Oct 18, 2017 02:55 PM IST | Source: CNBC-TV18

Here are some Diwali Pataka Stocks from market experts

Watch the interview of SP Tulsian, Ambareesh Baliga Independent Market Expert, Prakash Diwan Altamount Capital and Dipan Mehta Member, BSE & NSE with CNBC-TV18's Varinder Bansal and Surabhi Upadhyay where they spoke about the road ahead for Indian markets and shared their Diwali Pataka Stocks.

In an interview to CNBC-TV18, SP Tulsian, Ambareesh Baliga Independent Market Expert, Prakash Diwan Altamount Capital and Dipan Mehta Member, BSE & NSE spoke about the road ahead for Indian markets and shared their Diwali Pataka Stocks.

Below are their stock picks for Diwali.

SP Tulsian on Dalmia Bharat Sugar and Industries: We have been recommending sugar stocks for last 18 months and which have all given a gain of about maybe 500-2000 percent in this last 18 months. So continuing with this theme, my first stock for the evening is Dalmia Bharat Sugar. If you take a call on this, I will quickly go on to the fundamentals, they have five sugar mills, three in UP and two in Maharashtra with an aggregate capacity of 32,500 tcd of which 10,000 tcd is in Maharashtra and 22,500 tcd is in UP.

Now the critical point going forward that the season which has ended 10 days back for the country, for India, has seen a sugar production of 20 million tonne. We are expecting or we are estimating the production to come for the current year which has started 10 days back, because sugar season starts from October 1, expecting the production of 25 million tonne for the country i.e. about a growth of 25 percent going forward.

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However, the advantage, because the idea of choosing this particular stock is that Maharashtra 10,000 tcd, Maharashtra is going to show a growth of 72 percent against this with this company’s estimated show a growth of 100 percent. In UP, the growth is expected to be 12-15 percent while this company is likely to outperform with a growth of about 15-17 percent. So the production of 38 lakh bags which we have seen from the company in the last season, is likely to be seen at 48 lakh bags.

Last year the sugar recovery was sub 11 percent. This year we are estimating it to be 11.5 percent. Now if you go by the financials, company having a topline of about Rs 1,800 crore in the last year, posted an EPS of closer to Rs 23. Because of this production increase and all that, we are expecting that for current year i.e. FY18, company should be able to post a topline of Rs 2,000 crore and an EPS of closer to about Rs 28. So you are getting the sugar share at a P/E multiple of 6 where you have a growth visibility at least for next 18 months or so going forward.

Now if you take a call on the equity, very small equity of Rs 16 crore, with a face value of Rs 2, this is the only company in the sugar space where the promoter stake is at 75 percent. So that shows the confidence, that shows the financial strength of the company. Again, the debt is not significant, the long term debt is closer to about Rs 300 crore, while the major debt is for financing the working capital.

So taking all this into consideration, probably this could be the outperformer in the sugar space, though we have been giving ideas on many UP based sugar mills. However, taking all this into consideration, this stock is likely to outperform amongst all. We have given a target of Rs 245 by next Diwali.

Ambareesh Baliga on Indo Count Industries: My stock is IndoCount – basically into home textiles, mainly an exporter although they sell about 25 percent domestically. They sell in about 40 countries across five continents. In the last couple of months, this stock has corrected and overall it is very difficult to pick up stocks in a market like this at highs. I was looking at stocks where possibly the downside is limited so most of my picks are contra picks. So this is a stock which has corrected from close to about Rs 200-230 to levels of about Rs 108-110 now. The reason is that going ahead, I clearly see the performance improving. They are increasing the capacity which is currently about 68 million metres to about 90 million metres going up to 110 over the next 18 months and this should clearly show in the performance going ahead. In the last three months, they had issues because of goods and services tax (GST).

Just about a week back, the Finance Minister announced a relief so at least till March 31, they need to only pay 0.1 and I am very sure, they will continue with some sort of a relief for exporters because today India requires exports. It is important. So I think that sort of a relief will continue in some other manner. So looking at the performance which is expected, in fact, I am looking at about 11.2 EPS for FY18 and 13.5 for FY19 – it is in fact quoting at about 8 times.

There have been a few question marks on the management but I have met the management, I have been decently comfortable but then I think with a fall at the current levels, most of the things are discounted.

