What are Mehraboon Irani's best bets?

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Mehraboon Irani is bullish on auto stocks including the ancillary pack. He is positive on Jay Bharat Maruti with a target price of Rs 120-130 over the next six months.

In an interview to CNBC-TV18, Irani explained the rationale, "We should possibly be looking at something of a PE ratio around 7-9 for companies like Jay Bharat Maruti because there are bigger names like Motherson Sumi in this pack. Considering it is not one of those big names which would attract institutional interest, even if we take 7-8-9 PE, the stock could possibly see a price of Rs 120-130 over the next six months."

The other stock he is betting high is Delta Corp . According to Irani, Delta Corp may see an appreciation of 100-150% over the next 12-18 months.

However he is negative on Heidelberg Cement . Irani explained that the outlook not very good for the cement sector, there is nothing to look forward to as far Heidelberg Cement goes and he would give the numbers a miss.

Below is a verbatim transcript of Mehraboon Irani's interview on CNBC-TV18. Also watch the accompanying video for more.

Q: Did Jay Bharat Maruti's numbers go down well with you?

A: Most of us were expecting good numbers from the auto ancillary pack and Jay Bharat Maruti was no exception. With an equity of Rs 10.8 crore, and face value of Rs 5, we saw sales going up around 40% and the net profit went up 130%. What has impressed the market is the fact that the operating profit margin also went up by 1.5%, which was around 10.8%.

Earnings for this quarter itself stood at around Rs 4.8 earnings per share (EPS) by the face value Rs 5. With an Rs 8-8.5 EPS for the first half and if we expect the same type of earnings for the next two quarters, we are possibly looking at an earnings of Rs 16-17 per share. The stock went up, but clearly from the result side this result cannot be classified as anything but a hit.

Q: What is your target price for Jay Bharat Maruti?

A: We should possibly be looking at something of a PE ratio around 7-9 for companies like Jay Bharat Maruti because there are bigger names like Motherson Sumi in this pack. Considering it is not one of those big names which would attract institutional interest, even if we take 7-8-9 PE, the stock could possibly see a price of Rs 120-130 over the next six months.

Q: You didn't like Unichem Laboratories Ltd numbers?

A: When the sales improved 25-26%, the bottomline never increased much. When you look at the results a little bit closely, you find that the staff expenses have gone up and other expenditure has gone up. Operating profit margin wise, there is a 1.5% basis drop in the operating margin.

Valuation wise, I personally feel it's fully valued. The stock at the present level, if you look at the annualized earnings it's going around 15-17-18 times for this company. Numbers wise, considering there is a drop in the operating profit margin, the net profit has not gone up by more than 2-3% as compared to the sales which has gone up nearly 25%. This result according to me was below expectations.

Q: Would you say the same of Heidelberg Cement's numbers as well?

A: The numbers were absolutely disappointing but that was largely expected from most of the cement companies. If you look at the bottomline, it's hardly anything. To say that the company made profit would be an overstatement with an EPS around 12 paisa for the quarter, profit at Rs 2.82 crore, against Rs 27 crore in the last quarter. Sales were also down 16%. What has hurt is the fact that operating profit margins has also come down sharply.

This was largely expected from the cement players as most of it was built into the price. But with the outlook not very good for this particular sector, I don't think there is anything to look forward to as far Heidelberg Cement goes and I would give the numbers a miss.

Q: Where is Delta Corp heading? It's had a big run from Rs 50 to 80 but then has gone sideways, where is it heading?

A: This is a company which I have been tracking right from 2003, when the share was Rs 10 and we had liked this company. The company had a whole lot of restructuring done and virtually came out of debt and became a debt free company.

From that time the stock which had 100 shares, today has 3,500 shares, apart from which we have 350 shares free of Arrow Textiles which is also a listed company in the market. The stock is today at around Rs 2,800 from an investment of Rs 30-35 in 2003.That has been a huge appreciation.

But what has attracted me towards Delta Corp even today and over the next 12-18 months is I will not be surprised if we have another 100-150% appreciation in the stock price.

The company definitely stands out because of the fact that it is focused on areas in which it feels it can do well. The gaming and the entertainment business, the casino business, the offshore and now possibly the onshore, looking at areas like Daman, Sikkim and possibly going into areas maybe like Sri Lanka which the company is looking at, as and when the permissions are granted.

This is a company to look forward to. I have always believed that 5% of your money should be in companies where there is conviction. Possibly you are an early entrant in the business and maybe over a three-five year timeframe, the balance sheet will really grow four-six times from the size of which is it at. We were early entrants in the stock and I feel the best for the company is yet to come.