PN Vijay's best bets: Jagran Prakashan & Mahindra Holidays

Portfolio Manager PN Vijay picks Jagran Prakashan and Mahindra Holidays as his multibaggers for the day. 

Vijay sees Jagran Prakashan rallying to Rs 135 in the next one year. "The stock is trading around Rs 105 and I think it has the potential to go up to about Rs 135 in the next 12 months," he says.

Vijay recommends Mahindra Holidays as he sees good growth for the company. The added advantage with the stock is that Vijay sees "no great risks associated with the investment."

Also read: Four stocks on brokerages' radar post Q3 nos

Below is the edited transcript of Vijay's interview to CNBC-TV18.

Q: Why have you picked Jagran Prakashan?

A: Jagran Prakashan is a leading vernacular paper. It has got Dainik Jagran which is the most popular paper in the north in Hindi. Jagran Prakashan is the biggest regional print media player in the country. It also has Mid Day which is a tabloid which is popular in Mumbai, Delhi, Pune, Bangalore. It also has Nai Duniya which is more in Chhattisgarh, Madhya Pradesh and a women’s leisure magazine Sakhi.

Jagran Prakashan has had a pretty decent quarter. The turnover went up to about Rs 350 crore, about 8 percent, but the gross margins surged more than 60 percent due to very soft news print prices. The net profits also surged by an equal amount. What makes a stock like Jagran Prakashan interesting is that today, there is a demographic shift in print media. This shift is more towards the regional papers, especially the north where there is more prosperity coming in. The newspaper penetration is very low and it is bound to improve.

There also seems to be a turnaround in Mid Day and Nai Duniya. The losses have sort of reduced and are getting to zero. All these are great positives for the stock. The stock is trading around Rs 105 and I think it has the potential to go up to about Rs 135 in the next 12 months. The risk to this recommendation is ofcourse news print prices, because here is a company where the raw material inputs are subject to fairly large variations while it is very difficult for the company to pass on the price to the end users. So, that is only caveat, but it looks good and it is a fairly safe stock.

Q: Why have you picked Mahindra Holidays?

A: Mahindra Holidays is ofcourse a concept stock. It belongs to the large Mahindra Group. It is a market leader in the leisure hospitality business and has got a very powerful brand Club Mahindra. The positive about Mahindra has been its growth.

Over the last five years, its room inventory has gone up three times to over 2000 and the number of locations has also increased considerably. It’s membership has also shown a Compounded Annual Growth rate (CAGR) growth of more than 20 percent. The last quarter was reasonable for Mahindra. The turnover went up about 8 percent or so to Rs 180 crore and the profits followed a similar pattern.

The positive for Mahindra Holidays is that it is a concept stock. Leisure hospitality in India is really catching on as domestic tourists spend more of their time in leisure and travel within India to short destinations and so on. The capital expenditure is financed almost entirely out of internal accruals and membership. Both are interest-free and the company has realised the potential for membership for Non-Resident Indians (NRI) who necessarily come once a year to India and are doing more of holidaying.

They have just opened an office in Dubai which is raking in good numbers. So, all this is a great opportunity. It is almost like a Fast Moving Consumer Goods (FMCG) stock if I may call it. It is trading around Rs 295. I do not think it will run away but it will have a steady growth of about 20 percent or so per annum. I am projecting a target of around Rs 350 in the next 12 months. There are also no great risks associated with this investment.