Which stocks is LKP Shares looking at?

Giving his perspective on the performance of VST Tillers Tractors and Fem Care Pharma , S Ranganathan ,  LKP Shares said they believe that the above stocks are value plays and in a market which ignored valued for sometime, they are quite optimistic on both these companies.

Excerpts from CNBC-TV18 exclusive interview with S Ranganathan: 

Q: Your call on VST Tillers Tractors. The one thing that strikes the eye is of course the slender volume that it's done 2,790 and what's the kind of investment argument, you have in favour of it?

A: VST Tillers Tractors is essentially in agricultural inputs company. It derives more than 70% of its revenue from power tillers, where it has a market share in excess of 50% and it is also a player in the lower HP Tractors and diesel engines along with components that go into diesel engines. What we like about the company is that it has got three facilities, one in Bangalore and the other two at Hosur and Mysore.

The Bangalore facility is located on a 20-acre plot in Whitefield, which at today's price is worth more than Rs 200 crore. So if at all, the company decides to relocate its facility to other two locations, that will open up a huge window of opportunity for stakeholders and besides of course, the valuations is what makes it very attractive because it trades just about 7 times current year expected earnings.

Q: The other pick Fem Care Pharma. You are looking at 30% upside from current levels but the key aspect remains on the volume for the stock and for the company. The competition it has from multinationals?

A: This is basically a personal care and grooming company. What we like about this company is the kind of new products that it has introduced over a period of time and as you rightly mentioned it has to face competition from some of the big multinational players because they have huge ad spends. But the key point here is that despite all the competition, the company has been able to grow its EBITDA by more than 200 basis points YoY over the last three years. So essentially what we are looking at is a company, which is now thinking of merging its marketing arm with itself, which actually brings in the entire distribution chain within the listed entity.

So again it's a valuation, very attractive, trading at 10 times current year expected earnings and we believe that both these stocks are value plays and in a market which ignored valued for sometime, we are quite optimistic on both these companies.