2 stock picks to invest in: Ashish Maheshwari, Blue Ocean

In a chat with ET Now, Ashish Maheshwari, Director, Blue Ocean, says Gujarat Heavy Chemicals Limited is available quite cheap considering its caustic soda and textile units are working at almost 100% capacity. Edited excerpts

ET Now: What is the first stock on the radar?

Ashish Maheshwari: Both of my wealth creation ideas are companies that have come out with excellent Q1 numbers and I am expecting same set of performance will continue round the year.

My first stock is idea is Gujarat Heavy Chemicals Limited, GHCL. In Q1, the company reported a profit of almost Rs 103 crore vis-à-vis Rs 62 crore in Q1 last year. The rationale is if we see their divisions, they have caustic soda manufacturing and textile divisions and both these divisions are working almost at 90% plus capacity.

Caustic soda is a money spinner because one of the world’s largest caustic soda ash manufacture plant in China has been shut down for almost six months. So, caustic soda prices are at a new high at present. So this company will keep on making good money on it 7.5 lakh thousand tonne capacity.

The textile division, where they make products from yarn to home furnishing is also working at almost 100% capacity on back of good demand. This year, I am expecting that the company can report an EPS of almost Rs 35 to Rs 40. The stock is still looking cheap . The future looks quite promising. So for this particular stock, my target for next six months will be Rs 400.

ET Now: Let us talk about the next recommendation then, what is that you like?

Ashish Maheshwari: My second stock idea is Sybly Industries, a smallcap thread manufacturer which is a niche player in thread manufacturing and embroidery thread making. If we see the last quarter performance, company came out with excellent numbers where profit went up from Rs 1.7 lakh which was reported in previous quarter to almost Rs 98.7 lakh in this quarter.

I am expecting this performance will continue in this year. Again, the rationale for this growth will be they have doubled their capacity from 10,000 spindles to 20, 000 spindles via contract manufacturing and again they have launched some new brands into the retail thread market which are getting good traction in the market because this company is having a standing of almost 30 years odd.

Another trigger which might be there in coming financial year is that they are looking for some demerger also of their businesses. So this company which is a niche thread making company which is having high profitability margin will be in this listed company.

So I am expecting this year they may report a EPS of almost Re 1 going by the trend in Q1 and that is why like stock is available still 10-12 price-earnings multiple from FY17 earnings but going forward as the margins have improved and the capacity addition is happening and this demerger story will kick off, the stock has a potential to go up by 100% in the next six months.

So I am recommending this stock with a target price of 25 and a stop loss of Rs 9.