Price target is around levels of Rs 180 and managements all of them are various shades of grey and you need to see as to how much of it is grey and how much of it is in the price. Same stock possibly at levels of about Rs 250-260, I would have possibly given a sell. In fact, this was the stock which moved up from Rs 50 to Rs 1,000 at about levels of Rs 900. It was a Rs 10 stock. At levels of Rs 800-900, I was clearly saying this is madness to have Indo Count at these levels, it is better to buy Himatsingka Auto Enterprises which was at Rs 70 at that time.

Prakash Diwan on Aimco Pesticides: The company that I thought I will introduce to all of you today is from the agricultural space and not just the agricultural space at large but this is a company promoted by a family that is very keen and has articulated its mission to help the farmer create wealth and that is something which is very well aligned with the larger macros of the country and the economy that we are seeing shaping up. So I thought maybe we would look at this space and while there is a huge entry barrier issue and a lot of other new players cannot get in, some of the existing players were struggling including this company and they made losses for quite some time. They eroded the net worth and it went to the BIFR. Now that the net worth has turned positive, there is very high chances or probability that it moves out of that BIFR status as well as starts generating -- it has generated positive cash. It doesn’t have any debt on the books, it is a small company as about Rs 160-170 crore marketcap but the promoters have recently gone ahead, issued warrants to themselves, preferential allotment at a very decent rates as compared to the market price. It is at about Rs 168 that they have decided to add more equity and in the past Excel Crop Care, which was one of the partners moved out because of the global realignment to its Sumitomo. So that was the reason for them to move out. So this is a great company, it has a very specialised focus into not just insecticides but also fungicides and weedicides.

What is happening is the affordability cycle in agri will have a step up from fungicides, weedicides then to pesticides because you cannot straightaway go into complex pesticides and start spending high cost chemicals for generating yield which is not very great in India. So I think this is the space that is going to be extremely promising, there is a lot of headroom for efficiency growth and the management the Dave family that runs it, knows it well. So you need to ride on business that is turning around which valuations are not stretched at all because of the status of the lossmaking set up but it has turned around and I am sure going forward the way they are globalising their business, exports and all, people can look at the financials by themselves but just wanted to give a topdown approach.

In the year, it has done almost more than 3x because it is a turnaround and turnarounds can go up and head anywhere but my sense is at least 35-40 percent upside given the kind of robust change that we already see on a quarter-on-quarter (QoQ) basis so that momentum should take it another 40 percent up.

Dipan Mehta on Mahindra Holidays and Resorts India: I think consumption per se remains a very powerful investment theme and leisure travel is growing rapidly and has got good growth potential in India and that the particular trend favours Mahindra Holiday. it has been around for long time and a lot of the initial teething problems and the accounting related issues have all been sorted out and its focus is more on providing an experience to a family and therefore, the resorts are in tourist towns and therefore doesn’t compete directly with other hotels or for that matter even new disruptive players like Airbnb and some of the other players which we have seen.

What I like best about the company is its multiple revenue flows. So it is not just a selling a vacation ownership, they get annual subscription fees then they get beverages and the food, which is consumed by the members at their resorts and during lean period they get rental from the resort income from the resort rooms, which they rent. So at some point of time, all these revenue flows tend to grow and it has got great opportunity in terms of operating leverages because all the basic resorts are in place. As and when the occupancy goes up, you will see an improvement in the profits at the much higher pace than the revenue.

This company has adopted technology phenomenally in terms of not only digital marketing but even in terms of using digital products like apps and websites etc for their members as well and if you see the resorts, they are amongst the best rated as far as TripAdvisor rating goes and I think that it is a nice steady performer and we like such secular growth stories which can compound 15-20 percent over a long period of time and that is how value gets created.

Whatever is good quality is expensive in this market. If you want good quality, it is expensive. You have got the Mahindra brand and that corporate governance kind of premium I would say is present in this company as well. I would say that these are long-term stocks and over a period of time, these valuations do get neutralised for example, from now two years down the line, the company’s profits go up by 50 percent or so and what is 35 times effectively buying at 20 times or thereabouts so you have to be patient in companies like these and this is where you get the benefit of compounding in stocks like Mahindra Holidays with limited downside.

SP Tulsian on Eon Electric: It is light-emitting diode (LED) lighting maker company and they have a topline closer to about Rs 200 crore and 60 percent of that comes from their LED lighting makers on which they have EBIT margin, I am not referring EBITDA margin, is closer to about 32-33 percent and they have been ramping up their margin every year, if you see FY17 had an EBIT margin only on the lighting sector, sub-30 percent, Q1FY18 had 32 percent.

