Bet on M&M, L&T; shun Prestige Estates: Angel Broking

Rajen Shah, CIO Angel Broking continues to be positive on infrastructure and capital goods stocks. Shah is positive on Larsen and Toubro and sees the stock touching highs in the next 12 months.

Meanwhile, he is betting on Mahindra and Mahindra from the auto space. From the midcap IT sector he is bullish on Aptech. Despite Prestige Estates' excellent numbers he recommends avoiding the stock. Also read: Market to be choppy; buy on dips, sell on rallies: Sukhani Below is the verbatim transcript of his interview to CNBC-TV18 Q: Larsen and Toubro (L&T) will declare its numbers today. What are your expectations and what would you do with the stock after this move upto Rs 1,600? A: It is time to load up infrastructure and capital goods stocks and we have been positive on the space for now quite a while. This year we are expecting L&T to report about Rs 90-95 kind of earnings for the FY14. At about 16-17 times I certainly feel it is a stock to be owned. There is still 25 percent upside. The kind of money flow we are seeing, I am sure that this stock should be touching its high maybe in the next 12 months. So, we are very positive on companies like L&T. Even Crompton Greaves looks like to give a 20-25 percent move. Voltas, yes, the numbers were very disappointing, but I think this year they should end up with Rs 7 kind of earnings. So it could go to about Rs 105. We are positive on capital goods and infra space and we would recommend strongly loading up these stocks. Q: You guys track some of these real estate companies. Did you have a look at the results of Prestige Estates? A; Yes, it was an excellent numbers, very strong growth in revenue and profit. I think the trend would continue in the current year. However, at about 20 times the current year expected earnings, the stock seems to fairly priced. So, would avoid Prestige at the current levels. Q: What will you do with the Tata Motors now? A: For the past few quarters we have been talking about Mahindra and Mahindra (M&M) on your channel and it has done exceptionally well. Tata Motors around this level is trading at about 10 times the current year earnings. So, it certainly looks cheap. However, Mahindra has run up a lot and could take a breather, but on June 5 they are launching Verito Vibe, which is basically going to compete against Swift. They are going to take on Swift head-on and it believes it is going to be a very sporty and a very good-looking model. So, they are going to take Swift, Polo and all this in this segment. Let us see how the launch is and how the product is and then probably we could see Mahindra go beyond Rs 1,100. But my bet in the auto space would be certainly Mahindra even at this point of time. It could take a breather for a while, but yes, we are very positive on Mahindra still. Q: From the midcap IT related space Aptech has come back on the radar after a long time, perhaps to do with the buyback. Are you bullish on that name? A: Yes, we are very bullish on Aptech. It came out with reasonably fine numbers. This year also we are expecting it to clock about Rs 6.5 kind of earnings. Both international and domestic operations should be doing well. Above that it pays Rs 4 as dividend, so the dividend yield itself works out to be very good. If one sees at the current price of Rs 58, I do not see any major downside. I see a 50 percent upside in the next 12 months basically because the market cap is about Rs 285 crore. There is about Rs 120 crore cash on the balance sheet and they are going in for a buyback of Rs 65 crore, which is almost 25 percent of the current market cap and that too at a price till Rs 82. Normally stocks do not move during buyback periods, but once the buyback is over which should be in the next nine months the stock can run into Rs 90. The risk in Aptech is very much in favour of reward.