We already know from past experience that Daljeet Kohli’s stock recommendations are not meant to be taken lightly. While he has his fair share of duds, a large number of the stock picks do perform and give hefty gains. So, let’s pay attention to his latest picks.
Daljeet’s first stock pick is Aurobindo Pharma Ltd. He is enthused by the fact that Aurobindo Pharma has shown healthy revenue growth across all segments & geographies.
Aurobindo’s revenue increased ~70% y-o-y (25% q-o-q) on back of increased contribution from formulations business. The formulation business (Excluding ARVs) grew ~125% y-o-y to Rs 20.51 bn (contributed 70% of total revenue in Q1FY15 V/s 42% of total revenue in Q1FY14) on the back of 79% y-o-y growth from US business (~66% in USD term to ~$ 186 mn) & 25% y-o-y growth in RoW business. In this quarter Aurobindo integrated Actavis business into European operations as a result European business grew 359%. Additionally, ARV formulations (contributed 7.6% of total revenue) grew ~17% y-o y to Rs 2.24 bn.
Daljeet points out that at the CMP of Rs 714, Aurobindo is trading at a P/E multiple of 14.1x FY15E & 14x FY16E earnings estimates. In the last 3-4 quarters, Aurobindo has shown robust performance on top line as well as surprised on the margins front on account of better product mix & positive operating leverage.
Daljeet has valued Aurobindo at 16x FY16E earnings and recommended a buy for a target price of Rs 817.
Daljeet had earlier put a buy on Capital First when it was at Rs. 223. So, a gain of 15% is already on the table.
Daljeet has reiterated a buy on Capital First on the premise that it is “Poised to deliver rapid growth & superior returns”.
Daljeet explains that Capital First has emerged as one of the fastest growing NBFCs and is well placed to move on next stage of growth. Though Capital First’s return profile is lower than its closest peers, the ROEs are likely improve to double digit by FY16E from current low single digit. It is pointed out that most of the NBFCs are trading at 2.0-2.4x for FY16E ABV while Capital First, at the CMP of Rs 257, is trading at P/ABV of 1.8x and 1.7x for FY15E and FY16E respectively. The discount on Capital First (currently at an average of ~30%) compared to other NBFCs is likely to narrow down on back of improving its return profile, Daljeet adds. He has recommend a buy with the target price of Rs 300, valuing it at 1.9x FY16E ABV which is much lower than peers valuation of 2.0-2.4x for FY16E.
Nesco, the favourite amongst value investors, is Daljeet Kohli’s third stock pick.
Here again, Daljeet had earlier recommended a buy when the stock was at Rs. 769. He then reiterated a buy when the stock touched Rs. 1109. So, this is the third time Daljeet is recommending NESCO.
He points out that Nesco reported top-line of Rs 374 mn, up 53.5% y/y, down 27.6%. Increase in y/y top-line was driven by 68.4% increase in Exhibition & IT Building segment revenues (91.9% of Q1FY15 revenues). Better than expected revenues from recently commenced IT Building III led to such strong top-line growth. He adds that at the CMP of Rs 1,226, Nesco is trading at FY15E & FY16E EV/EBITDA multiple of 9.8x and 5.3x, respectively and recommends a BUY with a price target of Rs 1,680.
So, there you have it. I suggest you study the research reports in detail and take an informed decision in the matter.