Multibaggers: Two stocks that have good upside potential

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Multibaggers: Two stocks that have good upside potential

PN Vijay, Portfolio Manager is bullish on Kajaria Ceramics and Allcargo Logistics.

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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 Kajaria Ceramic BSE | NSE 01/06/12 Are Mutual Funds betting on Kajaria Ceramic? Other Stocks in this news Allcargo Logistics | Kingfisher Airlines |

The Indian market has been muted over the last couple of sessions. Experts advice investors to focus on specific stocks and start investing for the long-term.

PN Vijay, Portfolio Manager is bullish on Kajaria Ceramics and Allcargo Logistics .

For Kajaria Ceramics, he has a target of Rs 140. For Allcargo Logistics, he has a target of Rs 200.

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Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: Do you have any thoughts on the Kingfisher Airline and the kind of news flow that we have seen since last evening?

A: It is getting from bad to worse. The State Bank of India providing for Kingfisher's additional debt is known to the market because everybody knows about the financials of Kingfisher. That's not an incremental bad news. But some of the safety standards failure, which the DGCA is pointing out, is much more serious.

I think Kingfisher is worst in the bad lot. It's not the core business of Mallya. I think the only positive you can say about Kingfisher is that it's a right takeover candidate. If this 26% in airlines come through, as many believe it will after UP elections, then even foreigners maybe interested because they do have 18% market share.

Q: Kajaria Ceramics is the stock you have picked up today. What is the story there?

A: The company has been growing very impressively. It's got a terrific brand image and a strong distribution. Kajaria has recently expanded its capacity by about 20%.

The trouble for Kajaria is that a very large percentage of its sales are traded products, third party products. The ceramic industry is full of small players littered all over the states. On trading, they have very low margin. So, the company has been focusing on adding to its own manufacture at its various locations. Its capacity expansion is very strong.

On negatives, it's got relatively high debt because of expansion and also because the working capital cycle of ceramic companies is quite large. In Kajaria's case, the gas is expensive. They have gas fired ceramic facility. So, it eats into the margins. Even then in the last quarter, Kajaria has grown impressively. The top-line and bottom-line grew upwards of 40% driven by volume increase.

After touching Rs 120, it's back to Rs 100. It's trading at about 11 times the 2011 earnings of nine. We are giving a target of about Rs 140 based on profit growth of about 35-40% in financial year 11-12.

Disclosure: It is safe to assume that the stocks discussed have been recommended to clients.