Two stock to make money in medium to long term: Siddharth Sedani, Anand Rathi

In a chat with ET Now, Siddharth Sedani, Anand Rathi, explains his wealth creation ideas.

Edited excerpts:

What is the first stock that you are betting on?

The first idea is Escorts Ltd. It is a leader in the tractor segment with 11% market share. The December data was quite optimistic with 16% sales growth in the tractors division. In fact, their other equipment divisions are also doing good. If you look at the quarterly numbers, they have reported 35% growth in the tractor volumes as well as some 19% growth in the construction equipment division. Escorts is looking good with a medium to long term horizon. If we look at the management commentary, management is expecting the industry to grow around 15% and expecting the company’s growth to be exceeding the industry growth. We like Escorts with a medium to long term horizon.

What is the next recommendation?

As we know, Dawat is the leading brand for LT Foods and it has an 18% market share in India in basmati rice. If you look at the product mix as well as the cost efficiency which the company is following, along with inventory control which is expecting to reduce the debt for the company going forward. Even a brand called Royal which is again a popular brand in US and has a 50% market share in US markets. has been doing good in niche brand category in India as well as US. The stock trades a little bit in discount to the other peers likes of KRBL and Tata Global. We believe it has great profitability and strong return ratios. So we assign it a 7x EV/EBITDA FY17 earnings. We believe LT Foods with a medium to long term horizon and a target of Rs 390 looks very interesting and promising.