over the next four-five years. It is going to be a multi bagger about Rs 4500 crore of revenues is what I am expecting from Shrenuj over the next four-five years. I am not seeing the kind of a phenomenal growth from Gitanjali. It will certainly grow but not at the pace which Shrenuj would be growing. So my bet in this industry would certainly be Shrenuj and Company.