Coming on to financial, if you take a marketcap of the company, right now at Rs 150 crore of which Rs 70 crore is lying in the books of the company, so you are getting the company at a net of cash valuation of Rs 80 crore on topline of Rs 200 crore, sales to EV ratio 0.4, promoter stake 60 percent, on turnaround case in FY16 they have negative EPS of 2.50. FY17 they had positive EPS of 2.50. This Rs 70 crore cash translates into Rs 45 per share. So if you knockoff Rs 92-93, the present price, you get the share at Rs 50.

If you take a case of Kenstar where Rs 1,600-1,800 crore kind of brand valuation only been given, this company have very good brands. So going forward and they have one negative that is cable and wire which has been a loss making company but they have been continuously reducing the losses and right now recently in the last three or four months, cable and wires have started predominantly all over making losses and all have turned into profits or have started reducing the profit. So once that starts happening, if not in FY18; in FY19 we could see an EPS of Rs 5 plus. If you take price to book even if Rs 75 is a book value, price to book is 1.2. On earnings multiple, net of cash is ruling at a PE of 10 while all other consumer durables and lighting companies are ruling at a PE multiple of Rs 30-35. So I think on all aspects, maybe as a turnaround story the robust business model of LED lighting maker etc, makes the stock very good and I am expecting it to touch Rs 130 by next Diwali.

Ambareesh Baliga on OnMobile Global: Just to give a background, most of us use OnMobile services without even knowing that we are using it because most of the caller tunes which we hear are OnMobile and they are across close to 80 countries and they have about 55-56 various clients, basically the telecom providers. The latest one to be added is Banglalink, where they added 35 lakh customers out there.

Yes, when you talk of value trap, here the net worth of the company, they do not have any debt. So net worth of the company is about Rs 560 crore and that is the marketcap of the company. The company is making profits; at least I expect it to show about 3.5 EPS for FY18 and about 4.8 for FY19 unless they end up with huge loss then it could be a value trap otherwise I do not see any downside from here and it is a worthwhile risk at these levels because if things work out it can easily move to levels of Rs 80 or more than that.

Prakash Diwan on JHS Svendgaard Laboratories: The stock is kind of known but has been on and off on most investors' radar for good reasons because the company was always a contract manufacturer, it tried getting into its own brands and even today it has been 16 percent coming from its own toothbrush brand but it didn't do well and they realised that distribution, marketing is very high cost, so they stick to doing it for the market leaders. They had a strong relationship with Dabur India and Patanjali has also kind of blessed them. So with the blessings from Patanjali, things are looking up very differently. Last quarter the numbers told a very different story.

The company also went into expansion mode sometime back, last two-three quarters they have spend a lot of money on expansion to the tune of almost 175 percent of what they used to be last year, they also have a huge packaging. So in fast moving consumer goods (FMCG) you need to be fully integrated, you cannot be doing one part. So they stared making bristles then they started making toothbrush and then toothpaste and now even packaging it in all formats and all shapes.

I think it is a company that is on the right track. It has scalability, it has headroom for growth and they also settled issue with P&G and got some Rs 27 crore. So if you look at financials, they look very healthy but that is slightly misleading because Rs 27 crore has gone to the bottomline last quarter and that makes the EPS look very robust but if you take that out it is at about 30 times trailing and a lot of the businesses in the same space are at 50 times.

If you do a math of their other clients, Patanjali would end up being about 46 percent by end of next year. It's a significant risk and significant promise but Dabur is there and they have some other clients as well and they will minimise 16 percent of their own branding which is there. So it's Rs 400 crore of marketcap. Off late the management has started meeting some marquee investors from the fund side, some new names have come in who have been interacting with them, so that is why the stock is seeing some activity in the last week-ten days after the results but wait for it to subside and you can buy it for the longer term and this could double in about 15-18 months from here.

Dipan Mehta on TeamLease Services: It is a staffing solutions company and it benefits from three very powerful trends. First of all is the growth in the services business. The services economy in India is growing at a much faster pace than agriculture or manufacturing and within the services industry, there is a great propensity for the players over there to go for staffing solutions because there is a higher degree of volatility and disruption within the services space as well and they do not want to get saddled with employees which have bid on the overheads, so that is where company like TeamLease comes in and provides flexibility in staffing. So that is one trend that services are growing and within the services space there is a great degree of acceptability of using staffing services companies.

