Stock recommendations of Siddhartha Khemka Centrum Broking

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Pee Vee
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Stock recommendations of Siddhartha Khemka Centrum Broking

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Siddhartha Khemka, Head-Equity Research Wealth, Centrum Broking, believes Essel Propack is a buy recommendation at current level for about 25% upside from current levels.

Why do you like Essel Propack?

We recently initiated coverage on Essel Propack. It is clear in the laminated tube segment and a market leader in global oral care packaging segment with 36% market share. The company has been focussing on non-oral care segment as a growth strategy which we believe could be a trigger for the company’s growth going forward. We estimate around 17%-18% growth in the non-oral care segment while the oral care segment continues to remain steady at a 8-9% growth. Along with this, the company’s margins are expected to improve with improving profitability in the global markets and along with that if you see the company’s financials, they are very healthy with operating margins of near 20%, return ratios of more than 20%, healthy cash flow generation and valuations of about 17 times, 14 times FY19. We believe this stock is a buy recommendation at current level for about 25% upside from current levels.

Some of the midsized, small sized engineering and construction companies have done extremely well today from Punj to a GMR to IL&FS Engineering. What do you guys at Centrum like?

In terms of infra that you were discussing, we clearly do not see any investment opportunities right now. Having said that. we like the EPC portion of the infra space where the companies do construction activities. As of now, these companies could at best be a trading or a technical opportunity and currently do not form any of our investment recommendations.

You like Bharat Financial. About a month ago, we first did the story that IndusInd Bank could be interested in Bharat Financial. That has not been confirmed as yet but could that be a technical trigger or do you like it even if that deal did not go through?

Bharat Financial as we all know is a microfinance lender. In India, there are triggers in terms of news report suggesting that Bharat Financial could get acquired by IndusInd or the likes. However, we are positive on the core business which continues to do well. In the past few years, the company’s book has grown at a very strong pace. Currently, the loan book is about Rs 7000 crore and the company is looking at doubling it to around Rs 15000 crore by FY19.
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