Daljeet Kohli has had good luck so far with his finance stock picks.
He put a buy on CARE Ratings in March 2014 when it was at Rs. 730. Today, CARE is at Rs. 1704, with a gain of 133%.
He recommended Capital First on 16th July 2014 when it was at Rs. 223. Today, CAPF is at Rs. 450, giving gains of 102%.
Daljeet’s latest stock pick is Dewan Housing Finance Corporation Ltd.
Dewan Housing was in the news recently because Rakesh Jhunjhunwala used it as an example of how “When You Spot A Gold Mine Stock, Buy First, Think Later”.
The Badshah explained how he had spotted Dewan Housing languishing at Rs. 105 even though it was growing at 20% CAGR and offered a high dividend yield. It was dirt cheap then. The Badshah grabbed the stock with both hands without a further thought. Today, he has a 3-Bagger in his hands.
Daljeet, in his initiating coverage report on Dewan Housing, emphasizes that the stock is still cheap compared to its peers and that it has great potential.
Daljeet has given five reasons to support his theory:
(i) The Assets under Management (AUM) grew at a robust pace of 47% CAGR in last three years. The healthy AUM growth is expected to continue over FY14-17E;
(ii) Change in borrowing mix will improve NIMs;
(iii) Asset quality is at a manageable level due to robust credit appraisal and risk management process;
(iv) Return Ratios will improve from the (RoA) and return on equity (RoE) of 1.3% and 15.5%, respectively in FY14 to 1.5% of RoA and 17% of RoE by FY17E;
(v) Cheapest valuations amongst peers of P/ABV of 1.2x and 1.1x for FY16E and FY17E, respectively.
At the end of a detailed analysis, Daljeet has recommended a buy on the basis that Dewan Hosuing has consistent loan growth, stable NIM, strong asset quality, better capital adequacy, improving return ratios and reasonable valuations. He has foreseen a target price of Rs 630/- (P/ABV of 1.5x for FY17E) which means that an upside of 35% is there from the CMP of Rs. 460.