VSSL could be next multibagger: Vinit Bolinjkar | Economic Times

One needs to book profits because we are dealing with midcap and smallcap stocks which have gone up and we should not forget that inflation is very sticky globally and yields have started hardening, says Vinit Bolinjkar, Head of Research, Ventura Securities. There was a bit of a scare. Market is elevated and it was a shakeout of sorts because I am sure some short-term traders would have been shaken out of their stop losses, etc. What are you assigning to your clients on these kinds of sharp cuts?We continue to be secularly and structurally positive on the market. And we are getting into that frothy space where we could see some kind of correction come in and which is very natural after the market rallied over a thousand points. My reading is that where we have seen substantial runs in the market is where froth has built up. One needs to book profits because we are dealing with midcap and smallcap stocks which have gone up and we should not forget that inflation is very sticky globally and yields have started hardening. Portfolio rotation should now go from a very aggressive strategy to more of neutral on risk and focus should be more on largecaps and midcaps because that is how the rotation of the market will continue to happen. There was a bit of a scare in ITC. It is also one hell of an underperformer. Would you be a buyer in ITC at these levels?At every level. People underestimate the kind of results that ITC would be showing over the next few quarters. Just what we have seen happen in Tata Motors will eventually play out in ITC because it is a very strong consumption story. FMCG margins are going to expand marginally but EBITDA has the potential to double from here and that will take the stock in the limelight. If we look at the other segments, paper stocks are doing really well. Prices of paper are up. Hotels are on an upswing with revenge trade. Agro sector is also becoming a booming export industry for India. So all sectors are firing on all cylinders. Cigarette business continues to be the cash cow for ITC and it is a monopoly situation out there. A lot of the selling pressure is coming from sources that we thought would never happen and that is getting absorbed. The consensus among people who are making memes on ITC is that now ITC is getting its mojo back. The stock is scared out of shape. It is 5% down today. It has run up from 200 to 250. At 250 you are saying there is value in it. But are there any chances that between now and the Budget, it may go sideways and underperform?It is always very difficult to predict what the stock will do on a near term basis. But having said that, we are convinced buyers on ITC on two counts. I believe that the ESG problem with tobacco trade and the deep pocketed investors who are sellers in these counters -- all that has been absorbed. There is no incremental selling coming in. All the tired patient holders have also sold out and there is a new breed of investors who believe in the growth story of the segment other than cigarettes. Secondly, we have to keep in mind that the entire cigarette taxation has happened historically over the last 20-30 years and that is a trend which is going to be there and it plays out over a period of two-three years. So we have one or two years of increase, followed by one or two years of pause. The GST revenues that come from tax collections from cigarettes are very strong. The government would also not want to let go of that. Also, there is the thriving opportunity of tobacco exports. There will be a comprehensive policy review. What would be the increase in the taxation on cigarettes would be difficult to comment on right now but I believe that once this is in stride, once this is passed through and all have been taken into account, the stock will continue its run up. What do you like in the small and midcap space?In the small and midcap space we like a couple of stocks. We like Dollar Industries. They have got their act together. They have done new branding and the things are going to go through. We expect that stock to play catch up. We are expecting a 17% to 19% CAGR in this space. Another midcap stock we like is Vardhman Special Steels Limited. They have got into a tie-up with Aichi Steel which is a subsidiary of Toyota and the only vendor to Toyota for special steel products. With the Aichi tie-up, the entire global market opens up for VSSL. If one considers the China plus policy plus the scrappage policy and the move towards EVs, they are also EV agnostic. We believe the profit which is at Rs 44 crore in FY21, should go to Rs 140 crore in FY24. That would be a significant jump and at a PE ratio of less than 10 over the next couple of years, there is a small multibagger sitting on your horizon. What else do you like in specific stocks? What have you been researching?We have been researching stocks where we feel there is a lot of value. We like a story called Gujarat Pipavav Ports Limited. It is one of the few ports in the world which is net debt free. And the only thing that is overhang on the stock is that their concession period is coming to an end in 2028 and they have applied for renewing the concession for another 20 years which will go through to 2048. Since their concession has not been renewed, the stock is in a limbo and it is trading at distressed valuations. But I believe the management has taken up all the necessary works that was required when they did the first phase of the concession period. And given their exemplary record, I believe that will come through very quickly. So it is a value stock. It is an MNC promoter and in the DFC corridor, there is strong growth in railway freight. Nhava Sheva is not coming up for another two years so over the next two-three years this becomes a very attractive choice given its parentage, growth prospects and valuations.