Rajen Shah cherry picks United Phosphorous, TRF

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Rajen Shah cherry picks United Phosphorous, TRF

Rajen Shah, chief investment officer, Angel Broking selects United Phosphorous and TRF as multibagger stock ideas for the day. According to Rajen these stocks have the potential to earn better returns ahead.

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Rajen Shah, chief investment officer, Angel Broking selects United Phosphorous and TRF as multibagger stock ideas for the day. According to Rajen these stocks have the potential to earn better returns ahead.

Shah said United Phosphorous has been ignored by the market for the past about four years. Its time that this stock does lot of catching up. "We have a target of about Rs 260 over the next two years or so," he said.

"The management of TRF has mentioned that by 2015 they would be doing a turnover of Rs 2,500 crore which is double what it reported last year. I am expecting TRF to report at least Rs 40-45 kind of earnings for 2015. So it's a multibagger in the making. If one has a time period of three-four year then one can treble his money in the stock," he added.

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

On United Phosphorous

Over the past four years, since January 2008 the Sensex has delivered about 20% minus returns, it's down 20% from 21,200 to current levels of about 17,000. But agriculture related companies have done exceptionally well for example Bayer has doubled, Rallis India has trebled and Coromandel has quadrupled.

All these companies have done very well but Untied Phosphorous despite the sales and net profit doubling over these four years, Untied Phosphorous' market cap is down 40% from that level. So this stock has been given step motherly treatment by the market. A significant rerating is likely on the stock in the coming years.

Even on other parameters like market cap to sales Rallis this year will report about 1,450 crore of turnover, market cap is about 2,900 crore, so its two times the sales. International companies like Bayer Crop Science, I am talking about German company, this year will report about USD 10 billion of revenue and the market cap is about USD 30 billion, so its quoting at three times the sales. United Phosphorus this year will report about Rs 7,200 crore of turnover and the marketcap is Rs 6,200 crore, so its 0.9 times the sales. On all parameters United Phosphorous looks relatively cheap.

The other interesting thing is that infra spend has slowdown and it is likely to be subdued for the next six months or so. But if India has to see 6-7% kind of growth infra spend has to increase. If there is a huge spend on infra it creates millions of job opportunities for underprivileged and the labour segment of the society and when these people make money they spend on food.

I believe that demand for agri commodities is going to be very buoyant. This should see better farm prices for farmers and when they make money they are going to spend on agrochemicals to boost the output from the farm fields and then the best possible price. The demand for agrochem is going to be very robust.

United Phosphorous being a global agrochem company and the largest Indian agrochem company in fact its turnover is 5 times that of Rallis. It is a company which has been ignored by the market for the past about four years. Its time that the stock does lot of catching up and we have a target of about Rs 260 over the next two years or so.

On TRF Ltd

TRF is a new name for Tata Robin Fraser and Tata Steel owns about 32% stake in this company. So, it is a quality company and when the market cap of a quality company tumbles 75-80% from the peak it certainly warrants a look. Over the past 18 months the stock price of TRF has come down from Rs 1,175 to current levels of about Rs 265, so it's a 75-80% kind of correction.

There were certain reasons for correction one was misstatement by some senior officers of the company, however that stands corrected and is a matter of past. The other reason was that infra has slowed and is currently subdued and that's precisely one of the reason why TRF stock has also taken a significant beating.

In infra it caters to power generation, port sector, mineral and mining and its connected indirectly the auto sector. All these sectors have seen a little slowdown and TRF has reacted a bit more than what it should have. Hence we are seeing the market cap down 75%.

But the point to note here is that despite the infra spend slowing and the growth remaining subdued, we have seen 25% kind of jump in the first half revenue of TRF. Revenue has gone up 25% and the company has posted decent numbers.

Going forward I am hopeful that maybe after six months the infra spend is going to pickup and all these companies which are related with infra will do exceptionally well. The management of TRF on its website has mentioned that by 2015 they would be doing turnover of Rs 2,500 crore which is double of what it reported last year. So it's a significant growth.

I am expecting TRF to report at least Rs 40-45 kind of earnings for 2015. So it's a multibagger in the making. If one has a time period of three-four year, then one can treble his money in the stock.

Disclosure: We own about 3.5 lakh shares approximately of United Phosphorous and we also own about 40,000 shares of TRF in our PMS.