Multibagger picks: Persistent Systems, Piramal Healthcare

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Multibagger picks: Persistent Systems, Piramal Healthcare

PN Vijay, portfolio manager at pnvijay.com in an interview to CNBC-TV18 picked multibagger stocks for the day. He chose Persistent Systems and Piramal Healthcare.

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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

PN Vijay, portfolio manager at pnvijay.com in an interview to CNBC-TV18 picked multibagger stocks for the day. He chose Persistent Systems and Piramal Healthcare .

Persistent Systems is trading around Rs 300 and hasn't fallen that much in this crash. VIjay predicts it to touch Rs 400 in the next 12-15 months.

He see a 30% upside to Piramal Healthcare to about Rs 500 in the next 12-15 months. "This upside would be driven by good businesses and a strong cash flow which gives the company inorganic growth opportunities," Vijay added.

On Persistent Systems

This is a south based midsized IT company, it was started by professions and they went public a few years ago. They are in cutting edge verticals like mobility, cloud computing, etc. They have a varied client base of 250 odd clients. Last quarter they had turnover of Rs 238 crore, up 6% QoQ and the EBITDA margins improved about 100 odd basis points to 19%. It is a strong mid-sized IT company which has lot to offer. In terms of valuations we expect it to have about Rs 35 to 36 EPS this year which translates to a price earnings multiplier of slightly above 9 which is good, which is not cheap because it is somewhere in the lower range of the midsize IT companies.

They are guiding a CAGR of 25-30% in the next three years, so it will be trading at about 8.25 times 2013 earnings. I don't see a great bumps to the earnings. In terms of hedging policy, they have hedged around 48, 50% of their earnings, so at least some upside on the speculative dollar.

All in all, it is a stock which we like. It is trading around Rs 300 and hasn't fallen that much in this crash. We are predicting about Rs 400 in the next 12-15 months on this midcap IT company.

On Piramal Healthcare

Piramal is an old company they hit the news in a big way when they sold their legacy formulations business to Abbott made a pile. They are still getting part payments and incidentally the last one that came in this quarter they made a forex gain of more than Rs 100 crore because the market had factored in a rupee price for the terms action. Piramal Lifesciences is left with mainly its Contract Research and Manufacturing services (CRAMS) business which is 57% of its topline. It is also in some Over the Counter (OTCs) and in some criticals.

It made peace with the US pharma giant Baxter and they have a generic called Desflurane which they would be introducing the US market as it goes off-patent. The interesting thing about Piramal is it has got a lot of cash, they took 5.5% stake in Vodafone - Essar some time ago for USD 640 million. Their current assets on the books is more than market cap of the company. Imagine you are getting Piramal's operating business free.

They are guiding for a 20% CAGR on the topline, the businesses are steady. Piramal's are strong investors in other businesses for profit. Some of their investments are very good in my view. And they on lucky position that they are getting dollar earnings through the balance three payments they have to get from Abbott. The stock is trading around Rs 375, it is fallen of the high it reached about Rs 600 when the Abbott deal was announced. But we see a 30% upside to the stock to about Rs 500 or so in the next 12-15 months driven by good businesses and a strong cash flow which gives them inorganic growth opportunities.

Disclosure: I have no personal holding in any of the stocks discussed.