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Sep 18, 2012, 03.51 PM IST
Rahul Shah said Everest is headed to become a Rs 1,000 crore company this year and MT Educare too has been able to capture a niche market. He suggests a target of Rs 250-260 for Everest Industries, while he is hopeful of MT Educare reaching Rs 140-150.
Rahul Shah, Head PCG, MF Global Sify Securities India picks Everest Industries and MT Educare on strong growth expectations. In an interview with CNBC-TV18, Shah said Everest is headed to become a Rs 1,000 crore company this year and MT Educare too has been able to capture a niche market. He suggests a target of Rs 250-260 for Everest Industries, while he is hopeful of MT Educare reaching Rs 140-150.
Here is the edited transcript of the interview on CNBC-TV18.
Q: You have Everest Industries as one of your picks, tell us why do you like it and what kind of targets you see?
A: We like Everest Industries. It has good pedigree of management. From a pure building product player with focus on roofing sheets, it has moved on to become an infrastructure player with focus on pre-engineered buildings and structures. Even if you look at the major sectors where it goes from erstwhile pharma, FMGC, auto ancillary to the infrastructure plays like airport, railways, metro railways, it has wider applications than what it used to have before.
Even if you look at the financials, it will be almost a Rs 1,000 crore top-line company this year with 10% EBITDA margins and close to 5.5% net profit margins. It looks good at the current level with high ROE, good pedigree of management, trading closer to the book value and high growth. We expect this stock, which is trading right now at Rs 190 to touch around Rs 250 to Rs 260 levels in times to come.
Q: The other one I believe is MT Educare - you seeing some traction picking up in education?
A: This is a very small company, very niche play on educational coaching which is picking up quite a bit in India. This is promoted by first generation entrepreneur Mr Mahesh Shetty and it has focused more on coaching right from 9th to 12th standard focusing on engineering and chartered accountancy.
It is also a very niche player on entrance test preparations, a category which is picking up in a big way in India. This company has a USP of a very well researched content and technology support. It makes the entire model quite scalable. We like this company which is right now a small company with Rs 130 crore top-line.
However, it is a very high ROE business. It generates free cash flows, it is debt free and we believe that with the increase in enrolment and increase in fees, this could project top-line growth of 25% in the next 3-4 years with bottom-line growth of 40% in the next couple of years.
Q: Would you prefer something in the infrastructure space at all we hear a lot about a possible package coming for the SEBs and therefore is there anything in that space that you recommend either infrastructure, capital goods, finance stocks where perhaps there is headroom for the stocks to rise?
A: I think manufacturing stocks have been beaten down primarily on various concerns, right from high cost of capital to high raw material cost and a lack of visibility of order flow and stuff like that. Once the government makes a move in the right direction you might see this sector picking up. We may like to go with the market leaders like IRB or a small cap company like ITD Cementation which are placed very well in that domain to capitalize growth.
A small short term play could be small PSU banks which are trading close to half times their book value to 0.75 times. Though there are fears of NPAs looming large, the valuations are attractive to take a small bet there also.
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