Multibagger picks: Rajen Shah's two long term bets

Rajen Shah, chief investment officer, Angel Broking in an interview to CNBC-TV18 picked two multibagger stock ideas for the day. He expects JK Tyre and India Cements fetching better returns in the span of two-three years.

"JK Tyre has come down to very compelling levels. I expect the slow down in the auto industry to be there for a while. For the foreseeable future we at Angel Broking expect the auto industry to grow at least about 12% for the next two-three years. More than that the replacement demand has also started happening, that should be good for the tyre industry. In the next two-three years it should touch Rs 200 levels that would be my target." "It is contra call on India Cement. The company is a leading player in south. Cement demand is expected to pick-up ahead. At these levels there is very less downside of about 10-15% but the upside could be as high as 100% in the next three years." F&O market: Get experts tips on Infosys, DLF, Kotak Mahindra Bank Below is the edited transcript of Shah's interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. On JK Tyres This stock has come down to very compelling levels. It is quoting at about Rs 75. The market cap of the company is about Rs 300 crore. I expect the slow down in the auto industry to be there for a while. For the foreseeable future we at Angel Broking expect the auto industry to grow at least about 12% for the next two-three years. More than that the replacement demand has also started happening, that should be good for the tyre industry. Just to make a small comparison in case of the tyre industry, MRF would report a turnover of about Rs 10,000 crore this year and the market cap is about Rs 3,000 crore. Apollo would report turnover of about Rs 11,000 crore and the market cap is about Rs 3,000 crore. The market cap of these two companies is about 30% of the turnover. Given that, JK Tyre it is too cheap. Their turnover (consolidate revenue) this year would be about Rs 7,000 crore. Their market cap is just about Rs 300 crore. Logically, if you were to give it the same market cap as MRF or Apollo it should have been at Rs 2,000 crore. JK is quoting at about Rs 300 crore market cap. Even if the quality of management and the brand is discounted, JK needs to trade at least Rs 1,000 crore market cap. So it is a clear cut 200% upside in the stock. The other reason why I feel that tyre industry should do well is that rubber prices will collapse from here. I expect prices of rubber which is used to manufacture tyre to come down from Rs 215 per kg to about Rs 175-180 levels. JK spends almost Rs 2,500 on rubber every year