Multibagger: Aashish Tater spots 2; gives his metal outlook

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Multibagger: Aashish Tater spots 2; gives his metal outlook

In an interview on CNBC-TV18, Aashish Tater, Head of Research at Fort Share Broking talks about some of his investment ideas, Swan Energy and Lakshmi Electrical Control Systems. He also shares his views on how investors should play the metals space.

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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 Lakshmi Elec BSE | NSE 01/01/70 Are Mutual Funds betting on Lakshmi Elec? Other Stocks in this news Swan Energy | Gujarat Pipavav Port |

In an interview on CNBC-TV18, Aashish Tater, Head of Research at Fort Share Broking talks about some of his investment ideas, Swan Energy and Lakshmi Electrical Control Systems . He also shares his views on how investors should play the metals space.

Below is a verbatim transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. For complete details watch the accompanying video.

On Metals:

We came up with a report some time back with a call of sell on metals and we still maintain a bearish view on metal stocks, specifically on the steel sector. What is worrying me is that the larger companies are seeing shrinkage in terms of net profit margins but the midcap companies are still surviving in the black. There is some sense of worry in terms of those midcap and smallcap companies as to how they are able to post profit.

We feel the carnage that we have seen in SAIL yesterday around the Rs 119 mark, the pain for the metal stocks is still likely to be there on the longer-term or at least for the next six months or so. We do not see the companies, except, Tata Steel and a few other top names would be able to actually survive in terms of net profit.

Also read: Here's how you should trade the metals today

On Swan Energy:

This was one company which was referred to the Board for Industrial and Financial Reconstruction (BIFR) in 1995-96. Since then, the company has turned around, thanks to its real estate. Now the company knows where they want to go next. They have diversified into the power sector and all the cash that they would receive from the sale of their two real estate projects, one in Sewri and another one in Kurla, they would be channelising the entire cash flow into power projects.

They have a 49% stake in Gujarat Pipavav Power Company (GPPC). This is one stock which is a good bet because there is a limited downside. What is happening right now with real estate cum these kinds of stocks is people are using the discounted cash flow model right from 11% when it was hovering around the Rs 120-125 mark, to 18% and that is exactly where it is trending right now.

If we take a call from a four years perspective, if a stock is going to give you a discounted cash flow earnings of close to 17-18% why would you not treat it as a portfolio bet?

On a conservative side, if worse comes to worse, the stock should be hovering around Rs 65-70-72 odd mark but on the upside there could be a potential of 40-45%. For the first time, the company has actually turned back into black. This is because of their strong cash flow generations from real estate projects.

Because of this GPPC stake, they will be getting almost Rs 70-80 crore in terms of carbon emission rights over the next eight to 10 years, right from FY13. This quantum is not exactly decided by the United Nations Framework Convention on Climate Change (UNFCC). So we are still waiting on the report as to what could be the exact amount of cash flow. But before that as well, if someone wants to hide into a safe stock with good quality assets this is one stock that people can look at.

On Lakshmi Electrical Control Systems:

This stock is right now hovering around Rs 250-260 odd mark. The company charges a depreciation of Rs 20 per share. I get comfort on the cash EPS front, even if the company is able to maintain its topline growth. That means the company would still be doing somewhere around that 150 odd mark in terms of topline. On a conservative side, if I estimate because of shrinkage of margin and other execution problems, they would still be delivering Rs 28 which is 20% less than last year.

With Rs 20 of depreciation plus Rs 28 it gives you a cash EPS of close to Rs 50 on the most conservative estimates. The company would be able to do close to Rs 58-60 of cash EPS on a higher front and close to Rs 35 of EPS considering that they will be able to maintain their margins and topline, this is one stock that people can look to for good dividend yields and good parentage.

The promoters have been increasing stake slowly because 26% is what they own but I am not sure about how the close circle owns this particular stock. If 26% is owned and looking at the recent changes in norms, this can be a safe haven for investors who are looking for some momentum on the upside. I have a target of Rs 320 and Rs 380 considering the scenario the market is in right now. One should not enter aggressively into the stocks recommended today. Add small quantities and on dips for both stocks.