Aashish Tater's multibagger picks: IL&FS Transport, REC

Aashish Tater, Head of Research, Fortunewizard.com, is bullish on IL&FS Transport and REC. He feels IL&FS Transport deserves price to earning multiple of 6-7 times and expects the stock to post an EPS of over Rs 28 on a consolidated basis. He finds REC attractive.

Also Read: Aashish Tater's multibaggers: IFCI, Indian Overseas Bank On IL&FS Transport
IL&FS Transport Network Ltd (ITNL) could be a very interesting bet at current levels. We feel the cash flow that the company is expected to generate over the next two to two-and-a-half years is attractively valued at current levels. Even looking at the latest result, we feel this is one stock that deserves a rerating in terms of price to earnings (P/E) expansion. Also if you see the NH2 driveway order book along with other order book, we feel this is one stock that will go and stabilise around that Rs 170-175 from next 12-18 months perspective.
If someone sees a the next six months horizon on this particular business, the surface transportation, we feel that the stock will languish between Rs 120 on the downside and Rs 145 on the upside. Once the market sentiment improves, definitely there is going to be a rerating into companies, which generate free cash flows. This is one stock, which is expected to do an earnings per share (EPS) of over Rs 28 on a consolidated basis. Given its strong parentage, it definitely deserves a price to earning multiple of 6-7 times thus taking the stock to that Rs 175 mark from medium-term perspective.
If you see the exposure across the globe, this is one company that is automating its toll business, which is going to be very positive in the long run. Apart from the toll business, the built-operate-transfer (BOT) business is also expected to do well because of the strong order book and the execution capability the company has. On REC
We are now neutral to positive on Rural Electrification Corporation (REC) along with Power Finance Corporation (PFC). Earlier we had a negative call. The way REC and PFC have shaped out, it is right now trading at 0.7-0.75 time price to book, which we feel is very lucrative for a company like REC. The results posted recently, there has been a remarkable improvement and a consensus beat both on topline and bottomline, in fact on asset quality front too we feel this is one stock where there is a lot of comfort compared to public sector undertaking (PSU) banking space.
Thus, it is not right to compare REC and PFC with banking finance companies or even banking companies in the PSU space and thus deserves a rerating on both the stock. We feel a target of Rs 185 and Rs 210 is likely achievable from short-term perspective on the stock and the stock will languish between Rs 158-160 zone on the downside where the accumulation should be done from medium-term perspective. Disclosures: Aashish Tater does not hold any personal position in the stocks.