In his latest interview to ET, Daljeet Kohli sounded the warning that the storm has not yet blown over and that markets will correct more in the short-term.
However, he advised investors to adopt a “stock specific” approach and focus only on the fundamentals of each stock instead of worrying about the state of the entire market.
Daljeet put the focus on three stocks that he most bullish on:
Daljeet recommended a buy of Mastek in July 2014 when the stock was at Rs. 190. His logic was that the Company would seek to list its US-based insurance subsidiary and that there would be “value unlocking”.
Well, today, eight months later, Mastek is at Rs. 423. This means that gains of 122% are on the table.
Daljeet is still gung-ho about Mastek. He said “… we are reiterating a buy on Mastek …. purely because they are in that process of getting one of their subsidiaries listed in the US and once that subsidiary gets listed, there will be a comparable valuation for their insurance business which we feel is highly under priced. We have given a target of 550 where we have taken that insurance business at two times of market capital saved, whereas their nearest competitor guide trades at eight times to market cap to sales.”
Interestingly, ICICI Direct and Anand Rathi have also recommended a buy of Mastek with a target price of Rs. 600 and 621 respectively.
In an interesting irony, Ashish Dhawan, who held a massive chunk of 12,92,793 shares of Mastek, sold off a large part of his holding in September 2014 at Rs. 318. It is unfortunate that though he held on to the stock for several years without any meaningful returns, he sold it just as it began its upward march.
Hindustan Sanitary (HSIL):
Daljeet recommended HSIL in April 2014 when it was at Rs. 136.
Today, about a year later, HSIL is at Rs. 445. This means that gains of 227% are on the table.
Daljeet’s theory for recommending an investment in HSIL remains the same. He pointed out that the QIP of Rs. 250 crore will be use to repay debt and that the glass division will see a bit of better numbers. He also pointed out that the building products part is continuously seeing good traction of 15-20% coming in quarter after quarter. He emphasized that HSIL is trading at 50% valuation to Cera Sanitaryware, which is the nearest competitor. In terms of EV to EBITDA, HSIL is at a “deep discount” of nearly 30-40% to Cera. So, there is valuation comfort coupled with continuous growth, he said.
Daljeet recommended a buy of Kalpataru Power in January 2015 when it was at Rs. 236. He has foreseen a target price of Rs. 332 (40% upside) for the stock. However, the stock is presently flat at Rs. 227.
Interestingly, Prashant Jain’s HDFC MF bought 17,82,000 shares of Kalpataru Power Transmission at about Rs. 230 per share.
Daljeet pointed out that Kalpataru Power would also see “value unlocking” because its subsidiary, Shree Shubham Logistics, wants to go public.