3 hot stock picks from Geojit Financial Services

We maintain a positive outlook from H2FY18, due to normalization in industry business and new models with iEGR technology. We expect AL’s revenue to grow at 11% CAGR over FY17-19E- due to high order book from African countries and new launches in LCV. We increase our P/E to 20x (17x earlier) on FY19E EPS with revised target price of Rs116 and maintain Buy rating.

Mahindra CIE Automotive Ltd

Rating: BUY                           CMP: Rs252                           TP: Rs291

Mahindra CIE (MCIE) is among the top global forging players with a strong presence in both Europe and India. Currently 2/3 of the revenue comes from Europe (split btw CV’s & PV’s) while rest from India (PVs).

Diversified product portfolio, broad based customer profile and strong geographical presence establish MCIE a preferred choice for the OEMs. Scaling up new product line to drive growth in two wheeler business will paint positive outlook to the company. We expect EBITDA margin to improve by 350bps over CY16-18E led by cost control initiatives and capitalizing the OEM mix. Consolidated Revenue/PAT to grow at 14 percent/57 percent CAGR over CY16-18E led by increase in order book from OEMs & recent acquisition (BFPL).

Havells India Ltd

Rating: Hold                          CMP: Rs460                           TP: Rs500

Havells India Ltd (HAVL) is a leading player in electrical consumer goods in India. Its key verticals include switchgears, cables & wires, lighting fixtures and consumer appliances.

HAVL reported a modest revenue growth whereas PAT declined by 16 percent YoY on lower operating margins. Due to implementation of GST, significant destocking was witnessed at trade channels which led to adverse sales mix. Inability to pass on higher cost added further pressure on EBITDA margins. Going forward, Lloyd consumer business is expected bring sharp scalability to HAVL’s consumer business. Currently HAVL’s has presence across entire consumer electric space. Given its strong earnings outlook, premium valuation is expected to continue. We upgrade HAVL to Hold.

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