Buy V-Guard Industries, says Rahul Arora

Rahul Arora, CEO at Nirmal Bang Institutional Equities told CNBC-TV18, "In V-Guard Industries, we have increased our price target from about Rs 1,100 after the results yesterday or day before to about Rs 1,450. That has come with a 25 percent increase in earnings estimates for both FY'17 and FY'18. The reason for that is, I do not think anyone on the street, ourselves included was working with a double digit EBITDA margin guidance which the management stated on the conference call which we hosted. The sensitivity to earnings with the EBITDA margin expansion is huge in the case of V-Guard.""Interestingly, if you see the valuation differential, even after this 45 percent run to Havells India is quite a sharp discount. So, on our earnings, V-Guard is still trading at about 22-23 times FY'18, whereas Havells is still trading at about 28 times. So, if you think V-Guard's earnings are going to sustain which is the call we are taking, either V-Guard's valuation with Havells has to close or Havells will have to correct a little bit," he said."Either which way, they are still at 25-30 percent place still left in V-Guard despite the run it has seen. It has got a 7x fixed asset turnover. I would buy this stock even at these prices. It has probably been the stock of the results season for us.""The results were good for Swaraj Engines. Obviously, the monsoon did help a lot. At Rs 1,100 in change, you are still getting the stock at about Rs 13.5-14 times FY18. We still think that volumes will grow 18-20 percent in FY17 and FY18. We still think margins will expand 300 basis points over the next two years and profitability will also increase between 15-20 percent. You are getting that growth delta with return on equity (ROE) and return on capital employed (ROC) at the range of 35-40 percent. Very rare to get these kind of growth metrics at sub-5 percent valuations.""I think, at sub-Rs 1,100, maybe at around Rs 1,000, I would definitely look to be a buyer. Liquidity is an issue, I do understand the perils of impact cost and an illiquid stock, but if you get the stock at about Rs 1,000 or thereabouts, it is a great story to be playing. In terms of tractor recovery, it is a market share gainer, it has gained 9 percent market share over the last eight years. Though it is a captive for Mahindra, it has taken away a lot of market share from the other players in the industry.""So, if you look at the erstwhile Punjab Tractors, which is now Swaraj Brand of tractors, they are coming out with 54 hp, 60 hp and 65 hp. So, even the basket of engines that is being supplied to the parent, that will also go up. So, I think I am buyer in Swaraj Engines, despite the run it has seen. I could wait for a little bit more of a correction, but I do not know if you will get it. If one month from now, if the monsoons happen to be better than expected, then you probably get the stock at Rs 1,200. But we remain structurally positive.""If you are getting Atul Auto between Rs 450 and Rs 500 I would be a buyer. The stock has gone to as high as Rs 700 a year, a year and a half back if I am not mistaken. But at these sort of prices, I would definitely be a buyer." "I will continue to be a buyer in CCL Products," he said.