BHEL, IRB Infra, Yes Bank high on buy list: SBI Cap

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BHEL, IRB Infra, Yes Bank high on buy list: SBI Cap

Sanjay Vaid, senior vice president and co-head of equities, SBI Cap, in an interview on CNBC-TV18, gave his view on BHEL, IRB Infra, Crompton Greaves and Tata Motors. He also answered investor queries.

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Excerpts from Markets Midday 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 BHEL BSE | NSE 31/05/12 Are Mutual Funds betting on BHEL? Other Stocks in this news IRB Infrastructure Developers | Crompton Greaves | Tata Motors | Neyveli Lignite Corporation | Yes Bank |

Sanjay Vaid, senior vice president and co-head of equities, SBI Cap, in an interview to CNBC-TV18, gave his view on BHEL , IRB Infra , Crompton Greaves and Tata Motors  while answering investor queries.

Below is the transcript of his interview with Latha Venkatesh and Sonia Shenoy of CNBC-TV18. Also watch the accompanying video.

Q: Can one invest in BHEL at current levels?

A: I think BHEL is one of the best stocks to invest in for long term because of its industrial as well as international order book. The kind of savings the company has done on the employee cost is very positive. So, it is a company which has highest amount of visibility going forward.

We have a target of almost Rs 2000 plus for the stock for the current year. In the near term there could be some pressures because of the recent results and a slowdown in the order book build up, and the stock could go down a little.

So if an investor accumulates over a period of time, buys the stock even at Rs 1700 and holds it for maybe year, then it can easily go past Rs 2000 within a year. The target will be much higher for three years.

Q: What's does IRB Infra look like in the next six months?

A: IRB Infra is doing very well given the kind of results it reported for this quarter. The revenue was up almost 56% and profit after tax (PAT) was up 14%. The company has huge amount of visibility and most of its projects are debt free. The company is mildly leveraged, the debt to equity ratio is just 1:9. Its new projects would start rolling money.

The only concern which we have seen off late is the issue of corporate governance. Recently, we heard about certain issues relating to expenses. Moreover, there were previous issues regarding the derivative contracts, which were bringing in huge amount of losses to the balance sheet. Given these concerns and the kind of pressure the stock has seen, I feel that it could correct a little from here and maybe go towards Rs 155-160 levels.

However, looking at the visibility, revenue and core competency of the company, it could bounce back and head towards Rs 200-215 kind of levels. One can buy this stock.

Q: If you had some other stocks which could fetch better earnings or stocks with have lower risk profile, what would they be?

A: One thing which you have to see is whether the investor is planning to put money into infrastructure sector or if he is willing to look at other sectors. In case he is willing to look at other sectors, then there are a few stocks like Yes Bank . Similarly, there is a stock in the power segment itself, which is Neyveli Lignite .

Q: What about Crompton Greaves? After that big hammering would you enter into that stock or advise entering into that stock at all?

A: In case there is certain negative news in these counters then it will take some time to settle down. So going forward, for one quarter these kind of stocks underperform the entire markets. I think it would be better that we avoid it; let it settle down and then do stock picking.

Q: What should one do with 750 shares of Tata Motors bought at the rate of Rs 1,245.

A: A hawkish call is given to interest rate sensitive sectors. Our respected governor has said he would continue to see rate increases going forward. Therefore, there would be continuous pressure not only on volume growth but also on profitability of this sector.

Apart from this, we have to see how well the increased raw material costs and product mixes are positioned. For Tata Motors, we are expecting very subdued kind of numbers in this quarter. We are expecting its volumes to grow by 6% domestically and JLR (volumes to grow) by 8%. Although there would be some new launches going forward, the pressure on raw material costs and the environment we are interested in, will continue to harden. There could be some downward pressure there.

In the recent expiry, we have seen delivery-based selling happening on the counter and the Cost of Carry (CoC) going down to a large extent. This clearly shows that there would be some pressure on the prices while rolling into the new series of August. So, in case an investor wants to cut losses, he can do that but if he is a longer term player, then one year target of close to his level of Rs 1,200 could be achieved.

Also read: Dispute over Rs 15-20 cr expenses: IRB Infra on I-T raid