Expect 20% upside in ICI India: Kapadia

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Ranjit Kapadia See what other Experts & Brokerages are saying about ICI India See messages about ICI India Akzo Nobel BSE | NSE 10/02/12 Are Mutual Funds betting on Akzo Nobel?

Expect 20% upside in ICI India , says Ranjit Kapadia , VP-Institutional Research, HDFC Securities.

Kapadia told CNBC-TV18, "ICI India has about 20% upside and we have recommended some of the clients about this. It is in the paint segment and its 98% revenues are derived from this segment, if you see the valuation gaps between the two major companies, Asian Paints is trading at about 24-25 times, Kansai is trading at about 15-16 times and this company is trading at less than ten times, so there is a huge valuation gap and its parent company is a very pioneer company in the global space. Also because of the distribution systems have changed, the company has suffered in the topline, so going further if the topline is in place, the margins are likely to improve. "

He further added, "The topline has declined by 5% during the quarter because of the restructuring of the distribution channels and after that process is over, the market is growing at about 15-16% in this paint segment. So even if they grow at 10%, still they will be able to make good margins and margins have already improved because of the raw material prices that have come down last year, despite 5% decline in the topline the bottom-line improved by almost 55% during the quarter, so we are quite positive on that."

Disclosure: No holdings but recommended to clients.