The second is that labour laws in India are getting tougher and compliance also is improving as far as labour laws are concerned. So there is an element of uncertainty from the employers to take on employees on their rolls given the kind of tight labour situation that is there. So again staffing company comes into play where they do not have the headache of taking employees on their rolls and at the same time they can scale up-scale down.

The third trend is goods and services tax (GST). What GST does is it wipes out the competition or at least makes it level playing field between organised players like TeamLease and the innumerable numbers of unorganised players which are there. So the competing company is Quess Corp and that is double the valuation in terms of price earning multiple and of course you can get the upside in Quess Corp through Thomas Cook (India) but I have not been a great fan of buying holding companies. Look at the holding company returns compared to the actual operating subsidiary company returns, be it Bajaj Finserv versus Bajaj Finance or Godrej Industries versus Godrej Consumer Products, HDFC versus HDFC Bank. So I would like to go for the actual operating company and between TeamLease and Quess, Quess is a great business but it is just that the valuation comfort is more in TeamLease at this point of time. It is an expensive company because it provides exposure to kind of a narrow investment theme which is generally not available. So it's a bit of a concept stock which perhaps explains the high premium valuation but a secular growth story. It can grow at 15-20 percent for many years and that is the most attractive part.

SP Tulsian on LEEL: Diwali is a festival of light and you have caught my mind. I thought of – sugar obviously you need in sweets, you need light to lighten up your mood. I had many other ideas and LEEL I have chosen intentionally – about a couple of months back, I have recommended on our channel Rs sub-200, already it has risen by about 60 percent in couple of months but because of the kind of potential, which I see – this company recently monetised by selling their consumer durable business to Havells India for Rs 1,550 crore and that has been the conscious move and if those who will read the chairman’s speech, which the company has uploaded, they have given a guideline how the proceeds will be utilised and what I like about the company is that pending the adjustments and all things, receipt of money, they have been generous in paying a special dividend of 2000 percent that is Rs 20 per share.

In absolute number, it may turn out to be Rs 100 crore but they have said that the effect of that Rs 1,550 crore will be given in the books of account because they have received that money only in the middle of May so that gets reflected in the Q2 numbers, they have not given any effect of that in Q1 numbers but come on their residual business, OEM and the packaged air conditioners (AC) -- they are making about 8 lakh air conditioners and in fact they are supplying to majority of the AC makers. You can say that, rest all just put their labels, they market – in fact the entire packaged air-conditions are purchased by them.

Second is the hit exchanger business and I am excited more by this hit exchanger business because that is catering to railway, defence, metros, off the road vehicles and commercial vehicles where you all are seen growing at a very rapid pace if you take in all five – defence we all know, railway we all know, metro we all know and the growth can be tremendous.

Coming on Q1 numbers, this quarter numbers says not included consumer durables but they have posted an EPS of Rs 8.32 paise. On a very low equity, they have a very low equity Rs 40 crore with a face value of Rs 10. I don’t know what will be the profits because the effect of that Rs 1,550 crore will be already given but that will substantially raise the book value of the share by about Rs 100-150, they will be having the surplus cash to the extent of about Rs 600-700 crore because the major element of Rs 1,550 crore is on account of working capital. Fixed assets must be less than Rs 200-250 crore. So it is difficult to take a call that what will be the exceptional income and all but whatever money they will be having because they had interest expense of Rs 22 crore in Q1, that can get substantially reduced.

So even if I don’t extrapolate as Rs 8 EPS, I am conservatively taking 3X that means even if you take a EPP multiple of EPS of Rs 25-26-27 and cash in the books of the company, take the recent case of Dixon Technology, that is ruling a P/E multiple of Rs 50. You are getting this share at a single P/E multiple. So extremely positive view and their core business which has been more working capital intensive now will see the increase in the margin plus the comfort of the working capital finance now being available from sell of that consumer durable proceed, which they have already received. So extremely positive view over a longer-term but giving a target of Rs 440 by next Diwali.

Ambareesh Baliga on VA Tech Wabag: The stock cracked about 4-5 percent and that in fact gave me an opportunity to pick up. The main story is water treatment and I think that is a big story going ahead even from a country, even from a global point of view. The company is sitting on orders worth about Rs 8,200 crore or so. But the opportunity size is huge. Namami Gange itself is about Rs 25,000 crore, couple of states, Maharashtra, Karnataka, Tamil Nadu and Delhi, the opportunity size in terms of the tenders, which would be coming that is about Rs 18,000 crore, I am not even talking about the rest of the India. So Rs 43,000 crore just between these, so there is no way VA Tech Wabag will not have worked – clearly the visibility is there at least for the foreseeable 8-10 years.

