See 50% upside in Tips Industries: Rajen Shah

Shah told CNBC-TV18, "I have always believed in recommending good companies with quality managements but I cannot with absolute confidence say that Tips Industries falls in that category but the developments, which have happened in this company over the past 18 months gives me enough confidence to very confidently say that the stock price has headed much higher than the current levels of about Rs 59-60."

He further added, "This company bought back about 13.5 lakh shares at an average price of Rs 48 in 2010-2011. 13.5 lakh shares at an average price of Rs 48 works out to roughly around Rs 6.5 crore and the marketcap of the company then was about Rs 50 crore. Now another thing, which has happened is that in the last six months, the company’s management through acquisition acquired about 7 lakh shares from the market at an aggregate price of about Rs 50 pumping in about Rs 3.5 crore. Despite holding 59% stake, they bought 7 lakh shares and hiked up their stake to about 64%. So when a company’s management is buying back its shares, hiking its stake, that gives you significant confidence about the future prospects of the company."

"Now what is going to happen in the next six months is going to be very interesting but before that let me share with you what happened in 2008. In 2008, the company released a movie called Race and it was a very big hit and the company that year reported about Rs 19 crore of net profit and the EPS was about 12-13 and the stock went up to as high as Rs 140."

"Now Race II is going to release sometime in November and the casting is the same in fact it has improved a lot and I think it is going to be again a super-duper hit and the profits should be around Rs 20 crore resulting an EPS of about 13-14. So I do expect the stock to at least touch the three-digits mark."

"This is not an investment category kind of stock but once it touches Rs 100, investors would do well to book profits sometime in October-November. So I am very confident, it should give 50% upside in next six months or so minimum."

Disclosure: We own Tips Industries and Escorts.