PN Vijay's multibagger ideas: V Guard, Cox & Kings

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 V-Guard Ind BSE | NSE 01/06/12 Are Mutual Funds betting on V-Guard Ind? Other Stocks in this news Cox & Kings | Havells India |

Portfolio Manager PN Vijay in an interview to CNBC-TV18 shortlisted V Guard , Cox & Kings as his multi-bagger stock picks for the day. He details out reasons for investors to buy theses stocks at a set target price on from a particular time frame.

He said,"V Guard is a midcap stock. It has been traditionally strong presence in UPS, voltage stabilising equipment and PVC cables market. They are breaking out of the South and heading towards north and other parts of India in a very big way. They are also changing their product mix. Going forward, these two big triggers can give them a top-line growth and bottom-line growth. I give a target of Rs 300 for the share which has hugely outperformed Sensex in the last 12 months."

"Cox & Kings is more of a lifestyle stock. It has not been a cheap stock. It has been trading above 20 price earnings but at about Rs 220 it is available at 18-19 times its forward earnings. I think it is an excellent buy with the target probably of about Rs 310 or so in the next 12 months," Vijay added.

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

On V-Guard

V Guard is a midcap stock from Cochin in Kerala. They went public a couple of years back. This company has been traditionally strong in UPS, voltage stabilising equipment and PVC cables. It has done some kind of a niche for itself in the South.

They are breaking out of the South and heading towards north and other parts of India in a very big way. That seems to be paying off from revenues being garnered from non-south centres.

Secondly, they are changing their product mix, it is becoming a bit like Havells . It is moving into consumer portion of electrical space like fans, switches etc where margins are very good if cost is kept low.

Apart from maintaining a very strong market share in UPS, the company would be branching out. Last quarter was not very good for them because India had fairly mild summer. We did not have usual torrid summer and so their air conditioner and UPS sales were damp even then growth was good about 25-28%.

Going forward, these two big triggers can give them a top-line growth and bottom-line growth. The concerns of high copper prices but copper again is falling which may be a good thing for them. At around Rs 220 they are trading at 13 times of their current earnings which is quite attractive. I give a target for the share of Rs 300 which has hugely outperformed Sensex last 12 months.

On Cox & Kings

Cox & Kings is more of a lifestyle stock. The valuations are quite high, Cox & Kings is a very household name in travel. Cox & Kings like many other travel agencies after the entrance of internet into travel booking has totally shifted its focus. It has become an inbound and outbound tour operator. Backed by good brand equity they have done a very good job.

In the last one year they made a very big acquisition in UK. An interesting travel company called Holidaybreak Plc which is a theme travel company in education space. This company does camps, educational tours, hold tours etc and every robust cash flows and fairly recession proof industry. Cox & Kings has been adopting a very inorganic growth strategy and has been buying many companies all over the world.

Unfortunately, in the last quarter they did not do to well. They had a decent profit but the growth was badly hit by Japanese tsunami and Japanese inbound into India. There were issues in the Middle East also which affected the India-Middle East outbound business but even then their profits were good.

Once the calm restored in these two troubled areas one might see a vertical improvement in profits. Cox & Kings has not been a cheap stock. It has been trading above 20 price earnings but at about Rs 220 it is available at 18-19 times its forward earnings. I think it is an excellent buy with the target probably of about Rs 310 or so in the next 12 months.

Q: How are you reading the rupee in the context of the stock market this time at 48?

A:  The rupee is the biggest worry. People have not focused enough on it. It has run away to 48 very quickly to some extent it is because of dollar being overvalued. It is very simplistic to say that FIIs will pull out from a weak currency which does not happen.

FIIs time their decision at such a point when they feel that the local currency will incrementally appreciate. If the rupee is at about 48 to a dollar and the FIIs feel it will appreciate 5% next year they would bring in more money. This is because they would get more Indian shares for the dollar. But if they feel that rupee will go to 50 then they will sell.

Given the robust export growth and Indian interest rates which have a large influence on rupee dollar will tend to go down in the next one year. The possibility of rupee slipping beyond 48.75-49 is very remote. From that point of view, I won't put that as a major negative for the market but if it continues to slip it is worrisome.