Bet on Punj Lloyd, JK Tyres, Godrej Properties: Rajen Shah

Rajen Shah of Angel Broking is positive on Punj Lloyd and sees a good upside of 35-40 percent in in the next twelve months from the current level of Rs 54. He has a target price of Rs 75.

In the tyre space he is bullish on JK Tyres and advises holding Cummins India. From the realty space, he is bearish on DLF and likes Godrej Properties. "At Rs 600 Godrej looks much more promising than DLF."

Also read: Sun Pharma, Cipla good picks in pharma space: Satish Gupta

Below is the verbatim transcript of his interview to CNBC-TV18

Q: We saw a string of midcap results over the weekend, Punj Lloyd and Apollo Tyres and names that you track closely, what did you take away from those numbers?

A: We had mentioned that Punj Lloyd is turning around and yes, the losses have compounded significantly and have reported just about Rs 8 crore of loss. This year, it should end up reporting a reasonably fine net profit. The order book position is also improved to about Rs 23,000 crore. So, Punj Lloyd at about Rs 54 certainly looks for a decent upside. We are expecting at least about 35-40 percent kind of upside in the next twelve months for Punj Lloyd. Our target of about Rs 75 cannot be ruled out.

Apollo Tyres’ results were not up to the mark but still on a consolidated basis, it reported about almost Rs 12 kind of earnings. So, the stock is at about Rs 8 price per earning (P/E) multiple. More than Apollo Tyres, the stock, which we like in the tyre space is JK Tyres and Industries. It is extremely cheap trading at hardly 2.5 times the earnings.

Q: Do you track Cummins India? The reported numbers were good but the EBITDA level performance seemed to be a bit disappointing?

A: Yes. We need to keep in mind that these numbers are coming in the context of what we are seeing in the economy. It is a severe slowdown. Still they managed to post Rs 27-28 kind of earnings, which is certainly pretty good.

Stock is also at about Rs 18-19 P/E (Price-Earnings) multiple. The management has expressed optimism over long-term. So, if I were holding onto Cummins India, I would certainly continue to hold on.

Q: Any thoughts on real estate stock like DLF, they are looking to raise some money, the stock has been quite active in the realty bunch, do you guys have a recommendation on it?

A: We do not feel that DLF will move. The offer-for-sale (OFS) is tomorrow. It is for about Rs 1,800 crore, but we are not very positive on DLF at the current levels of about Rs 235. I had expressed my view few weeks back that we continue to be bearish on DLF.

In fact, in realty space, the one stock, which we like a lot, is Godrej Properties. At least 15-20 launches are planned over the next 12 months. Thus, the company is planning to raise the equity of about Rs 700 crore through rights issue, which would go towards growth capital. I think Godrej Properties at this level of about Rs 600 looks much more promising than DLF.