Buy Triveni Turbine at Rs 70, says Equirus Securities

Bhavin Shah Of Equirus Securities explains his strategy of trading shares of Gujarat Mineral Development Corporation, City Union Bank and Triveni Turbine. He suggests buying Triveni Turbine at Rs 70.

Below is the verbatim transcript of the interview (aired first on May 22). Q: Let’s start with Gujarat Mineral Development Corporation (GMDC) where you have a price target of Rs 200?
A: The stock has corrected quite a lot because the company disappointed somewhat with volume growth in FY13. But we think that with some recent improvements in Tadkeshwar and Bhavnagar, the volume growth should be better in FY14. We expect around 11 percent volume growth and after this massive correction the multiples have come down to basically high single digits and we think that something in the range of 15-20 percent earnings growth is quite achievable in FY14 and 15. So, I think it is just a moderate recovery in multiples plus the earnings growth should allow the stock to move back up closer to Rs 200 over the next 12 months. Q: In the entire banking space you like Citi Union Bank. Why is that? What would be the kind of target price that you expect on it?
A: We cover a lot of regional private sector banks primarily, so obviously the pick is focused on that area and within that we are trying to focus on midcap picks for the segment, so we picked up Citi Union Bank. We like their focus on the asset quality, the working capital loan based focus on SME segment allows the bank to grow pretty rapidly, over 25 percent advance growth is what the bank has been able to achieve. There have been some concerns about the rise in cost to income ratio, but result just came out and the ratio has started to stabilize. It came down slightly and the asset quality has also shown marginal improvement. So we think that with this kind of performance sustaining going forward bank can easily achieve about 2 times price-to-book valuation on a trailing basis that gets us to the target price of Rs 74. Q: What about Triveni Turbine? What is the price target here and what is the trigger?
A: Triveni Turbine has done reasonably well even in a very tough environment in FY13 in markets, especially the domestic Indian markets, because of its ability to generate revenues from spares as well as maintenance for the turbines that the company sells, especially in the captive power segment. We see a lot of growth opportunity for the company in the export market and that is also likely to be backed by some improvement in the domestic market and both of those combined will allow the company to deliver at least 20 percent plus earnings growth. So the company should be able to sustain 19-20 times earnings multiple given its very high Return On Capital (ROC) in excess of 100 percent. So that again gets us to the target price in the range of about Rs 70.