Bullish on BASF India, Mudra Lifestyle: Sanjay Chhabria

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Bullish on BASF India, Mudra Lifestyle: Sanjay Chhabria

Equity Analyst, Sanjay Chhabria is bullish on BASF India, Manaksia, Mudra Lifestyle. On BASF, he has a price target of around Rs 300 for the next one year because of the technological superiority and quality of BASF products.

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Excerpts from Closing Bell 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 BASF BSE | NSE 31/05/12 Are Mutual Funds betting on BASF? Other Stocks in this news Mudra Lifestyle | Manaksia |

Equity Analyst, Sanjay Chhabria is bullish on BASF India, Manaksia, Mudra Lifestyle.

On BASF , he has a price target of around Rs 300 for the next one year because of the technological superiority and quality of BASF products. "The outlook for the business in the coming year is fairly strong and given the increasing forecast on Asian markets by the BASF Group, the stock is quoting just less than 9 times FY08 earnings." he said.

Mudra Lifestyle has an EPS of around 8.5 and the stock is quoting at a very low valuations at less than 5 times FY08 earnings at less than 3.5 times, expected FY09 earnings, and also the stock is way below the issue price of Rs 90 which was at the time of the IPO in February 2007.

Manaksia claims to be the largest player in the secondary aluminum rolling in India and this gives the company an economic scale and helps it to reduce raw material costs, he adds.

Excerpts from the exclusive interview with Sanjay Chhabria:

Q: Why do you like BASF, what's your target and what's going to drive growth on the stock?

A: BASF is a 52.7% subsidiary of BASF AG Germany; it focuses on agro chemicals, performance products, plastics and fibers, the parent BASF AG Germany, is one of the leaders in the world chemical market and has a consistent financial track record. If you look at the recent results for the 9 months, ended in December 2007, the company has posted a net profit of around Rs 55 crore, and net sales of Rs 700 crore, for FY08, we are expecting a net profit of Rs 60 crore on net sales of Rs 900 crore, this gives us an EPS of around 21.5.

Given the technological superiority and quality of BASF products, the outlook for the business in the coming year is fairly strong and given the increasing forecast on Asian markets by the BASF Group, the stock is quoting just less than 9 times FY08 earnings. The icing on the cake is a good dividend yield of around 4%, based on last years dividend of 70%, so you can see that the stock has been beaten out of shape in the current melt down and I have a price target of around Rs 300 over the next one year.

Q: What about Mudra Lifestyle, what's the target on that one?

A: This stock is doublers on the next one year; it's the manufacturer of fashion fabrics and garments with a pre-dominant focus in the domestic market, the company supplies fabrics and garments to leading brands and garment manufacturers and some of these major customers are Madhura garments, Arvind Mills and Raymond's. The company is currently undergoing a capacity expansion, which will be completed in April 2008 and after that the company hopes to achieve a revenue mix of 50-50 for fabrics and garments in FY09.

Their presence in the domestic market is a big part for Mudra Lifestyle, more significant is the demand which is flowing from branded apparel outfit and retailers, its an indirect play on the domestic consumption theme. Coming to financials, for the 9 months ended December 2007, the company posted a net profit of Rs 23 crore on the sales of Rs 190 crore, and for FY08, we are expecting a net profit of around Rs 30 crore and net sales of Rs 280 crore, this gives  an EPS of around 8.5 and the stock is quoting at a very low valuations at less than 5 times FY08 earnings at less than 3.5 times, expected FY09 earnings, and also the stock is way below the issue price of Rs 90 which was at the time of the IPO in February 2007.

Q; What about Manaksia, it has been a very volatile stock recently, are you buying into that?

A: I am not owning any of these stocks though the subscribers in my newsletter might be holding any of these 3 stocks, Manaksia is a relatively new listing, it is into value added metal products and metal packaging products, the company has 18 manufacturing facilities, 15 in India, 2 in Nigeria and 1 in Ghana, it came with an IPO In December 2007, at Rs 160 per share. It claims to be the largest player in the secondary aluminum rolling in India and this gives the company an economic scale and helps it to reduce raw material costs.