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Last Updated : May 06, 2019 11:36 AM IST | Source: Moneycontrol.com

D-Street's focus is on growth; 12 stocks to buy ahead of election outcome

SBI and L&T among top stocks to buy ahead of the Lok Sabha polling outcome

Kshitij Anand @kshanand
 
 
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As we enter the fifth phase of elections, the countdown has already begun for the election verdict due on May 23.

What matters the most to the D-Street is growth.

Manifestoes (released earlier) of both national political parties - BJP and Congress - have that aspect covered. Analysts gave a rating of 4 out of 5 to BJP manifesto while a 3 out of 5 to the Congress'.

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“We give 4 Points to BJP a clear win according to D-Street. While our view for Congress remains on 3 Points. A progressive economy is always on top of any political party's manifesto, but on the front of maintaining sustainable growth in the long term is clearly triggered by BJP, because in the long run, we need good governance with a full mandate to strictly take decisions on every front,” Manish Yadav, Head of Research, CapitalAim told Moneycontrol.

“While Congress is not contesting election for the full mandate. Manifesto of Congress is no doubt economically maintained but on the distribution side, it announced Rs 72,000 yearly (Nyay Yojna) to poor, this will impact the economy in the long run,” he said.

Rajiv Ranjan Singh, CEO stock broking, Karvy, said, “While both parties make a number of promises, implementation is another matter. We will restrict ourselves to rating both of them based on market impact.”

“Promises made by both parties will have to face up to the reality of the fiscal situation. Both parties have made promises to simplify GST, and also to enact policies to help farmers, improve ease of doing business, improve infrastructure, as well as make changes to direct taxes,” said Ranjan.

Here is a list of 12 stocks which investors can look at buying ahead of elections:

Analyst: Vineeta Sharma, Head of Research, Narnolia Financial Advisors

State Bank of India:

The assets quality has been improving with the declining stress additions. For FY20, the management expects slippages to decline to Rs 24k-30k crore.

The net interest margins (NIMs) has been on improving trend led by lower slippages and supported by large low-cost deposits franchise.

The management aims for a 3 percent NIM in a year’s time. On the growth front, advances have picked up to the industry level growth which seems to be the key positive for the bank. SBI has approved capital raising plans of Rs 20000 crore in the year FY20.

Larsen & Toubro:

There is a strong order book of Rs 2,95,000 crore with an order inflow of Rs 55,000 crore at the end of March quarter. The company has laid down audacious target of order inflow of 10-12 percent with revenue guidance of 12-15 percent.

The working capital is aimed at getting lower to 18 percent. Capacity Utilization of the country has improved to 74 percent.

Reaching close to 80-85 percent utilization will open avenues for increased CapEx in the country and L&T should be the key beneficiary.

ICICI Bank:

The bank has shown a strong turnaround on the asset quality front on account of decline in slippages as well as good traction in recovery and up-gradation.

Even the stress pool (BB & below) has declined and 93 percent of corporate slippages were from the stress pool. Provisioning coverage ratio (PCR) of the bank is 76 percent, which is the best among its peers.

Moderation in NPA addition, lower credit cost and improvement in margins will boost the profitability in FY20. The management targets consolidated ROE of 15 percent in the near term and will relook at the target once credit cost normalizes.

Bharat Electronics:

The company is likely to benefit from changes in Government policies and also increased thrust on defense spending going forward. BEL expects Rs 150 bn order intake in FY20.

Finalization of the Akash missile order is expected to post the CCS Committee approval. Margins are expected to remain stable.

There is an order backlog of Rs 484 billion (+19.6% YoY) at end-3QFY19, which provides strong revenue visibility. The company is currently trading at 11times FY21E EPS.

Marico:

Based on the consumption growth, we expect 7-8 percent volume growth in Marico. Gradual recovery in the volume of Saffola is expected on the back of focused communication while Parachute Rigid and VAHO to lead the domestic volume growth backed by improvement in demand scenario (rural& urban) and new launches.

Tailwinds in terms of lower copra prices and premiumization will help in margin improvement, going forward.

Analyst: Rusmik Oza, Head of Fundamental Research, Kotak Securities Ltd.

KEC International:

Given a strong backlog (Rs. 184 Bn in 9MFY19), KEC can reach the upper end of 12-15 percent revenue growth guidance for FY19. Revenues are expected to grow from Rs. 100 Bn in FY18 to Rs. 139 Bn in FY20E

Leverage will reduce, led by payments received from Saudi Arabia, customer advances and a greater share of low-cost forex debt. The management expects to reduce interest cost to 2.1 percent of sales for 4QFY19, 2.7 percent for FY19 and 2.5% for FY20E.

L&T Infotech:

LTI growth momentum will likely sustain due to an excellent sales process reflecting in improved client metrics, a strong pipeline of large deals and strength of delivery.

The sales transformation that started two years ago has been refined further with multiple new strategies for new customer acquisition and large deal conversion

LTI has strong capabilities in multiple areas of digital across verticals. The success of digital initiatives such as analytics and digital in every account contributes to strong digital revenues

Surya Roshni:

The company has a business interest in two areas: Lighting and steel pipes. In FY18, 72 percent of revenue came from Steel Pipes and 28 percent from lighting business (led by LED).

In the Steel Pipe, segment company derives 70% of its sales through B2C format (through hardware stores). Company’s distribution network includes 250 dealers & 21,000 retailers.

We project 18.7 percent CAGR between FY18-20 in consolidated profits from Rs. 1.08 bn in FY18 to Rs. 1.5 bn in FY20E. Expect stock re-rating as and when lighting & steel pipe business gets demerged.

JK Paper:

JK Paper is a leader in India's copier paper segment (market share of 23%) & second-largest in the coated paper segment (market share of 12%).

Captive procurement of raw material (52%), lower logistics cost and increase in average realization in a rising global cost curve scenario are expected to support margins.

The acquisition of Sirpur unit and brownfield expansion plan of 200KT in Gujarat is expected to strengthen the company’s position in terms of product offerings and help gain market share.

The imposition of anti-dumping duty on certain kinds of uncoated paper is expected to benefit the company.

Analyst: Rajiv Ranjan Singh, CEO stock broking, Karvy

Mahindra and Mahindra:

The company’s tractor business would benefit from a pick-up in the rural spending by the government, also a revival in auto sales is likely to benefit the company.

Tata Steel:

The Steel sector would be a beneficiary of demand from infrastructure as well as from a stabilization in the Chinese economy. Capacity addition in the form of acquisitions and capacity expansion should help the company take advantage of the increase in demand.

ITC:

We believe that the government will need to pay attention to the rural sector, which should help improve rural consumption.

Companies like ITC would benefit from this focus, in addition, there should be a recovery in consumption growth in urban areas. We expect the organized sector to continue to benefit on account of increased formalization of the economy.

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.
First Published on May 6, 2019 10:03 am
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