Alpha Ideas 20-20 | Why Bhavin Shah Picks Gujarat Ambuja Exports As His Top Pick
The firm, Shah said, is a leading manufacturer of starch and soya derivatives, and is India’s largest corn processor.
It’s a leading manufacturer of starch and soya derivatives and cotton yarn, apart from being India’s largest corn processor. That prompted Bhavin Shah, founder of Sameeksha Capital Pvt. Ltd., to choose Gujarat Ambuja Exports Ltd. as his favoured stock pick.
Corn production would increase in India in the near future, he said at the Alpha Ideas 20-20 conference in Mumbai, benefiting the firm. The company, according to Shah, is increasing its maize processing capacity by adding new plants.
The maize business, he said, could achieve 20-30 percent pre-tax return on capital employed in the near future and contribute to higher earnings growth. Shah also expected the company’s market value to double in the next three-four years. Its net worth grew at an annualised rate of 15 percent over the past 10 years and the value investor expects the company to replicate its performance in the future.
He said the company’s operating profit has more than doubled in the three years through March 2019. Gujarat Ambuja has been effectively managing its capital expenditure considering capex per tonne as a metric, he said, in comparison with its peers.
There’s a possibility that the company may get a re-rating, Shah said, adding that its textile business, which has remained a drag, would be shut.
Gujarat Ambuja would set up a new plant in West Bengal, enabling growth and increasing the company’s footprint across the country.
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Sameeksha Capital is a SEBI-registered portfolio management services provider.