Ranjit Kapadia, Head-PCG Research, Prabhudas Lilladher said that his top three picks are Bhagwati Banquets, Time Technoplast and Kansai Nerolac Paints.
Kapadia likes Bhagwati banquets as the stock is attractively trading at 16.3 times ’08 and nine times ’09 valuations. He likes Kansai Nerolac as the company is insulated against the rise in crude prices due to rupee appreciation.
Excerpts from CNBC-TV18’s exclusive interview with Ranjit Kapadia:
Q: Kansai Nerolac is one of your picks. With crude as these levels, would you still go ahead buying it, with concerns on the margin picture?
A: Crude prices have gone up and correspondingly, the raw material prices have also gone up. That is because the solvents and chemicals are based on crude derivatives. But because of the strengthening of the rupee, it has insulated to some extent, as the imports have become slightly cheaper. There is a pressure on margins, because of material cost. But they are still partly insulated, because of the rupee appreciation.
Q: How about Bhagwati Banquets?
A: Bhagwati Banquets is deriving revenues from three major sources. One is the Banquets Hall facility and they have got four halls in Ahmedabad.
They have also been doing club management for three major clubs, like Rajpath Club, Karnavati Club and Gujarat Cricket Association Club and the revolving restaurant called Patang Restaurant. The third source is outdoor catering.
Now, 36% of revenues comes from the banquet facility, 24% comes from club management and around 17% revenues comes from outdoor catering. So, these are the three major areas.
As these are seasonal businesses, if one of the businesses gets affected, the other two businesses can support them. Currently, the stock is attractively trading at 16.3 times ’08 and nine times ’09 valuations. They putting up a 5-star facility in Surat, with a club facility. This is going to be starting from December ’09.
Q: What is your call on Time Technoplast and what is the target that you are laying for this one?
A: Time Technoplast is currently trading at 19 times ’08 and 14 times ’09. I expect the stock to go up to Rs 900 in one-year’s time. The company has five major sources of revenue.
One is from the plastic drums, pails and containers business. 70% of the company revenues are derived from that business. The second business is automobile fuel tanks, anti-spray flaps and radiator tanks, where the company derives about 12% revenues. The third is garden furniture and doormats. Around 13% revenues come from that. The next two segments, which are growing fast are health care, where they have developed an auto disable syringe.
In case of construction material, they have developed safety nets. These are the two growing areas. Recently, they have acquired NED Energy, Hyderabad. It has a 70% stake in NED Hyderabad, which is making high-grade batteries and this is will be a complementary business with their plastic business.
Disclosures:
I am holding Kansai Nerolac Paints.
Source: Moneycontrol.com
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