Valuations are now looking comparatively good compared to what they have been in a long time, Jashan Arora of Master Capital Services said.
With fears around coronavirus slowing down the global economy intensifying, the Indian market is losing ground.
The benchmark indices have fallen around 25 percent from the mid of February when the global markets realised the virus impact on China, followed by the spread of the virus to other parts of the world which made investors worry more.
If we compare the fall from record highs seen in January, the benchmark indices have lost nearly 28 percent now, while the Nifty Midcap index shed over 26 percent.
More than Rs 40 lakh crore worth of investor wealth has been eroded since the mid of February. Some experts feel it is 2008-kind of a situation as volatility is also quite high now and the market is reacting only to global cues.
Everyone on the Street agrees that no one can predict the top or bottom for the market, but given the quantum of fall in the market, valuations on all parameters look quite attractive and hence several quality stocks are available at a cheap price, experts feel.
"Now the valuations are comparatively looking good compared to what they have been in a long time. It is an excellent opportunity to start accumulating if you have money, invest some to it and wait for the markets to move from here," Jashan Arora, Director at Master Capital Services told Moneycontrol said.
Moneycontrol has collated a list of stocks that have been upgraded to a buy by brokerages in March.
These stocks could give 27-147 percent returns in the next one year. Returns are calculated based on the closing price of March 17.
Bajaj Auto: Buy | Target: Rs 3,100 | Return: 36 percent
Kotak Institutional Equities upgraded Bajaj Auto to buy (from reduce earlier) as valuations turn attractive given strong growth prospects in export markets.
"The domestic motorcycle segment forms only 10 percent of Bajaj Auto's EBITDA; hence impact on Bajaj Auto will be limited due to BS-VI transition. Export volume growth is strong currently and we built sufficient cushion in our numbers if oil prices remain depressed in the near term," said the brokerage.
Sobha: Buy | Target: Rs 465 | Return: 135 percent
Kotak upgraded Sobha to buy (from add) with a revised fair value estimate of Rs 465share (from Rs 515/share), saying the stock has corrected sharply over the past month, allowing sharp upside to revised fair value estimate.
"Current market price gives near no credit to the land bank of Rs26 bn that has traditionally been an area of debate for investors. In our view, concerns on promoter liquidity constraints are overplayed, and should be seen in the context of the purchase of stock by key management personnel over the past month," the brokerage said.
Lupin: Buy | Target: Rs 840 | Return: 36 percent
"The recent share price correction means that Lupin valuations reflect only domestic segment valuations, implying deep value and market's disappointments around the regulatory actions against its facilities as well as a lack of cost cuts, and implying no value to the US despite a strong pipeline build-out. However, we expect continued strong performance in India and EMs, and see levers for operating leverage starting with levo ramp from Q1FY21," said Kotak which upgraded the stock to buy.
Dalmia Bharat: Buy | Target: Rs 1,050 | Return: 93 percent
"Dalmia is progressing well to reach 37 mtpa capacity by FY2022E and would penetrate deeper into the West and East regions. With access to 20 states, Dalmia is no longer a regional player. Leverage is well controlled despite aggressive growth with net debt/EBITDA peaking at 1.7X in FY2020E," said Kotak which upgraded the stock to buy (from add) at an unchanged fair value of Rs 1,050.
The brokerage feels concerns on treasury appear overblown; resolution of the mutual fund case and divestment of IEX holding could trigger a re-rating. Valuations have corrected to an attractive 6X EV/EBITDA FY2022E, it said.
Bajaj Electricals: Buy | Target: Rs 500 | Return: 45 percent
JM Financial upgraded Bajaj Electricals to buy as it believes its risk-reward proposition has become attractive.
