PN Vijay picks Omkar Specialty, MBL Infra Moneycontrol (23/07/2012)
PN Vijay, Portfolio Manager, askpnvijay.com selected Omkar Specialty and MBL Infrastructure as multibaggers for the day. He sees these stocks having the potential to fetch better returns ahead.
PN Vijay sees Omkar Specialty a good stock to buy as the stock is currently trading at price earnings of less than Rs 7, which is very attractive.
PN Vijay says that MBL Infrastructure is a very strong company. MBL Infrastructure is a progressively moving from an EPC model to an EPC plus BOT model, which gives certain annuities going forward. It is trading at Rs 3.5 price earnings and with growth of 20%, we expect CAGR of 20% in next three years for the company. I think the valuation is extremely attractive.
I expect this stock to touch Rs 275 in next 12-15 months. Slower implementation and relatively high debt are two risk associated with this stock which is endemic to infrastructure stocks.
Below is the edited transcript of PN Vijay's interview with CNBC-TV18.
Omkar Specialty is a midcap drug and the specialty chemical stock. The company concentrates on generics, APIs with emphasis in the veterinary space and specialty chemicals. What makes Omkar interesting is its aggressive inorganic growth route.
For example, in the last quarter it acquired LASA Labs, which has a very good vertical in the veterinary API space. After this acquisition Omkar Specilty would be able to access the virgin but lucrative veterinary markets of Europe, Australia and New Zealand but the margins are very high.
During the quarter, Omkar also acquired Urudwa Chemicals on an asset purchase programme and then it invested Rs 28 crore. This company is in specialty chemicals and it will grow the base business of the company substantially.
Profits in the last quarter for the company were good where the topline grew by 32% and the bottomline by 38%. Going forward we expect the company to have a turnover of Rs 250 crore and an earnings per share of Rs 11.5. Currently, the stock is trading at Rs 76 which makes it price earnings of less than Rs 7, which is very attractive, given the growth and the vertical and the sector it is.
This is a good stock in the midcap category to be picked up in the specialty chemicals space with the target of Rs 110. However, the only risks to this investment is that as it is a midcap stock it suffer from all the disabilities of investing in this terrain especially in volatile markets.
“With new products on the anvil and continued focus on cost productivity, efficiency and R&D, we are cautiously optimistic of growing ahead of the market in the quarters to follow,” said Herlekar..
On MBL Infrastructure
MBL Infrastructure is a Delhi-based hardcore highway contractor. It is a very strong company. Last year, they had order inflows of Rs 713 crore including three good contracts in the BOT, they are progressively moving from an EPC model to an EPC plus BOT model, which gives certain annuities going forward.
The order book stands at Rs 2,900 crore, which is close to three times revenue. The working capital requirement of MBL is 147 days compared to 200 or more of its peers, in the NHAI space.
Last quarter was flat where they maintained an EBITDA margin of 10%. The management is expecting to improved margin of 12.5-13% and hope that the high commodity prices and other operating expenses, interest cost would come down.
At Rs 179, the stock looks very attractive. It is trading at Rs 3.5 price earnings and with growth of 20%, we expect CAGR of 20% in next three years for the company. I think the valuation is extremely attractive.
I expect this stock to touch Rs 275 in next 12-15 months. Slower implementation and relatively high debt are two risk associated with this stock which is endemic to infrastructure stocks.
It has a debt equity ratio of 1:1 which is not too bad for the whole sector but in absolute terms, it is a bit high. So these are two risks but given the attractive valuation and the very strong order inflow, MBL looks an attractive case.