KYI: Wrapping up 2011, what should you invest in 2012?

ALSO READ News and Notices about Crompton Greave See interviews with Crompton Greave Management See what other Experts & Brokerages are saying about Crompton Greave See previous Results of Crompton Greave

Know Your Investment, helps investors take a prudent call on their investments. This week, Hemang Mamtora, Vice President- Equity Advisory Desk, Emkay Global Financial Services Ltd gives his take on various sectors and stocks.

So, what should the strategy be for investors to follow going forward?

Moneycontrol.com's initiative, Know Your Investment, brings you answers to the queries you asked us on our Facebook page .

Q: Abhilasha Dube: What is your view on Crompton Greaves ?

A: In the near to medium-term there is a lot of negativity in the stock. Crompton Greaves is yet to stabilize its core domestic operations. Consumer and industrial growth are likely to remain subdued. The power systems business continues to be impacted from increasing competition and slowdown in demand. But it does expect healthy performance by overseas subsidiaries. Stabilization of operations will be a key for upgrades.

Q: Anurag Srivastava: I have shares of Bank of India . What should I do?

A: Bank of India's current valuations is at 0.9x one-year forward ABV which are not very attractive. Looking at a modest 15% ROE and high NPL ratio of 1% is negative for the stock. One should shift to some other stock like PNB or Bank of Baroda.

Q: Navin Castelino: Where do you see the market going from here until budget?

A: This year the budget will be delayed due to state elections. In the run up to the budget there are quite a few events like - Q3 FY12 results, a possibility of interest rate cuts from the RBI and most likely state election results which will be also be declared just around the budget.

The Q3 FY12 results are expected to be muted and in some cases quite disappointing. On the positive side, any interest-rate cuts can lead to sentiments turning positive. Even the election results will have an impact on both domestic and foreign investors' outlook for markets. Markets are therefore expected to remain quite volatile, reacting each time to the above mentioned events.

Q: Shramnesh Jain: What is your view on South Indian Bank and Delta Corp ?

A: South Indian Bank has got a strong 644 branch network, the second highest amongst old private sector banks. Valuations are at 1.1x 12-forward and the ABV are attractive looking at a 20% ROE.

The gaming business is in a very nascent stage in India and Delta Corp has the advantage of being one of the first movers in the industry. This fast paced, high adrenalin industry will continue to grow and could grow exponentially from here. Delta would be a value buy with a long-term perspective as the full potential of this stock would reflect in the price only when the gaming industry makes the leap.

Strategic tie-ups and its foray into the hotel Industry makes me believe that they are in this for the Long haul. It is still a concept stock but sure to do well in the future. The stock has corrected to attractive levels as well and one could look for an entry point.

Q: Anant Singh Bagga: Can you suggest multibaggers in smallcap and midcap stocks to invest in?

A: Stocks which we continue to like as investment ideas are Divis Labs , Shree Cement , Greaves Cotton & Hexaware Technologies.

Q: Deepak Khurana: What is your view on HDIL ?

A: We are not bullish on HDIL considering its key project Mumbai Airport Slum Rehabilitation has not taken off as planned. The company has also suffered from change in FSI norms from 1.00 to 1.33 by the Maharashtra government leading to a fall in demand for TDRs, the key revenue generator for HDIL. The company is also suffering on the cash flow front wherein it recently sold off a plot in Andheri for a loss to meets is interest cost on the mounting debt of Rs 40 billion plus.  We would recommend an avoid.

Q: Kumar Vikas: What is your view on Oil India ?

A: On Oil India, we expect a total under-recovery of Rs 1300 billion for FY12E. Oil India's net realization comes at USD 56/bbl, which translate into Rs 142 per share of earnings for FY12E, growth of 18% YoY. Moreover, the company is focusing on using the cash balance of Rs 120 billion (FY12E), for potential acquisition which could be a possible trigger for an upside in the stock. At present, the company has net cash per share of Rs 500. We believe any success in potential acquisitions would enhance volume as well as profitability. At CMP it trades at 7.7x FY13E EPS and 1.3x Price/book.  

Q: Darshan Shukla: What are your short-term and long-term targets for Adani Power ?

A: Adani Power is trading at 1.4x FY13E book with a huge downgrade risk to its earnings and book value. Our numbers are building in a book value growth of 45% by FY13E over FY11. So, it is likely that there will be significant cuts going forward.  

Q: Parmeet Singh: I hold 260 shares of Nestle India at Rs 762. What is the long-term prospect?

A: Nestle is one of the fastest growing FMCG companies which focuses on the food & beverage segment. The domestic business has been growing at a healthy pace. The growth remains broad-based across milk and nutrition, prepared dishes and cooking, chocolates and confectionary segments. In order to drive future growth, the company is incurring capex of Rs 17 billion, which remains well on course.

Better product mix along with cost reduction programs have aided margin growth and the management is confident of maintaining its margins despite input cost pressures. Its strong position in high growth market will aid healthy growth of 19% over CY10-12E and drive earnings CAGR of 18% over this period. The stock is currently trading at 34x CY12E earnings of Rs 122 per share.