Check out: Fort Share Broking's 3 multibagger stock ideas

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Check out: Fort Share Broking's 3 multibagger stock ideas

Aashish Tater, Head of Research, Fort Share Broking is bullish on Ahluwalia Contracts, Akzo Nobel India and Sandesh.

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Aashish Tater, Head of Research, Fort Share Broking is bullish on Ahluwalia Contracts , Akzo Nobel India and Sandesh .

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

Q: Ahluwalia Contracts, what the idea is behind choosing this one?

A: This is one stock that has been on the analyst radar. What I like about this stock is that promoters have actually sensed that by just being present into a realty sector they will not be able actually match on the earnings growth momentum. Their order book right now stands close to Rs 5,300 crore with net profit margin of close to 5.5-6%. For the full year, the company would clock close to Rs 1,400 crore of sales and for the first two quarter itself the company has got order close to Rs 1,000 crore.
 
The management has actually forayed into urban infra with their latest project coming for Rs 72 crore odds for the Kota Bus Terminal, which gives me a sense that the promoters are trying to shift more and diversify into a space which is more stable and has got better cash flows to generate from a longer-term perspectives.

So, for the next year, I feel the company would get close to Rs 300-350 odd crore into the urban infra space as an order book and close to Rs 5,000 crore which covers for at least two to two-and-a-half years of their order book to sales. I see a company available on a market cap which is just Rs 1,000 crore odd having stability for two to two-and-a-half years in terms of top-line and bottom-line.

Also, most importantly one of the largest civil players with quality projects undertaken by them, I feel the stock is undervalued and would definitely get re-rating once their foray into urban infra space gets reflected. We have pegged the target of close to Rs 200 for next 12 months, but this is one stock which should be accumulated on every dip. There was a panic bottom for the stock around Rs 130 odd levels, so I don't see much of downside into the stock, but good upside.

Q: What about Akzo Nobel India?

A: This is a very interesting stock from the paint industry. The total market cap of the company is available at Rs 2,700 crore on a sales of Rs 1,000 crore with net profit margins of 14-15%. But if one looks into the balance sheet of the company, the company has got close to Rs 1,000 crore of cash and cash equivalents which will be used for inorganic and organic growth expansion for the company.

Akzo Nobel is better known as Dulux Paints. Dulux- the brand equity of the company itself speaks for itself. So, if one sees the parentage of the company Akzo Nobel NV which trades roughly at 2.8 times marketcap to sales and if I adjust this Rs 1,000 crore odd into this particular company, the stock trades at 1.7 times. The company is looking for aggressive expansion going forward into 2011-2012 because right now they have only just three plants which is not enough to justify the growth momentum and demand from the rural space. So, on the longer-term, I feel there will be either an open offer from the company side or there will be a consolidation in the pain industry itself which will rerate the stock close to 2.5 times the market cap to sales plus Rs 1,000 crore odd of free cash flow.

The company can easily be an investment bet from a longer term perspective. I expect 20-25% YoY growth on the stock. If I recall the 2008 recession crash, this is one stock which did not move at all on downside, it was locked at Rs 500 levels, so this shows the clear cut long-term view on the stock from players who are holding into this particular space. I have a target of close to Rs 1,400 for the next two-and-a-half years, but this is one stock which can be played with good 20-25% YoY gain with good dividend yield of Rs 16 per share.