Which stocks/sectors is Equirius Securities upbeat on?

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In an interview with CNBC-TV18's Udayan Mukherjee, Bhavin Shah, CEO of Equirus Securities places his bets on the stocks/sectors he is bullish on.

Below is a verbatim transcript of his interview. Also watch the accompanying video.

Q: You have picked one stock which is very hot today - Andhra Bank , 4% high. Why do you like it over some of the other smaller PSU bank names?

A: If you look at Andhra Bank, you look at a range of parameters on which banks are evaluated whether you compare it with the public or private sector banks. Andhra Bank is based in operating measures such as non-performing assets (NPAs), whether its return on equity or whether its cost ratios, they suddenly are based in class.

We also see some more headroom as the bank increases its retail presence and room for increasing the current account and saving account (CASA) deposits versus that the stock being valued at the low end of the comparables at only 1.7 times book and also in a position to sustain pretty strong growth. Even without an assumption of any kind of multiple expansions we see substantial upside in the stock and that's why we like it.

Q: Is some price to book multiple adjustment or expansion justified in Andhra Bank you think?

A: Expansion is possible. We do think if the market becomes less and less concerned about the regional issues about Andhra and Telangana, if we move into that sort of an environment then in fact it might even see multiple expansion. Our target price of Rs 220 does not assume any multiple expansions.

Q: Why do you like the story of Shiv-Vani Oil and the space?

A: There is huge focus by Indian government through the New Exploration Licensing Policy (NELP) programme in increasing the exploration. Shiv-Vani Oil is an integrated onshore player which is far less volatile than the offshore players. It's a high growth opportunity being valued at relatively low multiples and they have very strong order book of more than Rs 3,000 crore.

There is a potential to add substantially to that order book. There is a lot of comfort in seeing the company achieve more or less 20% revenue growth. With room for improvement in asset utilization, margins could improve as well leading to almost doubling profits between FY10 and FY13. Those are some of the highlights of Shiv-Vani Oil. We do expect significant upside; we have a target as Rs 576.

Q: What kind of valuations is it trading at now?

A: It's currently trading at eight times FY11 price to earnings and 1.2 times price to book.

Q: Welspun Corp in the SAW pipe business. Why is that you're preferred pick in that sector?

A: Welspun does a fair bit of backward integration to improve its cost structure and at the same time establishing a presence near the end markets, they have already done in US and now also in the Middle East. The company is far more exposed to the opportunities in the export market as well compared to some of the other players which are more local.

From a valuation standpoint it remains fairly attractive and that leads us to see the stock appreciating to about Rs 334. It's currently trading around 1.4 times price to book and we think that the multiple is at about ten times trailing on a one year forward basis you can get that kind of an upside.

Q: You have also picked Godawari Power & Ispat . Take us through why you like that stock?

A: Our analyst visited the company last week. There were some issues with the pellet production over the last two quarters so the June quarter is also below expectations and we think that the September quarter results will also be weak given there are problems with respect to some filters in that plant.

However the company appears to have addressed that issue. We were able to absorb that the pellet production is now running at pretty normal levels and a result we will see the benefits of that in the second half. In the meantime, the price realisation is already seeing an improvement. Yesterday, there was news by Tata Steel about raising prices.

The price outlook is already pretty good and with an improvement in production the company should be able to see strong growth coming through in the coming second half of this year and FY12.

It's also one of the few companies which actually have its mining strategy, iron ore production fully in place and fully in production. It will lead to significant cost reduction as well as and hence margin expansion. We expect the stock to trade up to about Rs 290 in a year's time and again its trading close to one time price to book so very attractively valued today.

Disclosure: We might have position in Andhra Bank.