Multibaggers: Aashish Tater picks Sintex, NHPC

In an interview to CNBC-TV18, Aashish Tater, Head of Research, Fortunewizard.com recommends Sintex Industries and NHPC as his multibagger stocks.

Tater is bullish on these two stocks even though they have suffered in past and feels they will yield better future returns if invested for a long-term. Below is an edited transcript of Aashish Tater's interview on CNBC-TV18.
 
Sintex Industries
Last time we pegged Rs 52 as the worst level for Sintex. Now the stock correlates an interesting pattern with other stocks facing similar problems. The stock may again stabilize at much higher levels than Rs 65 that we earlier pegged. Now we have a stabilization target of Rs 85 and eventual target of Rs 120 on this particular stock.
We feel the stock would go up and test this particular level in days to come because if you see the market cap to sales or enterprise value to sales, we find the stock to be undervalued. With the problems solving for this particular company from the Foreign Currency Convertible Bonds (FCCB) perspective, the stock would be rerated because the price earning multiple roughly trades at six times forward next year.
 
Given its an F&O stock and the average PE, the stock earlier had10-11 times on conservative side and in good times the stock can go up and test those PE multiples given our regression models. This is an easy upside of almost 50-60 percent from current levels if someone has the potential to hold for another one year or so.

Yesterday, the company re-augmented their balance sheet and this will allow a lot of cah from promoters and cross holdings which will see a lot of debt issues being resolved at the company’s end. Now the company may again go to stabilization levels at much higher operating profit margins and EBITDA margins which will see a lot of analyst traction. The stock would be rerated somewhere around Rs 85-89 for the next six-eight months. Also Read: Nifty inches closer to 6000, bank shares build on gains
NHPC
NHPC has been suffering since the past five years but now with reforms it would be attractive again, bet at current levels for long-term perspective. We recently had coverage on this particular stock because we felt new plants would come in and the plant load factor would also stabilize at around 90 percent levels from current 85 percent. We did a sensitivity analysis on this particular stock. There were two projects having a lot of hurdles because of the environmental clearance but apart from the coal power generation company, government has to be lenient in giving clearances to companies like NHPC.
If you go towards south to Coimbatore, Tamil Nadu, Hyderabad, the industry is not working more than four days a week due to power cuts. It has similar issues towards  Jammu and West Bengal as well. Combining these aspects with the environmental clearance guided by the management, the EPS increment of the company should be at least 50-60 percent from current levels.
The company would stabilize around Rs 4 EPS and given it’s a PSU company government would be looking for higher dividends from the management. Rs 2 dividend cannot be ruled out on this particular stock. With a two years perspective, see if you can get a Rs 2 dividend on Rs 25 stock and the dividend yield roughly works out to be at 5 percent. The stock can easily go and test Rs 42 mark that we are pegging for the next 18 months perspective.
The worst has almost factored in, in this particular price because the Parbati-II project and the other project where the company was facing hurdle has been written off from analyst radar for valuing the company. With project clearances coming in FY13, in the later stages these assets will again come into analyst radar and we are pegging that sensitivity analysis at Rs 4 plus EPS, there could be a huge rerating on the stock because on an average the price to book value of these companies is around 1.6 times. The stock is right now trading at one time price to book, so almost 60 percent upside for next 12-15 months. This is definitely a portfolio bet, given there is 60 percent upside and hardly any downside on this stock. Disclosure: Safe to assume the stocks discussed have been recommended to clients.