So again, looking at an EPS of over Rs 38 for FY18, Rs 46 for FY19, I don’t think the downside is very much from here. It may just correct in case the market corrects and I am looking at a price of about Rs 850.

I would place this company a slightly better compared to other companies because the quality of earnings is better, consistency is there.

Prakash Diwan on Gulshan Polyols: Gulshan Polyols fairly new name, not many people would have come across this. It is a fairly old company to be honest, it has been operating out of Muzaffarabad in Uttar Pradesh (UP) for the last many years, 25 years this company has done the same business of making sorbitol and carbonates. Where do these go? They are basically agro processed products that border on the synthetic and agrichemical product basket.

A lot of them are import substitutes like fructose syrups and all of that. These go into various industries. If you look at the client list, it is a who’s who of the industry. The fast moving consumer goods (FMCG) industry like the P&G, Colgate of the world to a lot of pharmaceutical companies, to a lot of soap manufacturing companies. So it has been a very impressive run for the company. It throws up a lot of cash. In the last few years, it has done a very interesting thing.

The bi-product that it makes is gluten and a lot of things that go into feeding animals, poultry, in the dairy business, fishery. So they have started making money out of everything that they do.

The waste which was going out has been converted into bi-products of gluten and all those germ-feeds. Secondly they hit upon somewhere around four years back, they got into extra neutral alcohol and what it does is extra neutral alcohol is made out of corn and rice and this gets supplied to liquor companies. That is seeing a huge demand across the board.

So you are seeing the way the distilleries are running on 100 percent plus capacities, you saw the numbers on GM Breweries just a day back. The same thing is happening to most of the consumer segment for this product and the company is started expanding setting up different plants in various geographies. Today they have ended up doing 8 locations so they started off with one in UP, they have moved into this. I think it is a brilliant franchise, it is just that it has not been discovered, people find it difficult to evaluate and put a number on it because of the sum-of-the-parts complexities.

However, a very large mutual fund (MF) has a significant stake in this company, another FII also owns a significant stake. Apart from that there has not been much of activity on the institutional side but I think it is ripe for the picking.

Dipan Mehta on Zee Learn: We all know that education is a great space to be in but very few stocks one can buy with confidence and Zee Learn certainly comes on top of the list over there. It is India’s largest operator of pre-school centres and they also have presence in K12 that is kindergarten-twelfth standard schools under a different brand.

After many years of trying to establish the business, set the model right, I think the company has now reached a growth phase where it is steadily expanding its footprint. It has got about 1,740 centres and adding 300 centres almost every year or so. It has made investments into the K12 schools, which are breaking even at this point of time. As and when those start making profits then you could see a further surge in the topline and bottomline as well.

It is in the middle of very powerful trend where more and more parents are getting aware on child education – we all know getting into good schools is difficult so the planning starts at the pre-school stage.

Also now what is happening is that they are going more and more to the tier-II, tier-III cities where there is a great need for such services and such businesses. So I am very confident that this company again is a secular growth story, can easily grow at 15-20 percent for the next several years or so. So you get the benefit of compounding over here. Although it is a bit expensive at this point of time about 37 times or so, over a long period of time, these high premium valuations will get neutralised and you have the benefit of the Zee brand, the KidZee brand which is a very powerful brand, which the company has created over several years and other well managed education companies – there is a lot of technology also in terms of delivering education, child development at the pre-school stage as well as the K12 stage. So looking forward to this company.

SP Tulsian on Indian Toners and Developers: Even this has a festive theme because if you are sending physical greetings to anyone you need a printer and even if you get email greetings, sometimes you want to retain them by having a print. They are making toners for all the printers and in this digital era we need to have good potential scene for those. They are making digital machines, they are making for multifunctional printers, they are making printers and the best part is that the company has two units. One unit which is exclusively catering, exporting to 24 countries, they supply to all the global brands. That export oriented unit has a capacity of 1,200 tonne per annum. Their domestic unit has a capacity of 2,400 tonne per annum and rightly so because even India has that kind of consumption, so 1/3rd is catered to the world, 2/3rd is catered to India.

