Long-term bets: Bhavin Shah picks Graphite India, HCL Tech

5886 Investors following Graphite India. Share this News with them.

0

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

Long-term bets: Bhavin Shah picks Graphite India, HCL Tech

Bhavin Shah, CEO at Equirus Securities endorses Graphite India, HCL Technologies and Gujarat Alkalies and Chemicals as strong bets for long-term investment.

Post your opinion here

 

0

Tweet

Share on Tumblr

Excerpts from Bazaar 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 Graphite India BSE | NSE 01/06/12 Are Mutual Funds betting on Graphite India? Other Stocks in this news HCL Technologies | Gujarat Alkalies and Chemicals |

Amidst rising concerns of skyrocketing inflation, interest rates and lack of government policy reforms, investors have turned wary in picking risky assets. In fact, they are eyeing counters which are likley to ignore the sharp drop in key benchmark indices or bear the brunt of negative news flows. Bhavin Shah, CEO at Equirus Securities endorses Graphite India , HCL Technologies and Gujarat Alkalies and Chemicals as strong bets for long-term investment.

Below is the verbatim transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: Let us start with Graphite India , a stock that you are quite bullish on - take us through what makes you bullish?

A: Graphite India makes electrodes that are used in steel production. It is one of the six producers in the world, which makes it a concentrated industry on a worldwide basis. Graphite India is expected to deliver at least 20% growth in earnings over the next two years. A large chunk of it will come from volume, but they are also likely to see some price improvement as the global leader, Graftech, has announced a price increase coming up in a few months from now.

Moreover, there is some improvement in the customer base of Graphite on the basis of volume production coming through, and, especially from places like Europe. Graphite India will benefit 60% plus of its revenue from export. The stock continues to trade at a low valuation of 1.1 times price to book and earnings of about eight times FY12. Given the strong earnings growth, the company could deliver pretty good upside and also there is a 4% dividend yield on the stock.

Q: You have been tracking HCL Technologies for many years now - do you see a 25% upside? Is it the best buy from the top-line IT?

A: Yes. HCL Tech has been able to deliver strong growth over the last eight-ten quarters, but of-late they have started to focus on margins too. We believe they have the lever to deliver promised margins. The BPO business is also turning around. With fresh hiring and better utilization, we expect 30% plus kind of earnings per-share (EPS) growth from HCL Tech in FY12-13. It remains undervalued relative to the other big IT names. However, there is still room for multiple expansion as well as growth appreciation from earnings growth in HCL Tech. This is the reason why we are seeing upside in HCL tech among the largecap IT stocks.

Q: From the midcaps, you like Gujarat Alkalies & Chemicals - what kind of price target would you invest that with?

A: We have a price target of Rs 190 on Gujarat Alkalies and Chemicals. The industry has come off from the bottom with a very strong improvement towards the late part of March quarter in ECU realizations. They will continue to enjoy healthy ECU realization prices even in June quarter and going forward. It continues to trade at a discount to its book value i.e., 0.7 times price to book. Over the long-term, it might trade at least one time price to book.