Dharmesh Kant of IndiaNivesh has a good track record in stock picking. He has a number of big winners to his credit. However, he also has his fair share of losers. Let’s do a quick review of how some of his recent stock picks have fared as of date:
|Stock||Date of reco||Price on date of reco (Rs)||CMP (Rs)||Gain (%)|
|Camlin Fine Sciences||11.08.2014||50*||93||86|
As you can see, the record is excellent with huge winners in MPS and Force Motors and hefty gains in Camlin, Hester & Thomas Cook.
As regards the losing stocks, AVT Natural & Camson Bio, it should be noted that these are good companies facing temporary turbulence. AVT Natural belongs to the reputed AV Thomas group of Kerala. It is debt-free and has high return ratios. Camson Bio is also on a strong growth trajectory. Both are small caps and have a long runway ahead of them.
Dharmesh Kant’s latest stock pick is Balkrishna Industries Ltd, a mid-cap with a market capitalisation of about Rs. 6300 crore.
|Balkrishna Industries’ Core Financials & Ratios|
|Figures in Rs crore||2014||2013||2012|
|Profit After Tax||488.37||355.83||268.52|
|Operating Profit Margin (%)||25.38||20.96||18.06|
|Net Profit Margin (%)||13.65||11.15||9.52|
|Earning Per Share (Rs)||50.19||36.56||27.54|
|Return on Capital Employed (%)||18.89||17.60||18.55|
|Return on Net Worth (%)||29.56||28.48||28.09|
Dharmesh points out that Balkrishna Industries is engaged in the manufacture of ‘Off Highway Specialty Tyres’ which are used in vehicles for Agriculture, Industrial, Heavy Material Handling, Construction, Earth Moving (OTR), Port, Mining, Forestry, Lawn & Garden Equipment along with All Terrain Vehicles (ATV). He explains that Balkrishna was was established in 1987 and since then has become the leading manufacturer of Off-Highway tyres with a global presence across 130 countries.
Dharmesh has given 12 reasons why according to him Balkrishna Industries is a sound bet. One of the reasons is that the company operates in a segment which has a high entry barrier. The speciality tyres take a couple of years to be made and there are very few competitors present.
Dharmesh also emphasizes the fact that Balkrishna has shown good resilience by growing its gross sales at a CAGR of over 22% in last three years and outperforming the industry average growth of 4% to 5%. He states that this is commendable given the fact that environment was tough. He also states that the Q3FY15 results are remarkable because Balkrishna posted an Ebitda growth of 16% and PAT growth of 6% on Y-o-Y basis.
Another point that Dharmesh makes is that the domestic market is expected to throw up significant growth opportunities for Balkrishna Industries with the ‘Make In India’ campaign.
Dharmesh also likes the fact that Balkrishna Industries enjoys a strong cash flow situation. He also draws attention to the point that the management has expressed confidence of improving the EBITDA margins of 25% through operating efficiencies. The Bhuj plant is a strategic fit to achieve higher operational efficiency, he adds.
After more number crunching and a bit of crystal gazing, Dharmesh has confidently predicted a target price of Rs. 983 for Balkrishna Industries. He has determined the target price by taking a relatively modest P/E of 15x the EPS for FY16. Given that the CMP is Rs. 659, this implies that there is a hefty 50% gain in the offing.
Whether Dharmesh’s target price will be met, and if so, in what period of time, requires to be seen.