Broking firm Sushil Finance is bullish on the following stocks. It suggests investors to consider these stock for the coming year.
1. Everest Industries Ltd (EIL)
Given the government’s thrust on rural development and the significance of rural India in the overall GDP growth, we believe that the Roofing Industry would continue to grow at a decent pace.
Due to growing urbanization and unique benefits, increasing demand of value added products like fiber cement sheets, boards and panels and growing acceptance of pre-enigineered buildings (PEB) in the industry, we believe Everest Industries (EIL) is well positioned to reap the benefits of its de-risking strategy. It would put EIL into different league increasing the possibility of re-rating of the stock. Also Operating Cash flow of Rs 100 crore plus on market cap of just Rs 370 crore itself is big anomaly, which should rectify sooner than later.
2. Gujarat Mineral Development Corporation Ltd (GMDC)
Given GMDC’s strong execution skills as witnessed in Q2FY13, increase in lignite prices at Panandhro and likely price hike at other mines and likely improvement in the power business, we believe GMDC will continue to grow at a healthy pace with consistent volume growth.
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Also, the company has a good pipeline of mine additions which will significantly add volumes in the subsequent years coupled with likely commencement of Alumina JV with Nalco will significantly add value to the company’s core business. It is debt free company with strong return ratios and generates robust cash flow of over Rs 800 crore; still it trades at significant discount to its immediate peer.
Nesco is a unique play on exhibition center and steady lease rentals wherein it gives comfort of sustainable cash flows. Unlike other Real estate players, its growth is not linked to land banking rather it is linked to land monetization.
The company’s business model is one of its kinds which wiil be difficult to replicate given the fact that availability of such tracts of land on a prime location at low prices is difficult in today’s market scenario. Strong Return Ratios, healthy balance sheet, zero debt and robust cash flows make Nesco an attractive bet.
4. Jyothy Laboratories (JLL)
Considering synergy benefits from Henkel India’s acquisition, new appointments at the upper management level and improved clarity in its business, we believe Jyothy Laboratories (JLL) to grow at a healthy pace with improved margins going ahead as the company has initiated various cost rationalisation measures in H1FY13 for e.g. a) rationalising distribution margin structure at distributor and retailer level b) changing distribution model from owned depot to C&F model c) consolidation of sourcing and manufacturing activities and d) rationalisation of distributors from presently 7000 to 1500-2000 in the next 2-3 years.
5. LIC Housing Finance Ltd (LICHFL)
LIC Housing Finance (LICHFL) has grown at a healthy pace in the past few years driven by strong growth in its loan book along with improved asset quality and high return ratios. Asset re-pricing, favorable borrowing mix coupled with strong disbursement growth to result in the reversal of NIMs which in turn would lead to healthy PAT growth. Reversal of rate cut will make the case more special with much attractive valuations.
6. Hindustan Zinc Ltd (HZL)
Hindustan Zinc (HZL) has come out with better than expected set of numbers for Q2FY13. The company’s mined metal production was well in line with its mining plan for the year. It expects a slight growth in mined metal production on a YoY basis for FY13, which implies good performance in H2FY13. Its cost of production (COP) is likely to be flattish on a full year basis; COP is thus likely to be lower in H2FY13.
Current valuations for HZL imply USD 1700/tonne of zinc and lead price, which is fairly conservative, considering the current zinc and lead price of $2068/tonne and $2305/tonne respectively. The zinc prices are also likely to hold up due to increasing mining cost, stable demand and supply side constraint in future. The company has also been engaged in new exploration possibilities which could be the next big trigger for HZL.
7. Finolex Cables Ltd (FCL)
Finolex Cables (FCL) being one of the leading players in the cable industry seems well placed to capture huge opportunities considering its strengths and the industry in which the company is operating. Derivative losses coupled with bleak performance by its communication cable segment were the major reasons for de-rating of the stock in the past which in our view seems to have been overdone. Given likely bottoming of its return ratios coupled with Cash flow of over Rs.150cr on M.Cap of Rs.900cr definitely warrants re-rating.
8. Tech Mahindra Ltd
With over 25% CAGR in the last five year in Non-BT accounts, compensating for decline in BT account, Tech Mahindra expects its Non-BT accounts to deliver decent growth, while BT’s revenue is expected to muted in the short-term due to its internal rationalization program and stabilize going forward.
Moreover, the merger of Mahindra Satyam will further benefit the company by de-risking its business profile with more balanced industry, geography and client diversification, and business synergy by leveraging the expertise of both the companies. Considering its H1FY13 performance, the consolidation of HGS and Comviva financials and business outlook, we are positive on the stock.
9. SUN TV Network Ltd
Digitization should help the media companies like Sun TV Network. With nearly 2 million households in Chennai (1.3-1.5 million cable subscribers and 0.5 mn DTH subscribers) and nearly 11 million subscribers in five cities of Phase II (Bangalore, Hyderabad, Mysore, Coimbatore and Vishakhapatnam) of digitalization, Sun TV is expected to be one of the biggest beneficiaries of impending digitisation in these geographies.
Given the potential for deeper penetration of DTH services in the company’s key markets, the DTH revenue is likely to continue its momentum. Long term investors can look at this stock considering India being a long term story and the conversion from analog to digitization will increase the subscription income for the company without any additional capex going ahead. The management of the company has also guided for strong growth in advertisement income in H2FY13.
10. ICICI Bank
ICICI Bank’s asset quality has shown a turnaround as its NPAs have continued to decline over the last eight quarters led by contraction in slippages. This has led to a sharp reduction in the provisions and an increase in its profitability. We believe margins to improve with easing credit cost pressures which in turn will aid its RoA performance.
The management has also guided to steady state margins of atleast 3%. Further, with easing rates and higher growth in the domestic book (higher margins), we believe ICICI’s NIM performance can surprise the street. Concerns over asset quality and margin maintenance had dragged the stock performance in the past. However, steady state balance sheet expansion with easing NPA pressure may possibly lead to re-rating of the stock.
11. Jaiprakash Associates Ltd (JAL)
Robust Assets and strong execution capability are the key strengths of the Jaiprakash Associates (JAL) but the servicing of its huge debt continues to remain an overhang on the stock. JAL had demerged its cement operations in Andhra Pradesh (5 mtpa) and Gujarat (4.8 mtpa) into a separate entity with a plan to divest stake. Any stake sale in the separate entity will enable the company to reduce its debt and may lead to re-rating of the stock.
12. Aditya Birla Nuvo Ltd (ABNL)
Aditya Birla Nuvo (ABNL) will be one of the biggest beneficiaries from the government decision to allow 51% FDI in multi-brand retail. On 24th Dec 2012, CCI has also given green signal to the takeover of Future group’s Pantaloon brand business by ABNL. ABNL is also one of the key contenders to get the RBI’s approval to start banking operations. The above two factors will be the key triggers for the stock. Also SOTP valuation offers significant upside from present level.
13. Aegis Logistics Ltd (ALL)
Key trigger for Aegis Logistics (ALL) comes from the recent government decision to cap the supply of LPG cylinders (14.2 Kg) to six/nine per household a year. This opens up a level playing field for parallel marketers like ALL as the diversion of Household LPG to commercial and Autogas segment will be curbed to a considerable extent.
B2C Gas distributions will a key growth driver for ALL going ahead as the company has around 85 retail auto-gas stations across 7 states (77 franchised and 8 company-owned) and another 30 stations are under progress. ALL has 34 distributors across Maharashtra, Karnataka and Gujarat for commercial LPG business and plans to leverage the existing Auto gas dealers’ network to penetrate in other states for commercial LPG.