Multibagger idea: 1 stock that may go up 50-60% in 2 years

In an interview to CNBC-TV18, Rajen Shah, CIO of Angel Broking picks Finolex Industries as his multi-bagger pick for the day. He believes, the downside is about 10 percent on this stock and the upside to be as high as about 50-60 percent in the coming 24 months.

He further adds, "It makes sense to get into this company at the current price of Rs 60". Also read: Nifty to be rangebound; take only intraday trades says Sukhani Below is a verbatim transcript of the interview: On Finolex Industries Finolex Industries is currently quoting at about Rs 60. This stock has been in that Rs 50-100 kind of a range for so many years. It moves to Rs 50 then to Rs 100 and then again back to Rs 50. This happens over a period of 2-3 years. So it is not a stock wherein you actually multiply your capital. However, it is a stock wherein you enter when the stock price comes down to the lower band of about Rs 50-60. Now that the stock is currently at about Rs 60, we believe that the downside is very low about 10 percent and the upside could be as high as about 50-60 percent in the coming 24 months. Since the risk-reward is very clearly in favour of reward, it makes sense to get into this company at the current price of Rs 60. If you see Finolex Industries, it has both value and growth story in it. It has got a 2,60,000 metric tonnes of polyvinyl chloride (PVC) resin manufacturing plant at Ratnagiri. It is the second largest manufacturer of PVC resin in the country. If you went to set up a similar plant today, it would cost you nothing less than Rs 700 crore. Also, it has got a 180,000 metric tonnes of PVC pipe and fitting manufacturing plant at Pune. That would cost at today’s price roughly around Rs 200 crore so that becomes about Rs 900 crore. It has recently setup a new plant at Baroda in Gujarat to manufacture 50,000 metric tonnes of PVC pipes. It has been set up at a cost of Rs 100 crore, so that becomes about Rs 1,000 crore. It has got 43 megawatt of power plant at Ratnagiri, which if were to be set up today would cost around Rs 200 crore, so that becomes Rs 1,200 crore. It has got land of 76 acres at Chinchwad near Pune, which is about Rs 350 crore. That becomes about Rs 1,550 crore or so. And it has got Rs 150 crore worth of investments in Finolex Cables and some other investments, so that becomes roughly around Rs 1,700 crore. Add to this, the small port -- a landbank -- which they have at Ratnagiri. So, it becomes a Rs 2,000 crore asset company. If you take out the debt of about Rs 750 crore from this, the net asset of the company stands at about Rs 1,250 crore whereas the current market cap is about Rs 750 crore. There is a clear 40 percent discount sell going on in Finolex Industries. So, that becomes a value story. As far as growth is concerned, today in our country only 35 percent of the agricultural land is irrigated. With foreign direct investment (FDI) in retail, contract farming, firm agricultural commodity price, I think it is a matter of time before this industry starts growing at double-digits in the coming years. It is a long-term story yet to unfold. However, as and when that happens, there will be significant rerating of all these companies which are into PVC pipes which are used in irrigation systems, micro irrigation business.