Daljeet Singh Kohli of India Nivesh Securites recommends buying Apcotex Industries for target of Rs 444.
Daljeet Singh Kohli of India Nivesh Securites told CNBC-TV18, "We are looking at bottoms up approach and market on a whole, can do a lot many things. There will be a lot many issues to rattle with. But most important is ultimately, we make money when we choose the right stock. So, we have tried to find those stocks where the impact of Brexit is minimal or which can be taken care of by doing something on the domestic front where you will be able to make up more than what you would lose there."
"With that theme we are continuing with the bottoms up approach with the stocks selection. Apcotex Industries, which is purely nothing to do at all with any export markets, because they are 100 percent domestic oriented. They are entire business comes from India. They are a specialised chemical player. They are into rubber chemical and latex basically and have taken over a company called Omnova Solutions," he said.
"By taking this over, they are actually going double their revenue this year itself. The company that they have taken over was making a loss at the operating level. Within two months of integration, they have brought it to 4 percent plus. So, that is the kind of leverage that they have. So, we are expecting that in the end of FY17, the merged entity will also have a similar margin which they had in the prior to merger. That means an upside of almost 10-12 percent in the new business that they have acquired. That is the theme of buying Apcotex."
"In terms of valuations, the stock is trading at around 20 times and then 14-15 times of FY18 which again is reasonable. So, there is a track record of company integrating good things in the past also. There is a big synergy coming from the new business acquired and the valuation in your favour. It makes sense to look at the company even though market may do whatever, but the stock will perform. So, we have give a target of Rs 444 and a buy rating," he added.The Great Diwali Discount!
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First Published on Jun 30, 2016 01:18 pm