Tushar's Stock Tips: March 2013

Tuesday, March 12, 2013

Multibagger Ideas: Tater bets on NMDC & Shree Renuka Sugars

Aashish Tater, Head of Research at Fortunewizard.com picks two stocks as his Multibagger Ideas for the day. He bets on National Mineral Development Corporation (NMDC) and Shree Renuka Sugars with targets of Rs 185 and Rs 40 respectively in next six-twelve months time.

Below is a verbatim transcript of the interview:

On NMDC

National Mineral Development Corporation (NMDC) is one play where we feel it is roughly 31 percent undervalued given to global peers. This could be an interesting bet from next six months perspective.

Now, there are positive developments from index management perspective and since this is going to get included in April, we feel there will be lot of momentum in the stock in days to come.

On risk reward side, we feel there is hardly any downside. If I take a quantitative call that we have been projecting for so many stocks, which we have been going right on either side, we feel this is one stock that has made a double bottom around Rs 143 mark on weighted average price. If you see the management guidance, they are looking for an uptick in the March realisation and we feel there will be a follow-on uptick even in April. Thus, realisations should go higher from current levels.

In fact, for next fiscal we are forecasting a sale of approximately Rs 10,300 crore with a net profit margin of 64-65 percent. That could be substantially good for this particular company because if they are able to clock that Rs 7,500 crore of profit, we feel on a marketcap of Rs 60,000 crore, given it is a debt-free company that stock should trade at least at Rs 75,000 crore sighting 25-26 percent upside from current levels.

We are giving a target of close to Rs 185 on this particular stock. Given all these positive developments that has been announced and index inclusion, the stock is likely to see an expansion in terms of price earnings multiple, which will be definitely good for this company in days to come.

On Shree Renuka Sugars

Sugar as a sector has been a very interesting bet given that the cycle turns 5-6 years down the line and it has been a consistent performer after every 5 years.

There are quite a few possibilities that we are forecasting through our projection models. We feel the sugar prices should bottom around in the Indian Sugar Exim Corporation Limited (ISEC) futures somewhere around this USD 18 dollars itself.

If I take a snapshot of sugar futures, we feel if it bottoms out at USD 18, it has got a higher level of USD 23 to achieve from next six-eight months perspective. Also, we are betting on south companies compared to Uttar Pradesh (UP) sugar mill and we feel Shree Renuka Sugars fits the bill.

Third biggest trigger that we are forecasting is the mix of ethanol from the Brazilian subsidiary that will go and turn around the project for Brazilian subsidiary. This will be a very big boost for this particular company.

Now the company's current valuation looks very attractive given that the sugar up cycle is about to begin. We are forecasting that the September crushing season will be very good for the company and this could be a game changer for the stock.

Again, the government has hinted for that ethanol mixing that has been due for a long time. We feel with government setting in now, there is a likely possibility that from this angle the entire sugar sector can take a fire on the rally.

The third biggest trigger, we are seeing, from that perspective is that there will be at least Rs 2-3 uptick in terms of realizations, which will give mills around Rs 1.5-1.75 per kilogram. That will again be positive for one of the largest capacity player in India.

Given all these factors, we feel at Rs 27 odd level, Shree Renuka Sugars is one stock that is grossly undervalued and can be seen as a very good bet from next 12 months perspective. We have a very aggressive target of close to Rs 48 onto the stock.

Now, among these all projections even if 2 out of 3 works in our favour, the stock would stabilise somewhere around Rs 40 levels. Thus, one should keep a short-term outlook at around Rs 40 and with the decontrol coming in to place, we feel it is a no-brainer from current levels.

Source : http://www.moneycontrol.com/news/stocks-views/multibagger-ideas-tater-betsnmdcshree-renuka-sugars_827251.html

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