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.
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.
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