have taken all developments – geopolitical tensions between the United States (US) and Korea, monetary policies of various central banks, outcome of US presidential election at the global level and impact of demonetisation, goods and services tax (GST) rollout back home – in their stride. During the year (Samvat 2073), benchmark indices, the S&P BSE Sensex
and the Nifty
50, gained around 16% and 17%, respectively.
Though analysts caution that markets
are likely to remain volatile in Samvat 2074, strategies adopted by the global central banks; corporate earnings growth of India Inc; commodity prices, especially crude oil; and the progress on reforms and health of the economy are some of the key factors that will have a bearing on the overall market sentiment. That apart, market participants will also keep a tab on the state polls over the next one year, especially Gujarat.
Here is a compilation of the top stocks that leading research houses and brokerages have recommended for Samvat 2074.
Bajaj Auto: Healthy growth in exports as witnessed in past quarters expected to remain unchanged and post double digit growth. Recent non-equity JV with Triumph to help company strengthen its hold over mid-capacity motorcycles.
Birla Corp: Post the acquisition of Reliance Cement and the proposed greenfield expansion, BCL would become the 5th largest cement company in India with a pan-India presence. Higher volumes on back of infrastructural and developmental activities of the Government supported by the various cost cutting measure and turnaround in jute business would yield healthier profitability. We feel BCL deserves a higher valuation of $120 EV/Ton corresponding to 10.5x FY19E EV/EBITDA leading to a target of Rs 1220
Divi's Lab: Expectation of lifting the import alert (under clause 66-40– CGMP related) by end of FY18, FY19 could see a sharp rise in revenues/profits. Setting up a manufacturing facility on a greenfield site at Ontimamidi near Kakinada, Andhra Pradesh.
ICICI Pru Life Insurance: India holds immense opportunities to expand life insurance business, given the vast untapped potential, favourable demographics and an increasing awareness of the need for financial protection from which ICICIPRU has a lot to gain. ICICIPRU has strong financials and a healthy balance sheet. It is currently trading at 3.7x P/EV for FY17, which is lower than the recent listing of SBI Life insurance at 4.1x P/EV for FY17. Our target 1-yr fwd multiple of 3.8x FY19E P/EV yields 12M target price of Rs 520
Persistant Systems: Persistent Systems is focused in next generation technology areas like Analytics, Cloud computing and Mobility for the telecom. Life Sciences and BFSI verticals. It is securing multi-year, multi-million dollar deals.
Bata India: If the current trend is to sustain, the revenue and PAT could grow at a CAGR of 12% and 24% over the next two fiscals. The stock, however, is trading at 52.2x its FY2019E earnings. Yet this does not capture the earnings growth potential, in our view. Target Price: Rs 925
Cyient Ltd: At current market price, Cyient is trading at a P/E multiple of 14x/12x on FY18/FY19E which is towards the lower end of the 1yr forward PER range of 10x-16x. Further it has surplus cash of around Rs 75/share. Thus we believe that the stock has strong re-rating potential. M&A would provide upside trigger to our forecast. Target price: Rs 645
Larsen & Toubro: We forecast 12% CAGR in revenues till FY19. We anticipate a strong margin recovery through power, heavy engineering, electrical and automation and IDPL. Thereby, we believe EBITDA should grow by 20% CAGR over the next two fiscals. Target price: Rs 1,425
Manappuram Finance: Specialised NBFCs have operational advantages over banks, and as a consequence they continue to win market share. The shift from the unorganised sector to organised sector is expected to gain traction due to Aadhaar, Jan Dhan and demonetisation. Also, long-term outlook for gold prices remain steady. The stock is trading at P/BV of 2.1x/1.9x FY18/19E with a strong RoE of 22%. Target price: Rs 142
Mahindra Holidays & Resorts: Strategic focus continues to be acquiring rooms on lease. This has helped company to clock revenue in excess of Rs11bn. We anticipate 9% revenue CAGR in VO income for years to come. Also, MHRL could gain 19% revenue CAGR in resorts and ASF over the next two years. With cost control and better quality of members, the stock promises a brighter outlook. Target price: Rs 520
Sundram Fasteners: Given the attractive industry dynamics, the company is expanding capacities of certain products and setting up manufacturing facilities for newer product range to meet the rising demand for its products. The stock is currently trading at a FY19 PE multiple of 19x (based on Bloomberg consensus estimate). We have a positive view on the stock. Target price: Rs 590
Trent: The company was established in 1998 and part of the Tata group, Trent operates Westside, one of India’s largest and fastest growing retail chains; Star Bazaar, a hypermarket chain and Landmark a family entertainment format store. The company’s strategy to expand high ROCE Westside stores, closing loss-making Landmark stores and rightsizing of Star Bazaar (JV with Tesco Plc) are likely to improve its financial performance over the coming years. These opportunities place Trent at an inflection point. We believe that execution of these strategies would lead to strong improvement in Trent’s financials.The stock is currently trading at a FY19 PE multiple of 55x (based on Bloomberg consensus estimate). We have a positive view on the stock. Target price: Rs 415
Dewan Housing: Backed by healthy capital adequacy and increasing demand for home loans DHFL’s loan book is expected to report 23% loan growth over next two three years. Earnings growth is likely to be more than 28%.The stock currently trades at 1.6x FY2019E ABV. We maintain an Accumulate rating on the stock, with a target price of Rs 650.
