Day AV Sec bullish on PVR, Kaveri Seeds

Excerpts from Midcap Radar 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 Reliance Media BSE | NSE 30/05/12 Are Mutual Funds betting on Reliance Media? Other Stocks in this news Advanta India | IFCI | INOX Leisure | Kaveri Seed Company | Monsanto India | PVR | Vijaya Bank |

Seshadri Bharathan , Director, Stock Broking at Dawnay Day AV Securities told CNBC-TV18  that he likes PVR , Kaveri Seeds and Vijaya Bank .

 

On Kaveri Seeds, he says that the seed demand is expected to be around 40% till the year 2020 and there are only few listed companies in that space. He expects anywhere between 50-100% return in this stock.

 

PVR is the pioneer of multiplex industry and is one stock that people should look at since at current price, it's quoting around 18 times the multiple. So a substantial increase in the price can be expected, he feels.

 

He is positive on Vijaya Bank because Vijaya Bank is quoting at a multiple around 10-11 when most of the PSU banks are quoting a multiple of 18-20 times.

 

 

Excerpts from the exclusive interview with Seshadri Bharathan:

 

Q: Kaveri Seeds listed on the BSE is down about 2% currently at Rs 362. What's the argument in favour of it?

 

A: It's an interesting phase to be in; there are very few listed seed companies in India like Monsanto India , Advanta India or Kaveri Seeds. It's a very recent IPO, which got listed in the month of October with an equity capital of around Rs 13 crore. Their topline target is around Rs 100 crore with a PAT of around Rs 20 crore.

 

We expect the seed demand to be around 40% till the year 2020.

 

They have sizeable land bank with more than Rs 184 acre land bank in and around Hyderabad and they have leased around Rs 84 acre land. They have good technology; R&D facility and more than 50 scientists working on hybrid.

 

Interestingly hybrid seed takes anywhere between six-eight years to develop and they have more than 40 hybrid seeds and a sizeable presence in South Indian market in corn and sunflower segment. They came out with IPO, so we expect that they would expand their marketing in North since they have their presence for more than 20 years in South with more than 450 distributors.

 

Another factor, which should play in is biodiesel and the biocorp like corn and sugar, which can be use for ethanol. So if you see a demand for ethanol, we might see increases in the purchase of corn and sugar seeds. If we see increase in bio-diesel, then we might see an increase in mustard and soybean crop seed sale.

 

Q: What do you think it can deliver in 12 to 18 months?

 

A: There is a lot of interest in this because it's a very unique stock. I think we should expect anywhere between 50-100% return in this stock. I might be slightly optimistic on this.

 

Q: Your view on PVR. The stock has seen a huge run-up of course and it has talked about the movie business plans. What are the targets that you are quoting on PVR right now and what would be your fair value for this stock?

 

A: Multiplex is a unique business to be in. The players in the multiplex industry are Adlabs , I NOX , and PVR. PVR is the pioneer of multiplex industry; they have segmented their multiplex into PVR Talkies, which is low end and PVR Premier which is high end also has seen an increase in footfall in the PVR business with more than five million customers visiting their theaters in the September quarter coupled with the tax benefit. Entertainment outgo has also come down and is around 20%, also their margins have improved by 6 bps to around 20 bps and their expenses are low.

 

So, PVR is one stock that people should look at and I feel at current price, it's quoting around 18 times the multiple. So we can look at substantial increase in the price.

 

One more factor that I would like to highlight in PVR is that the lifestyle is changing, earlier it used to be movie per se movie, now people are going as an outing. So PVR is also experimenting with food courts and other features in their theater complexes. So that also would add to the growth story and if the co-production of two movies with Aamir Khan are hit at the box office, I think then there is substantial upside in PVR stock.

 

Q: What's the target on Vijaya Bank and what will drive earnings?

 

A: Vijaya Bank is quoting at a multiple around 10-11 when most of the PSU banks are quoting a multiple of 18-20 times. The second factor is the price to book value is around 1.6:1.7 while most of the PSU banks price to book value is around 2.9:3, also the price to sales is around 1.06 when the industry price to sales is around 1.6-1.7.

 

They have Rs 126 crore invested in IFCI and 50% of that would get converted into equity. I think there is substantial amount of upside in Vijaya Bank.   

 

Disclosure:

 

I might be holding or my clients might be holding some of the stocks that we have discussed today.