Looking to play Ranbaxy, PFC, Wipro? Devang Mehta guides

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Looking to play Ranbaxy, PFC, Wipro? Devang Mehta guides

Devang Mehta of Anand Rathi Financial Services in an interview to CNBC-TV18, gave reading and outlook for stocks across various sectors while answering investor queries. He shared views on stocks like Ranbaxy, Power Finance Corporation and Wipro.

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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

Devang Mehta of Anand Rathi Financial Services in an interview to CNBC-TV18, gave reading and outlook for stocks across various sectors while answering investor queries. He shared views on stocks like Ranbaxy , Power Finance Corporation and Wipro .

Below is the edited transcript of Mehta's interview with CNBC-TV18. Also watch the accompanying video.

Q: Investor has 25 shares of Ranbaxy at the price of Rs 475? What's your call on Ranbaxy?

A: Just few days back Ranbaxy signed a contract with US FDA about the consent decree on solving the Paonta Sahib and Dewas facility problems. An amount of USD 550 million has been spared for this which takes off around Rs 62 per share from Ranbaxy at this point of time.

Though there may be some concerns on the short term cash flow for Ranbaxy and it may take out some sheen because of the Lipitor deal, but this will solve a lot of decisive problems for the company. Since 2008 the stock has faced a hangover of the Paonta Sahib and Dewas facility issues. Going forward, if somebody has a little longer horizon of 1-1.5 year, solving these problems will do a lot good for Ranbaxy. We do have a fundamental price target of around Rs 515 for 1-1.5 year.

Caller: I have 243 shares of PFC bought at the price of Rs 193 each? What is your call on Power Finance Corporation (PFC)?

A: PFC has corrected 60% from its October 10 peaks and a lot of this fall has been quite unjustified. This is because we know that the state run utilities control a lot of such loans from PFC and REC . Right now it is over blown that these loans will default. Ninety percent of its loans are well covered by state government and lot of guarantees are given on these loans. There is negligible proportion of NPAs coming out of these loans.

My take is that this issue is very much over blown. The company can grow at a CAGR of 19-20% over the next two-three years maintaining an NM of 3.84% and with ROE's of around 18-19%. This is one of the better stocks to own. If somebody holds it for a year, then it is available currently at a price to book of around 0.8 FY13. So, the investor will make a decent buck. We do have a price target of around Rs 265 for PFC. Investor can start accumulating at this price.

Caller: I have 160 shares of Wipro bought at the price of Rs 284. What is your call on Wipro?

A: Investor is holding Wipro at a very good price. He is a long term investor and I guess the IT services industry in India is bound to do good over the next three-four years period. What drives Wipro is the current scenario in which the foreign exchange is in their favour. The IT industry is currently outperforming the markets big time. Around 15% outperformance has been seen in the last 3-5 months for the IT sector. But I would not advise him to average in Wipro.

He is already holding Wipro in a good quantity at good prices. Also the profitability as well as the revenue growth for Wipro has not been as robust as it has been for something like TCS or Infosys . Our preferred picks in this sector would be TCS followed by Infosys though Wipro is a very good hold. If investor wants to buy something into IT space, he should start accumulating TCS whenever there is a decent fall.