Expect upside in Arvind, Hexaware: Equirus Sec

In an interview to CNBC-TV18, Bhavin Shah of Equirus Securities picked stocks like Arvind and Hexaware. He sees Arvind going up about Rs 120 in 12 months.

He believes that large cap IT stocks have done fairly well in last couple of months and midcap IT stocks haven’t really kept pace with that. Shah sees some opportunities in midcaps, especially Hexaware, which he finds attractive at current levels. He thinks that stock could easily go up to Rs 115-120. Also read: Correction over, mkt awaits trigger; buy CIL: Macquarie Below is the verbatim transcript of his interview to CNBC-TV18 Q: One of your picks is Arvind. That stock historically sees a lot of volatility. What would your targets be? A: We believe that Arvind is transforming itself gradually into a company that is benefiting from not only textile business but also brand and retail business. Finally it is monetizing on its assets in the real estate. There is a clear focus on the company on improving its return on capital employed. However, due to the past history the market has not really rewarded the company with a valuation that it deserves, inspite of relatively healthy earnings performance. So, we believe that with the recent correction the stock is back to a level, which is very attractive. It is trading at 0.9 times price to book and a single digit 7-8 times earnings. We do see the company delivering reasonable earnings growth at least 15-20 percent over next couple of years. We think that return on capital employed will also expand as company continues to grow its textile business and see improvements in brand and retail business. A very comforting fact is that the management has been buying this stock around recent current price levels in the last few weeks. So, we see the stock going up to about Rs 120 in 12 months. Q: Hexaware Technologies has had a good run for the past few weeks, where do you see it headed, it is one of your picks? A: Hexaware had those challenges in December quarter with respect to a client not recognizing the revenues and that has hit the company significantly. Inspite of all that the company has still delivered high earnings growth in the current fiscal year. We think that similar growth is possible or even better next year. Versus that we are looking at PE multiple based on March 13 of only seven times and the dividend yield is close to 6 percent. So, if large cap IT stocks have done fairly well in last couple of months, midcap IT stocks haven’t really kept pace with that. We think there are some opportunities in that and Hexaware is looking very attractive at these levels. We think the stock could easily go up to Rs 115-120.