Aug 01, 2011, 10.51 PM | Source: CNBC-TV18

Rajesh Agarwal on Idea, Paper Products, TVS and Cox&Kings

Rajesh Agarwal of Eastern Financiers joins CNBC-TV18 to talk about certain stocks that have buzzing over a period of time. Check out what he says about Idea Cellular, Paper Products, TVS Motors and Cox&Kings.

Rajesh Agarwal of Eastern Financiers joins CNBC-TV18 to talk about certain stocks that have buzzing over a period of time.

He suggest buying Idea Cellular at every dip with a target of Rs 110 in the next 6-9 months. In a rate sensitive environment, when earnings was affected for almost all companies in the first quarter of this fiscal, Paper Products reported tremendous growth, he points out. "Accumulate the stock at declines with a price target of Rs 110-120 in the next 3-4 quarters," he advices.

Of the auto pack, he picks Bajaj Auto over TVS and says that the entire sector is likely to face a slowdown in sales and revenue growth, going ahead. 

Cox & Kings is trading at very low valuations, considering its brand image, he says. The recent overseas acquisition (of UK's Holidaybreak) is likely to uplift bottomline for the company and therefore, it is a good stock to hold in the portfolio, he says.

Below is the edited transcript of his comments. Also watch accompanying videos.

On Idea Cellular

We have seen lot of selling pressure in telecom stocks in the recent past, but now I think its already done. The performance of Idea Cellular over the quarter was decent; it was on a growth trajectory. We have seen churning of subscribers with low revenue subscriber going out and high quality subscribers coming in. Even on the ARPU front, they have reported stable numbers and minutes of usage were high. Revenues went up by 23%.

Also, with 2-3 competitors increasing the rate per minute, I think this is a big positive for the entire industry. Idea, operational in many circles and in 3G too, this is going to help the company in achieving good margins in the next 2-3 quarters.

The best part is the number of active participants. 92.2% active subscribers is a very good sign for the industry. As for Idea, one can buy this stock, accumulate on dips for price target of Rs 110 in the next 6-9 months.

On Paper Products

The company has around 59% foreign stake and is a big player in the packaging industry. Even in the domestic market, the entire range of FMCG companies, whether its Britannia , Dabur , HLL are all their clients. They have four plants in India; one of them is in Rudrapur which is a tax incentive zone. They are also planning for an expansion there, which is again going to lower their tax.

We believe that in FY12, the company is going to report an EPS of Rs 9-9.50, which translates into a PE of less than 10 times at current market price.

Seeing the kind of brand value and the clients this company has, and not to forget the expansion in a tax incentive zone, I think this stock can be accumulated at declines with a price target of Rs 110-120 in the next 3-4 quarters.

On TVS Motor

TVS Motors, the numbers were pretty good, but I feel the run up in auto stocks has already been completed. That can be seen in the month-on-month numbers for the entire industry, with an exception of one or two companies. But going forward in the high interest rate scenario, I think that there would pressure on revenue and sales. So I would be a little cautious on TVS Motors, or any other company in the auto pack, except for Bajaj Auto, which I believe can outperform the industry as such.

On Cox & Kings

As far as Cox & Kings is concerned, it is trading at very low valuations, considering the kind of brand value it has and the kind of business it operates in. Recently, they announced an acquisition abroad, which is going to help immensely in improving the bottom line. So I think one can definitely add this stock on declines.

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Idea Cellular Huhtamaki PPL Britannia
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