Ashish Chugh's top picks: Balaji Telefilms, Ramky Infra

Ashish Chugh, Investment Analyst & Author of Hidden Gems is bullish on Balaji Telefilms from the media space and Ramky Infra from the infrastructure space.

Below is the edited transcript of the interview. Also watch the accompanying video. Q: You have picked a media stock Balaji, what is it that you like about the story there? A: We like this stock primarily on account of two factors one is the operational part and second is the valuation or the balance sheet of the company. Company faced difficult times post 2008 when it ended its association with the Star TV. The profits of the company plummeted, it used to be in the range of 80-90 crore and they saw a sharp decline. Same was the case with the stock price. The stock price of the company had touched a high of about Rs 390 and it plummeted to a low of close to Rs 25 in March of 2009, currently it trades at about Rs 39. At the current price, the negatives probably seem to have been discounted. If you see the financials for the last nine months, the company seems to be on a recovery path. It made a profit after tax of close to Rs 10 crore for the nine months ended December 2011 as against the loss of roughly Rs 2 crore for the same period last year. Now the point to be noted here is that the success of Dirty Picture or the profits on account of the film have not been accounted for the nine months financials. This is primarily because that company is a part of the wholly owned subsidiary and consolidation is done only at the end of the year. If you include those profits, we could be in for a positive surprise when the company declares the numbers for the full year. The profits could be substantially higher primarily on account of contribution of profits from the movie which was a big hit. The second thing is that some of the new serials launched by the company like Bade Achhe Lagte Hai and Parichay have occupied top floors as far as TRPs are concerned. On the operational part, the company has started doing well. Two-three years, the company had faced difficult times, but it seems to be reviving. If I look at the balance sheet of the company, this is a totally debt-free company. At the current market price the marketcap of the company is just about 250 crore. The investments of the company as on December 31, 2011 is close to Rs 250 crore. Out of this Rs 256 crore, Rs 30 crore the company has invested in its wholly-owned subsidy which is Balaji Motion Pictures. The balance Rs 226 crore is invested in various mutual funds and in bank deposits. So, there is a cash of about 226 crore lying in the balance sheet of this debt-free company. If I look at the marketcap of Rs 250 crore, this debt-free company has got cash of about Rs 226 crore. If I include the other assets, I think the company maybe going well below its cash value. I am not even considering the land, building and so many other assets which the company has leave alone the creative genius of Ekta Kapoor, all these factors are not getting reflected in the stock price primarily on account of the fact that profits still seems to be low at about Rs 10 crore. But, once the consolidation happens, the picture could be totally different. So, pre-consolidation this could be an opportunity for investors to get into this stock, which is trading very close to its five-year low. It is substantially down from the five year high of about Rs 390 which it touched in 2007. At the current price I don