The Indian market appears to be in a phase of consolidation as every rally sees subsequent profit-booking.
After showing weakness at higher levels on September 14, Nifty showed an upside bounce with a rangebound action on September 15 and closed the day with decent gains of 82 points.
"We are seeing noticeable buying across the board during this consolidation phase and it’s indeed a positive sign. However, the participation of the banking pack is critical for any directional move in the index. Considering the prevailing scenario, we suggest keeping a close watch on the outcome of the US Fed meet for cues," said Ajit Mishra, VP - Research, Religare Broking.
Picking quality stocks is the mantra now. Based on the recommendations of several analysts, here are 12 stocks that you can bet on for a one-year timeframe:
Analyst: Jyoti Roy - DVP- Equity Strategist, Angel Broking
Chalet Hotels | Target price: Rs 200
The company’s hotel comprises six operating hotels in the key Indian cities of Mumbai, Hyderabad, Bengaluru and Pune representing 2,554 key.
Post sharp drop in occupancy in the month of April, the company has reported a strong pick-up in occupancy for June through August.
The company has posted a better than expected set of numbers for Q1FY21 as the commercial real estate segment provided stability to numbers, given the sharp fall in the hospitality revenues.
Occupancy levels have already started improving from July and expected to improve gradually over the next few months.
The analyst expects a significant improvement in the business post the festive season and normalization of operations in the second half of FY22.
Hero MotoCorp | Target price: Rs 3,422
Hero MotoCorp is India’s leading motorcycle manufacturer with an overall market share of 54 percent.
Entry-level motorcycles in rural India are posting a faster rebound in sales post COVID-19, given good monsoon and shift from public transportation to personal vehicles.
Hero MotoCorp continued to outperform the two-wheeler space and reported a 6.5 percent YoY growth in motorcycle sales for August 2020 with sales volumes recovering to pre-COVID levels.
"Hero Motocorp remains one of our top picks in the two-wheeler space on the back of strong demand from rural India and market share gains," said the analyst.
Metropolis Healthcare | Target price: Rs 2,156
The company has posted a better than expected set of numbers for Q1FY21 while management has guided for further improvement in business for Q2.
While non-COVID revenues are back to above 80 percent of pre-COVID levels, revenues from COVID related tests will more than makeup for any shortfall in revenues during Q2.
With further opening up of the economy, the analyst expects non-COVID revenues to reach the pre-COVID level in Q3FY21.
"We are positive on the company given expected long term growth rates of nearly 15 percent CAGR, stable margins profile and moderating competitive intensity due to consolidation in the industry," said the analyst.
JK Lakshmi Cement | Target: Rs 328
JK Lakshmi is a predominantly north India cement company which is the most favored region for the cement industry given better demand-supply dynamics.
The company had also posted a good set of numbers for Q1FY21 due to favorable regional presence.
Despite the sharp fall in volumes, cement companies were able to maintain their margins due to lower power and fuel costs which is expected to continue due to continued low crude prices.
"JK Lakshmi is our top pick in the mid-cap cement space given that it is trading at a significant discount compared to historical averages as well as peer group," said the analyst.
HCL Technologies | Target price: Rs 793
HCL Technologies posted a better than expected set of numbers for Q1FY21 as revenues were in line with street estimates though margins and profits came in above estimates due to cost control by the company.
Management commentary was also strong as they highlighted that the deal pipeline has improved significantly since March led by cloud-related services.
Management guidance of 1.5-2.5 percent QoQ growth in revenue in constant currency terms for the rest of the year also provides comfort.
At the current price, the stock is trading at a significant discount to the other large-cap IT companies like Infosys and TCS and offers value at the current levels given market leader status in Infrastructure management.
Analyst: Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities
The stock continues to offer a good combination of inexpensive valuations, healthy dividend yield, promise of solid long term growth in FMCG and emerging agri-business.
Strong traction in the food and hygiene portfolio should help improve base-line growth in FMCG.
The cigarette business getting back to close to normative volume levels by the end of Q1FY21 dismisses concerns of behavioural changes in tobacco consumption due to extended lockdowns.
The stock trades at an inexpensive valuation of 15 times on FY22E as compared to the sector average of 34 times.
"We expect RoE to inch up to 22 percent in FY22 which will be closer to the industry average of nearly 23 percent. The high dividend payout policy makes the dividend yield attractive at nearly 5 percent," said the analyst.
Indian Oil Corporation | Target: Rs 110
The analyst expects elevated marketing margins on auto fuels to offset the ongoing weakness in refining margins.
Even though IOC is far bigger than BPCL in terms of sales and net profit, it trades at more than 40 percent discount to the latter in terms of P/E and EV/ EBITDA, the analyst pointed out.
"We have a buy rating on the stock noting attractive valuations at 6.2 times FY22E EPS and a healthy dividend yield of nearly 5 percent. We expect the stock to get-rerated as and when BPCL divestment goes through," said the analyst.
The standalone business enjoys very high predictability of cash flows and profitability (more than 20 percent return of equity).
The analyst expects EPS to grow by 9.9 percent in FY21 and by 14.8 percent in FY22.
High operating cash flows leads to healthy free cash flow generation for the company.
The stock trades at a PE of 5 times on FY22E and 0.54 times on FY22E book value.
"We have a fair value of Rs 820, with the results for Q1FY21 further strengthening our investment thesis on stability of regulated business, moderating losses from new distribution circles and improving utilisation for Dhariwal," said the analyst.
Jindal Steel & Power (JSPL) | Target: Rs 280
Domestic steel price uptrend continues in September 2020 with prices now up by Rs 5,500/ton (up 16 percent) since June 2020 lows.
China’s stimulus and relative absence from export markets are supporting steel prices globally.
Spot steel margins are back to FY19 levels and should sustain in the coming quarters.
The combination of strong international iron ore and weak coking coal prices is ideal for Indian steel producers as they benefit from discounted domestic iron ore prices.
The analyst expects domestic steel industry utilisation to improve over the next 2-3 years led by limited capacity additions.
JSPL management has guided for 15 percent volume growth in FY21.
The company expects to conclude the Oman divestment in near future. The deal would reduce JSPL’s net debt by Rs 6,000-6,500 crore or by 17 percent and reduce net debt/EBITDA to 3.4 times from 3.9 times for FY21E.
Further, it would reduce concerns on lumpy debt repayments in FY21E.
"JSPL is our preferred pick in the steel sector due to better balance sheet, higher growth, strong FCF generation and attractive 4.8 times EV/EBITDA on FY22E. We expect JSPL’s EPS to go up from Rs 12.8 in FY21E to Rs 20.4 in FY22E," said the analyst.
Analyst: Siddharth Sedani, Vice President, Equity Advisory, Anand Rathi Shares and Stock Brokers
Hindustan Unilever (HUL) | Target price: Rs 2,452
HUL is the largest FMCG company with one of the largest footprints in terms of products and distribution networks.
Continued focus on strategy to target volume growth and decline in material and other costs should drive outperformance in both growth and profitability in the medium to long-term.
Bharti airtel | Target: Rs 625
With gradual easing pressure related to AGR dues, reduced competition, revenue market share gain and decent network capacity compared to peers, the analyst believes that Bharti Airtel remains well-placed for long-term growth in the telecom space.
The company intends to drive growth through the development of quality products at affordable prices.
The analyst believes the company remains well-positioned for growth given its strength in ORS and ophthalmic product portfolios, strong R&D, focus on new product launches, tapping new markets and healthy financials.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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