Expect 50% returns in Ranbaxy Laboratories: Rajen Shah

Rajen Shah of Angel Stock Broking told CNBC-TV18, "Reliance Industries would be my top pick which is trading at 11 times FY15 earnings. Decontrol of diesel will see its petrol pump business doing very well because they were not able to compete with PSU petrol pump business. Hike in gas prices is imminent too and their retail business too is growing at 35-40 percent plus, so that stock should do well."

He further added, "The second stock is Larsen and Toubro (L&T). Their Q2 results were reasonable considering given what is happening in the economy in the infrastructure space. It is trading at 14-15 times, which is not expensive at all. I believe if India has to grow, then infra has to grow and if infra grows, then the best company to bet on would be L&T in that space. So, the stock around Rs 850-870 looks promising with a longer time frame."
"Ranbaxy Laboratories is a pharma company quoting at very cheap valuations. The worst for Ranbaxy seems to be over. There are also other pharma companies like Lupin, Dr Reddys, Cipla, Sun Pharma is quoting at 10 times sales. It has Rs 10,000 crore of revenue and 1.2 lakh crore of market cap that is 10 times the sales. Similarly Lupin is about Rs 11,000-12000 crore of revenue and Rs 40,000 crore of market cap, while Dr Reddy at Rs 12,000 crore of revenue with Rs 40,000 crore marketcap. All these companies are quoting at 3.5-4 times sale. Moreover, Ranbaxy for which worst is over has Rs 12000 crore of revenue and marketcap of Rs 16000 crore, therefore trading at 1.3 times sales."
"The best time to buy stocks is when there is gloom and doom. Last year, Reliance Communications was quoting at Rs 70 and we have recommended the stock as an multi-bagger idea and in one year it has given 100 percent return. Although I am not saying that Ranbaxy will give 100 returns but 50 percent over the next 12-18 months is on cards."