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Feb 17, 2012, 10.59 PM IST
ICICIdirect.com has come out with its report on few attractive stock picks. The research firm has recommended to buy Bank of India (BOI), Infosys, Graphite India, Pipavav Defence, CESC, Jyoti Structure, NTPC, Bharat Forge and Sintex Industries in its February 17, 2012 research report.
ICICIdirect.com has come out with its report on few attractive stock picks. The research firm has recommended to buy Bank of India (BOI) , Infosys , Graphite India , Pipavav Defence , CESC , Jyoti Structure , NTPC , Bharat Forge and Sintex Industries in its February 17, 2012 research report.
Bank of India (BOI) : Is one of the largest public sector banks with business size of Rs 537607 crore as on December 2011. The stock has been under stress from past 2 years due to asset quality concerns. However, the pace of NPA additions is expected to slowdown which may support healthy profitability. The bank is trading at reasonable valuation of 1.3x FY13E ABV (historically during favorable market conditions, traded at 1.5x-1.8x one year forward ABV) with RoA and RoE expected at 0.8% and 17.3%, respectively, by FY13E.
Buying Range: Rs 386 - 375
Infosys (INFTEC): Is expected to post revenue/EPS growth of 17.2%/14.3% CAGR for FY11-FY13E period. The company boasts of a healthy client base of 665 active clients with 49 new clients added in Q3FY12. It is the only company which has clients (3) above the 200 million + bracket as of Q3FY12. Currently, the company is trading at one year forward PE of 18.6x. With the background of recovering US economy and most IT bellwethers commentary of exceeding NASSCOM estimate of 11-14% growth in export revenues (US $ terms) for FY13, Infosys could get rerated at its average FY11 one year forward PE multiple of 21-22x.
Buying Range: Rs 2900- 2850
Graphite India (CAREVE): Global steel demand is expected to grow at 6.0% in CY12. Healthy growth in steel global demand coupled with an increasing contribution of EAF share in total crude steel production is expected to directly benefit the graphite electrode industry. Graphite India (GIL) is currently expanding its consolidated capacity from 78000 tpa (tonnes per annum) to 98000 tpa (scheduled to be completed in Q4FY12) and is well placed to cater to the rising demand. GIL’s standalone capacity utilization level for last 2 quarters has been significantly high (103% in Q3FY12 and 97% in Q2FY12). At the CMP of Rs 88, the stock is trading at 8.0x FY13E EPS & 1.0x FY13E P/B.
Buying Range: Rs 88-84
Pipavav Defence and Offshore Engineering Company (PDOECL) reported an improved operating performance for Q3FY12 with core operating margin (excluding subsidy) increasing by 350 bps to 18.4% and net profit rising by 49% QoQ to Rs 14 crore. PDOECL has seen uptick in execution and enhanced efficiency which has resulted in higher core operating margins. PDOECL has an order book to the tune of US$1575 million comprising of defence orders worth US$665 million (constituting 42% of the order book) providing strong revenue visibility. The company 's joint venture with Mazgaon Dock (MDL) would enable Pipavav to jointly execute MDL's order book. Global shipyards are facing a dearth of new orders and existing orders are being cancelled owing to the weak economic scenario while PDOECL’s presence in the Indian defence segment and joint venture with Mazgaon Dock would provide it a strong and reliable order book. The stock currently trades at 2.3x FY13E book value of Rs 31. We believe Pipavav certainly deserves a scarcity premium due to high revenue visibility and can garner higher valuation.
Buying Range: Rs 76-72
CESC : Is a fully integrated power utility engaged in the generation and distribution of electricity across 567 sq km of licensed area in Kolkata, West Bengal since 1899. CESC owns and operates four thermal power plants generating 1,225 MW power. Current valuations of 0.8x FY13 adjusted book value are undemanding and ignoring 1) turnaround in Spencer’s, FDI in retail (key catalyst), 2) back ended capacity additions in FY14-15 and 3) no deterioration in working capital since it buys power from SEBs (unlike other utilities).
Buying Range: Rs 283-273
Jyoti Structure (JYOSTR): Expected reforms in the power sector and easing cyclical headwinds in form of decline in interest rates will benefit transmission EPC players like Jyoti Structures. We expect revenues and PAT to post better growth in FY13E on back of pick up in execution. Valuations at 5x and 4.6x on FY12E and FY13E EPS have discounted most of negatives and any incremental good news flows can lead to a re-rating and provide reasonable upside in the short – medium term.
Buying Range: Rs 56-53
NTPC : Is India’s largest utility with 36014 MW capacity . The company has a market share of ~ 20 % of India’s installed capacity. The company has no exposure to merchant power. We like the regulated nature of its business, capacity addition backed by fuel security (to maintain 80%+ PLFs for coal based power plants), lower PAF due to muted coal production (resulting in under recovery of fixed charges), capacity slippages and back down by SEBs are key risks for the company. On P/BV multiples, the stock is trading at 2.1x FY12E and 1.9x FY13E, respectively. Superior execution (in terms of commercialisation of power capacities) and higher PAF could re-rate the stock.
Buying Range: Rs 184-179
Bharat Forge (BHAFOR): Is one of leading global players in the automotive forgings business along with increasing reach towards non-automotive segments like oil and gas, mining , capital goods thereby providing strong business diversification. The demand outlook improvement in the North American market remains a key monitorable for the company and the recent improvement in the same is a positive for the stock. The CV segment remains the key domestic supply pocket in the auto-space for BFL and the outlook for FY13E is expected to be better in wake of impending rate cuts and expected budget support to the infra-space. On financials the stock has strong RoE,RoCE at ~21%/20% respectively. The stock is currently trading at attractive valuations of 13.2x FY13E consolidated EPS, 6.4xFY13E EV/EBITDA considering its market leadership and business reach.
Buying Range: Rs 321-310
Sintex Industries (SININD): Benefits from the increasing spending in social welfare schemes which has been the priority areas for government. Also, the increasing usage of plastic composites in automobile & Electrical industries is an opportunity set for the company. Looking at the company’s focus on improvement in balance sheet through working capital management and moderation in capex, we expect a progressive improvement in return ratios with positive Free Cash Flow during FY13-14E. We believe the current valuations are attractive as it is trading at 7.2x P/E on FY13E EPS & 5.1x EV/EBITDA on FY13E EBITDA, which are near to trough valuations of 2009 and ~30-35% discount to the past five year average multiples.
Buying Range: Rs 100-96
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Tags: ICICIdirect.com, attractive stock picks, Bank of India (BOI), Infosys, Graphite India, Pipavav Defence, CESC, Jyoti Structure, NTPC, Bharat Forge and Sintex Industries, Recommendation
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