Kimeng Sec suggests 3 stocks worth a second look

Jigar Shah of Kimeng Sec is bullish on LIC Housing Finance, Tata Global Beverages and Eros International.  His price target is very strong in case of Eros International. "It is about 80 percent higher from the current levels," he said.

In LIC Housing Finance Shah has seen good recovery in earnings for the fourth quarter. Now, he expects another 30 percent profit growth over FY13 in FY14. For Tata Global Beverages his view is that there will be reduction in losses and probably break-even in some of the businesses. His estimate is that there will be around 30 percent increase in profit for FY14. Also read: Macquarie wary of Crompton & BHEL, bullish on L&T Below is the verbatim transcript of his interview to CNBC-TV18 Q: Why are you bullish on LIC Housing Finance? What are the targets? A: On LIC Housing Finance we have seen pretty good recovery in earnings for the fourth quarter. We expect another 30 percent profit growth over FY13 in FY14. We feel that the downward movement in interest rates will benefit the company. The loan growth is going to be pretty decent. We think at about 1.8 times price-to-book for one year forward the stock is quite attractive. We have a target price of Rs 332 based on price-to-book of 2.2 times, which is not very demanding given the strong ROE and balance sheet of the company. Q: You also like Tata Global Beverages. What is the story and what is the kind of upside we could expect? A: The upside on Tata Global is about 20 percent on the current price. We like it because if we see the coffee business it is already doing very strongly. Both India as well as Eight O'Clock Coffee in the US the business has picked up over the last one year. The margin profile has changed considerably. The tea business is one which is waiting to improve especially in the Tetley part. We feel that the investments in the water and other strategic businesses will start paying off from current year. There will be reduction in losses and probably break-even in some of the businesses. So, we have a 30 percent increase in profit as per our estimate for FY14. We think at 1 times price-to-sales for a consumer product company the stock is looking very attractive. If some of the investments like Starbucks pay off that will be a very good catalyst for the stock. Q: The other one you like is Eros International. What is the story and what will be the price target? A: On Eros we have a pretty strong price target. It is about 80 percent higher from the current levels. This is mainly because if you see FY13 the numbers are yet to be out, but I believe it will be more or less flattish performance on the company because of some of the movies shifting to FY14. This year looks very good, because the movie pipeline is robust. They will be coming out with the Rajinikanth movie Kochadaiyaan in the second quarter that should provide a strong fillip to them. Apart from that they have some other strong movies lined up in the second half. We have a forecast of 35 percent increase in profit for this year and the stock is trading at just about 7 times. The movies business is very similar to the consumption stories and the consumer stories are still holding up. I think the company is well placed in terms of funding the movies and the stock has languished for now. So, there is a very strong upside as you see the quarterly earnings panning up from now onwards. Disclosure: We have coverage on these stocks, other than that there are no personal holding or company holdings.