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    Two stocks that will help you make money: Rahul Shah, MOFSL

    Synopsis

    Can Fin Homes is trading at a discount of around 15 per cent to the rest of the housing finance companies

    ET Now
    In a chat with ET Now, Rahul Shah, MOFSL, says Can Fin Homes and Escorts are two stocks which make sense to invest in. Edited excerpts



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    ET Now: Take us through your wealth creation ideas, what is first up?

    Rahul Shah: Investment rationale. I think if you look at Can Fin Homes, the stock has done quite well, almost trading at 52-week highs. We feel that the way the stock has been compounding in terms of earnings, we feel it will continue to do well as well.
    So, we expect 26 per cent PAT growth from FY16 to FY18. Terms of the ROEs also have been set to improve because of low cost of funding as the rating has also been upgraded for the company. If you look at the other avenues in terms of like say NCDs, public deposits which used to constitutes around 23% which is going to go up to around 40%.

    The costing in terms of borrowing will also come down. The management has set their target of 2020 with a vision of Rs 20,000 crore AUM in terms of a loan book which right now is around Rs 6,000 crore which will continue to grow.
    Secondly, the asset quality is impeccable and if you look at the entire industry space, it is around 0.23. So at this quarter also they reported 0.23. So I think with significant ROA return ratios and growth prospects, if you compare with the other housing finance companies in the same space, it is still trading at a discount of around 15 per cent to them. So, I would recommend buy with a target of Rs 1150 in Can Fin Homes.

    ET Now: And why is it that you like Escorts as a stock idea?

    Rahul Shah: My second pick is Escorts. This stock obviously has done quite well and again quoting at near 52-week high so we believe that the way the Escorts has transformed itself in the last two years in terms of managing their balance sheet as well as in terms of overall product mix, we are very excited about the new products.

    They are going to launch 10 new products in the pipeline and we believe that the 80% of the sales comes from the tractor division and in that series of product launch so and going forward we believe that they will manage 12% and 14% CAGR in sales growth from FY16 to FY18.
    We believe that PAT would grow from 15% to 60% from FY16 to FY18. Further, the silver lining is the good monsoon which is expected to add a feather in their cap and it is significantly trading at a discount to M&M at 30%. So it is valued at around 11 times forward. I believe that again we have a target price of Rs 290 in Escorts.




    ( Originally published on Jul 28, 2016 )
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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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