Indian unit was earlier a 51 percent subsidiary but in a very investor friendly and in simplistic way, they have merged that company to straighten the shareholding pattern which has seen the equity of the company increasing from Rs 9 crore to Rs 13 crore and because of that the promoters, I am not going into the details of all those things, so if you really see the situation now, they will be presenting the consolidated results of 100 percent of both the units.

If I give the financial results, in FY17 operating profit was at 24 percent, PAT was at sub-20 percent or maybe 20-21 percent. I do not think that this kind of performance have been seen from any company. Coming on to marketcap, financials, equity - as I have said Rs 13 crore, and of that if you take present market price of Rs 283 with face value of Rs 10, the marketcap is about Rs 360 crore. The company is having a cash of Rs 72 crore which translates into Rs 55 per share. If I knock that off, the marketcap is Rs 360 crore, I knock off Rs 72 crore cash, the EV is sub Rs 300 crore, to be precise Rs 290 crore. The EPS which is expected for FY18 is close to about Rs 24-25. If I go by the PE multiple without knocking off the cash, it is ruling at a PE multiple of Rs 11.5 and net of cash it is ruling at a PE of Rs 9. If I take a comparable peer, there are no comparable peer but still Control Print kind of things, they are ruling at a PE multiple of Rs 19-20-21on which even we have been keeping a positive view and even on those stocks at those levels also. So if you take a situation going forward, this is a good stock probably not identified because maybe having a low marketcap but we have been keeping a quite positive view with a target of about Rs 400 which we are expecting it to touch by next Diwali.

Ambareesh Baliga on Sanghvi Movers: This stock fell sharply, it was about Rs 230-240, and from there it fell to Rs 140 because the management announced that FY18 would be tepid and that they could even degrow. The orders which were expected from wind energy sector, that in fact would degrow and that is nearly 66 percent of the overall turnover.

However, one should remember that is one of the largest crane-rental companies, sixth largest in the world. Since their main business is from wind - one should look at how wind business is going to go in couple of years. India has to grow from 32.5 gigawatts to 60 gigawatts by 2020, which has been pledged for climate change. Therefore, if you have to move from 32.5 to 60 gigawatts then it has to happen form possibly 2019. Even if we achieve 50 percent of that, Sanghvi Movers will have enough business coming up. So, after this fall, it is great opportunity to buy because post 2019, one could see a very good move. In fact one could see movement happening in the next 8-9 months because market usually discounts quite early.

Prakash Diwan on HPL Electric: I like this company because it is one of the unsung heroes after the IPO. It has been languishing and nobody bothered about it and it did not deliver much because it came at the back of another high performing IPO. However, HPL has been in this business since ages, it is a contemporary of Havel's.

Their product mix is good because it is uniquely positioned into very promising segments - the first is smart metering. Recently a 5 million order that EESL gave and L&T was probably the L1 for this but it is first in a series of orders that could come through. They will also be a beneficiary of Saubhagya Scheme.

They have also started experiment of metering in localities in Kolkata very successfully - it is pilot which will propagate.

They also have step-down switch gears and equipment that is used for last mile connectivity because they are into switches and LED.

The company is getting its act together and it is fairly valued and not expensive. It is re-rating that will happen more than EPS accretion. So give it some time, it will start delivering.

Dipan Mehta on UFO Moviez: Since India seems to be transforming into a consumer-oriented economy and so makes a powerful investment theme.

UFO Moviez has been a bit of disappointment after it came with a lot of fanfare and great promise but did not deliver for various reasons.

They were pioneers in converting analogue theaters to digital theaters and that business lasted for 5-7 years but this company is entering a new growth phase where it has got advertising rights for all digital cinemas in which it has supplied the equipment and where it is supplying its virtual prints. Advertising is going to be the big growth driver, it has been till now growing at 25-30 percent, and will do so going forward as well.

Interestingly, all the theaters are in tier II-tier III cities and marketing spends and efforts are now being directed toward these cities because tier- I cities are exhausted.  Therefore they are likely to garner more advertising revenues.

They have other interesting ventures like Caravan Talkies, where a van is sent into rural area, which projects a movie. Through that van they try to advertise the products of the company. It has got good client list over there.

Moreover, they are also trying to go hyper-local and get more and more local establishments to advertise in their digital cinemas.

These are 3-4 good growth drivers for them but there are also some risk factors like there were sunset clause for D-cinemas and that could impact profit in the near-term, which is why valuations are at an attractive level of 15 times. However, 2-3 years hence, there is great potential in terms of marketing platform to their digital company where we feel earnings can growth and PE can expand.
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