Multibaggers: 3 stocks where Aashish Tater sees value

Aashish Tater, Fort Share Broking is bullish on Panama Petrochem Limited, Alok Industries and ILandFS Transportation Networks.

Below is a verbatim transcript of his interview with CNBC-TV18's Mitali Mukherjee and Udayan Mukherjee. Also watch the accompanying video. Q: Panama Petrochem Limited, what is the story here? A: Panama Petrochem Limited is very small company. But looking at the financial of this company, I feel this could be a sub USD 100 million company in the years to come. Talking about their core business, they are into agriculture spray oil, transformer oil and they have got interest with Petronas of Malaysia to distribute their oil Syntium. Along with that, they also have arrangement with Lubcon from Germany. So, I see a lot of potential for this particular company which also has manufacturing facility spread over four areas, in Daman, Ankleshwar and two in Mumbai. So, on a Rs 137-138 crore marketcap or Rs 250 current market price, I feel the stock is undervalued given their financial performance. The company has been consistently growing year on year. We expect a conservative earning per share (EPS) for this current fiscal of close to Rs 64. So, a company that is available at a PE multiple of less than four times, almost 30% expansion in the next two to two-and-a-half  years. That means in two years the company would be doing an EPS of close to Rs 90-100. The company is actually volatile to crude oil movement, so this is one concern for the company. We have done a sensitivity analysis for this stock. We feel if crude is hovering around USD 78-110 per barrel mark then our estimate would roughly be around USD 90-100 per barrel mark, but if anything happens to crude on the downside, the earnings potential will go up. The company can easily pass on to the customers if prices go beyond USD 120 per barrel. Taking all this conservative side, we have recommended to our clients with a target of close to Rs 350-400 on a conservative side from an 18 month perspective. But I feel the market would definitely respect this particular stock where the promoter holding is close to 67-68% and also the stock is having low float. This could be a concept stock in the future. More interestingly about the bottom-line expansion, they have been growing at 40% compound annual growth rate (CAGR). I think this is a multibagger if someone has the potential to hold. One should be buying on dips, on every 5-7% dips from a longer-term perspective. Q: Alok Industries is the other one you have picked out this morning? A: This is one stock which has been well discounted by the market, if I go by the fundamental route. But what has interested me in this stock is that it has been range bound between Rs 22 and Rs 29 mark. This is a good trading bet whenever market bounces back. Looking at the fundamentals of this particular stock, the company owns a subsidiary in the name of Alok Infrastructure, which was bought some years back close to Rs 800 crore marketcap, which actually resulted in lot of balance sheet problems for the company with debt getting overleveraged. The company had to come out with a right issue and the stock price tanked like anything. Now, going forward, I think debt problem for the company would be resolved because the core business is doing well and is expected to do exceptionally well for years to come. The company is into knit, weaving along with a brand called Alok which has approximately 260 retail outlets through franchise based models and company owned showrooms which will be spread to 400 stores in the next 18 months. So, we expect a bottom-line of close to Rs 5,000 crore for this fiscal and close to Rs 5,800 crore for next fiscal. Even going by the same margin that the company has been able to generate over the years, the company has close to Rs 200-225 crore of free cash flow for next fiscal. And that would help the company to reduce the debt burden from the balance sheet which is already been seen from their current payouts What is interesting is that we have been bullish on the textile story and we have a pair-trade strategy for the same. We have been asking our clients to short twice the Nifty against textile stocks because beta of the stock is close to 1.8 times and at every bounce back these are showing sharper bounces than the Nifty. So, we feel on a rangebound area, this particular stock can be traded both fundamentally as well as technically from the ranges of Rs 22-23 levels to Rs 24 to Rs 29-30 mark and small positions should be kept from a longer-term perspective with a target of close to Rs 40-45 for the next 12-18 months. Disclosures: I would like to give a cautious statement to all the investors. Firstly, please do not go and buy a large quantity. The better idea is to slowly accumulate these kind stocks because these are themes for 2012-13. So, these stocks can be easily traded out on a range. We have been suggesting the same to our clients and we might own these stocks into proprietary books of accounts. The same strategy is followed by us for our proprietary books of buying and selling on the basis of technicals for textile stocks along with Nifty. So, we have vested interest in that sense also. But I am not supposed to own any of the stocks recommended thus I do not have a personal position into them. _PAGEBREAK_ Q: You like IL&FS Transportation as well, what kind of share price performance are you expecting? A: ITNL is one stock which worries me as well as I am in favour of the stock. My past experiences suggest all the new listings at one point of their lifetime actually trades in that 6-7 times price band that is the price earning multiple. Going by the promising prospects of the business, I get attracted to this stock. The company will do an EPS of close toRs 18-19 for the current fiscal. We expect NHAI to award projects of 30,000 km in the rural-urban road highways where the company is also a pioneer.
Looking at the current order book of the company, the company is sitting on Rs 120 billion order book and is expected to grow at 20-22% going forward. So, here we have suggested to our clients that nobody can guess the downside for the stock because it is a relatively new listing, but one should definitely accumulate this particular stock because of the promising future it has into. IL&FS being one of the premium corporate houses in India, we feel the stock would not go to 6-7-8 times. But can easily bottom out around 10-11 PE multiple means that the stock should be accumulated between the range of Rs 200-270 odd levels from a longer-term perspective. Looking into the subsidiaries of the company, the company has a joint venture with Italy based companies where the company owns 37% and the company is actually operating on a BoT project for 1212 km. Apart from that, the company