First of all, we must compliment Ambareesh Baliga for his stock pick of 2015. On 9th January 2015, he unassumingly recommended a buy of Himatsingka Seide on the ground that the Company, which was then a “fallen angel”, was on a “comeback trail”. On that date, Himatsingka Seide was quoting at Rs. 90 and Ambareesh confidently predicted that the stock would see a “conservative” target price of Rs. 156 levels.
Well, today, Himatsingka Seide is standing tall at Rs. 222, translating into gains of 145% for less than a year’s work.
For 2016, Ambareesh has picked Jain Irrigation, another fallen angel. At one time in the past, Jain Irrigation used to be a darling of the cognoscenti and the hoi polloi owing to its dominance in the agriculture irrigation sector. However, a series of bad strategic decisions, including unrelated diversification and a heavy debt burden, sent the company veering off the growth path and its stock price saw tumultuous correction.
However, since then, much water has flown under the bridge. Jain Irrigation is now ready for a “second coming”, Ambareesh opines. He explains that the Government’s ‘Pradhan Mantri Krishi Sinchai Yojana’ under which nearly Rs. 50,000 crore is be spent over the next five years on irrigation and allied farming related matters, will catapult Jain Irrigation back to the growth path.
Ambareesh opines that Jain Irrigation has “huge potential awaiting to unlock” and that it could be “the story of 2016”. He explains that the recent strategic stake sale in the food business, which valued the subsidiary at an embedded value of about Rs. 3,000 crore, is not fully discounted in the market valuation of Jain Irrigation. He adds that the fall in oil prices as well as polymers will improve the margins for JIS.
At the end of a detailed analysis of the fundamentals of the Company, Ambareesh has predicted that Jain Irrigation will have a top line growth of about 15% to Rs. 8,000 crore in FY17 and that the earnings per share (EPS) will be about Rs. 7.15. This leads to a target price of Rs. 120 for Jain Irrigation, Ambareesh says with immense confidence in his voice.
Jain Irrigation is presently quoting at Rs. 65. If Ambareesh’s prediction comes true, we are looking at potential gains of nearly 100%.
Incidentally, Ambareesh Baliga was part of the team of S. P. Tulsian, Porinju Veliyath and Prakash Diwan which recommended a total of 16 potential multibagger stocks for 2016. Apart from Jain Irrigation, Ambareesh recommended a buy of HT Media, Engineers India and Gabriel India.
We will have to keep a close watch on each of these stocks to see if they are able to replicate the stupendous success of Himatsingka Seide and fill investors’ pockets with gold!