"Our thesis is based on the following: a) Bajaj Electricals' consumer business, whose performance has been strong in the past 3 quarters; it has the potential to improve margins and record a 15 percent CAGR in the medium term (robust distribution, impending rural recovery, etc.). b) its EPC business, which has been the biggest drag but should see some stability (despite expected losses for the next 2-3 quarters). c) Balance sheet improvement, led by a Rs 350 crore rights issue and collection of EPC receivables (significant reduction in interest costs)," said the brokerage which rolled forward with a March 2021 target of Rs 500 (earlier September 2020 of Rs 440) and upgrade the stock on the recent correction.
V-Mart: Buy | Target: Rs 2,700 | Return: 52 percent
Motilal Oswal upgraded V-Mart to buy as it stands to benefit from (a) its strong cost leadership at a time when regional players are facing pressure, (b) tailwinds from better monsoon and agricultural output and (c) low SSSG/margin base.
Also, the correction in the stock price from its peak in Aug’18 provides an attractive entry point, the brokerage feels.
Marico: Buy | Target: Rs 315 | Return: 27 percent
"After the requisite (albeit admittedly delayed) price action in its largest brand, Parachute (around 30 percent of sales), Marico's overall volume growth outlook appears relatively better than peers, barring HUVR and Nestle. Further, demand for brands like Parachute, Saffola, VAHO and youth products are unlikely to be significantly affected by the Coronavirus," said Motilal Oswal which upgraded the stock to buy with a target of Rs 315.
Trailing FY20 valuations of 32.2x FY20E EPS and FY21/FY22 valuations of 33.4x/27.5x FY22E respectively (much lower than 3-year/5-year/10-year average of 44.8x/42.7x/ 35.2x) offer potential for upside, it feels.
Hindalco Industries: Buy | Target: Rs 220 | Return: 91 percent
"Hindalco (HNDL) fell sharply, factoring in an unrealistic scenario of demand and price collapse due to Covid-19 virus outbreak. The fall overlooks the strong quality of Novelis and resilient domestic operations. Admittedly, the impending acquisition of Aleris would increase the debt by $2.6 billion. However, diversified product mix and improvement in spreads present a better earnings outlook for Aleris. Given the attractive valuations due to the fall in stock price, we upgrade Hindalco to buy with tp of Rs 220, EV/EBITDA of 6x FY21e," Prabhudas Lilladher said.
Apar Industries: Buy | Target: Rs 587 | Return: 90 percent
Prabhudas Lilladher recently met Kushal Desai, CMD-Apar Industries (APAR), to gain insights on company's growth strategy and industry outlook.
"We came out positive and believe that recent price correction factors in most of the negative's, such as a) weak economic environment, b) tight liquidity scenario and c) subdued demand. In our view, APAR continuous to remain a proxy play to government efforts of reviving the power sector as 75 percent of domestic revenues are linked to power infrastructure," the brokerage said.
Further, the company's focus towards value-added products would help de-risk itself from low margin traditional business and help them gain market share given its superior product quality, first-mover advantage, and strong brand positioning both internationality and domestically, it added.
Prabhudas Lilladher expects revenue/PAT CAGR of 6/13 percent over FY19-21E. "On account of change in revenue mix and factor in higher interest expense (despite lower guidance) we have reduced earnings estimates by 15.3/23.8 percent for FY21/FY22."
The brokerage upgraded the stock to buy from accumulate with a revised TP of Rs 587 (12x FY22E) given its global leadership position, robust prospects of value-added products, strong positioning across product categories and consistent dividend pay-out.
Vodafone Idea: Buy | Target: Rs 12 | Return: 147 percent
CLSA has upgraded the telecom operator rating to buy from sell and raised target to Rs 12 from Rs 3.50 per share as it believes risks are overdone.
"Adjusted gross revenue (AGR) dues will likely be 49 percent of ad-hoc provisions. Growth is set to accelerate, led by tariff hikes and cash EBITDA will triple by FY22. Market share in its top 10 circles is 1 ppt ahead of Bharti Airtel,' said the global brokerage.
It feels the company may even look to give up spectrum in its weak circles. "Funding need will be $2.3 billion including hefty spectrum payments from FY23."Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are his 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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