ET Now

In a chat with ET Now, Vivek Mahajan, Head of Research, Aditya Birla Money, says the Maruti stock could have an upside of another Rs 1500 from the current level in the next 6-9 months. Edited excerpts

What is the take on the markets and especially the recent spate of earnings that we have seen, anything that stood out for you?

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Actually the earning season is looking out be a mixed one, yes there are some outliers as far as the earnings seasons is concerned. Maruti, for one, came out with fantastic numbers. In smaller companies we saw PI Industries and Shriram City Union really surprising the market on the positive side. On Maruti, our take continues to be positive. We believe the stock could have an upside of another Rs 1500 from the current level in the next 6-9 months time as the new plant goes on steam in Q4 and we saw launch of the newer models.

As far as Shriram City Union is concerned, we are maintaining a positive view on the company. Actually it is one of our Diwali picks and we believe the stock has an upside potential or Rs 1000 from Rs 3200 — Rs 3300 level meaning an upside of 40% over the next one year. So that is one of our preferred long term ideas which should be giving a multi-year growth.

Tell us what else is on your Diwali picks list?

We are having a coverage on Edelweiss Ltd. The company is emerging to be a financial conglomerate. The stock trades at 2.2 times adjusted price to book FY18 earning which is pretty reasonable at this point of time.

Maintain a positive view on Swaraj Engines, this is a Mahindra & Mahindra subsidiary. If you want to play the agri theme we believe this is one of the better stocks to play wherein the safety is pretty high. The company has got a headroom of nearly 80% as far as the production of engines is concerned which goes into tractors. Tractors, already has seen a significant up move in the first half and normal monsoon will see to it that the tractor growth is phenomenal in the second half as well.

We are looking at a microfinance company. We have been recommending that for a pretty long time that is Satin Creditcare. The stock has already move up from Rs 300 odd level to Rs 570 level. We believe it will be one of the bigger beneficiaries in the microfinance space with lot of peers are turning into the small and medium banks. So this becomes a focus player and remains our preferred pick in the microfinance space.

Other than that, Pidilite has corrected of late. We believe this company should again see a multiyear growth and it is one of our Diwali picks.

Out of all the counters that have announced their results so far in which of the stocks do you actually see opportunities, we have seen a lot of stocks react very positively or either very negatively this entire quarter?

We believe PI Industries and Shriram City Union both have got further headroom from the current level. They should be delivering a return of something like 20-25% over the next one year.

DCM Shriram came out with numbers which were pretty good. The stock is trading at 10 times one year forward. They have got three main businesses which are driving the earnings; caustic soda where the capex cycle is behind, last quarter one month caustic soda did well. Caustic soda, again the prices have firmed up.

We believe that should be beneficiary. They are into agri and seed business, that should again be doing well in this current quarter and finally the other smaller business they are also contributing as far as this company is concerned. We believe this stock could have a decent upside from the current level.

Again, they came out with good numbers. In a smaller stock, Meghmani came out with numbers, according to me, the numbers are very good, stock quoting at Rs48 or thereabout. We believe this stock has a potential to go to 60 plus. Their capex cycle is behind and future cash flows will be used to retire the debt.