Karur Vysa Bank: KVB had a fairly strong loan CAGR of 14.9% over FY11-17.However, FY17 was year of consolidation and loan book grew by only 4.7%. We expect loan growth to pick up to 11% over FY17-19. Deposit growth is expected at 9% during the period. The stock currently trades at 1.4x FY2019E ABV. We have a BUY rating on the stock, with a target price of Rs 180.
Asian Granito: We expect the company to report a net revenue CAGR of 9.9% to around Rs 1,286 crore and net profit CAGR of around 23% to Rs 59 crore over FY2017-19E. On the EV/Sales, AGIL is trading at 1.2x compared to 3.2x of Kajaria Ceramics. We have a buy rating on the stock.
Blue Star: Aided by increasing contribution from the Unitary Products, we expect the overall top-line to post a revenue CAGR of nearly 19% over FY2017-19E and margins to improve from 5.8% in FY2017 to 6.6% in FY2019E. We recommend an accumulate rating on the stock.
Siyaram Silk Mills: Going forward, we expect SSML to report a net sales CAGR of 12% to Rs 1,981 crore and adjusted net profit CAGR of around 16% to Rs 123 crore over FY2017-19E on back of market leadership in blended fabrics, strong brand building, wide distribution channel, strong presence in tier II and tier III cities and emphasis on latest designs and affordable pricing points. At the current market price, SSML trades at an inexpensive valuation. We have a buy rating on the stock.
Maruti Suzuki: Automobile sector is expected to benefit from the lower interest rates and recovery in rural economy. The sector has seen a pick up in the volumes in FY17 as there were several positive factors like normal monsoon and lower interest rates. Due to a favorable business mix, company has also been seeing improvement in margins. EBITDA margin has improved from 11-12% to around 14-15%. Together with higher operating leverage at Gujarat plant and improving business mix, we believe that company has further room to improve its margins. We have an accumulate rating on the stock.
TV Today Network: TTNL is a play of higher operating leverage that would be visible as advertisement revenues gain traction. Going ahead, we expect EBITDA margins would improve. We expect TTNL to report a net revenue CAGR of ~9% to ~'727cr and net profit CAGR of ~14% to Rs 121 crore over FY2017-19E. We have a buy rating on the stock.
Music Broadcast: MBL outperformed its closest peer with 18.4% CAGR in revenue over FY2013-17
(ENIL reported 13.2% CAGR in revenue). On the profitability front too, MBL, with 32.3% CAGR in PAT over FY2013-17, has performed much better than ENIL (-5.2% CAGR in PAT). Moreover, Radio City posted a six year CAGR of 12.1% v/s. 9.1% of industry owing to higher advertising volumes. We have a Buy recommendation on the stock and target price of Rs 434.
KEI Industries: KEI’s export (FY17 – 8-10% of revenue) is expected to reach a level of ~14-15% in next two years with higher order execution from current OB and participation in various international tenders. We expect a strong ~26% growth CAGR over FY2017-19 in exports. We expect KEI to report net revenue CAGR of ~14% to Rs 3,392 crore and net profit CAGR of ~13% to Rs 125 crore over FY2017-19E. We have a Buy rating on the stock.
GIC Housing Finance: GICHF is consistently decreasing bank borrowing and increasing high yield loan book which is expected to boost its Net Interest Margin. The share of bank borrowing was 75% in FY15, which fell to 55% in FY17. In our opinion, the impetus on lower bank borrowings and increasing high yield loan book is likely to result in 17bps NIM over FY16-FY19E. We have a Buy rating on the stock, with a target price of Rs 655.
Navkar Corp: NCL is one of the largest and one of the three CFS at JNPT with rail connectivity, helping it garner high market share at the port. NCL is in a massive expansion mode where it is increasing its capacity by 234% to 1,036,889 TEUs at JNPT and coming up with an ICD at Vapi (with Logistics Park). We expect NCL to successfully use its rail advantage and scale up its utilizations at both JNPT and Vapi ICD. We have a Buy rating on the stock.
In the domestic market, company operates in acute and chronic segments. It is a prominent player in acute segment has forayed in chronic segment, from which it expects faster growth. The company has been outperforming the domestic industry growth which is likely to continue. Company is focusing on monetisation of its pipeline (92 ANDAs) in the US with annually high single digit ANDAs launches to grow the US revenues at ~20% CAGR from FY17-FY19E. We estimate ~13% CAGR in the bottom-line and 9% in the topline over the next two years. We have an accumulate rating on the stock.
Hero MotoCorp – Target Price -Rs 4300
Indiabulls Housing Finance - – Target Price - Rs 1,600
ITC -– Target Price -Rs 336
L&T -– Target Price - Rs 1,400
Can Fin Homes – Target Price – Rs 3,200
CDSL – Target Price - Rs 450
Glenmark Pharma -– Target Price - Rs 900
Natco Pharma -– Target Price - Rs 1,200
Somany Ceramics – Target Price - 1020