2 stock picks a multibagger for long -term investors: Milan Sharma, Rivergate Capital

In a chat with ET Now, Milan Sharma, MD, Rivergate Capital Partners, says Coal India and Jindal Steel & Power are great long-term picks and in Lakshmi Vilas Bank, one can see a multi bagger of the future.

Edited excerpts

What is the first stock that you are picking out?

Our first call is a buy call on Coal India Limited. It is one of the blue chip companies and a Navratna PSU. The reason we recommend Coal India is because we believe that in times to come the way the government has been emphasising upon the operational efficiency of all the PSUs and these Navratna companies and the way things are looking for Coal India especially in the power sector with the government is trying to revive the entire power sector and coal being one of the biggest beneficiaries, things are only going to improve for Coal India from here.

Even the Coal India valuations are quite attractive. In terms of risk reward, there is hardly any risk on the downside from these levels. If someone acquires at the Rs 270 levels, there will not be more than 5% downside risk for Coal India. On the contrary, if you talk in terms of the forward looking valuation for this stock, whether you use multiple valuation or you use cash to discounting, the fair price that works out is almost double from these levels. A long-term investor with three to five years horizon can safely opt for Coal India and almost 30% to 40% can be expected in year to year to basis.

What is your second choice? What makes you optimistic about it?

Our second choice is a buy call on Jindal Steel & Power. The company posted results yesterday. Though there were some one time exceptional gains due to which the stock corrected and there is negative news about the promoter but overall, we are quite hopeful about the entire steel sector. The valuations are compelling for the companies like JSPL. If someone is a long-term player and wants to create a long-term bet, then one should definitely go for JSPL at these levels. This stock can easily double to triple in next three to four years time from these levels.

Is there a third pick as well?

The third is a buy call on Lakshmi Vilas Bank, an old generation private sector bank. We recommend Lakshmi Vilas on account of its sheer valuations. This trades almost two times the book as compared to other players. It is almost double the valuation of stocks like RBL.
I believe that if someone is a patient investor with a five year horizon, Lakshmi Vilas can be a real multibagger in times to come.