Moneycontrol
May 11, 2018 04:21 PM IST | Source: Moneycontrol.com

Facing Karnataka poll blues? 10 stocks that could return up to 47% return in 1 year

On the market front, volatility is expected to rise on D-Street and investors could make use of this volatility by buying into quality stocks on declines.

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The Sensex rose marginally in May, ahead of a few crucial companies declaring their earnings for the March quarter, as well as the upcoming Karnataka assembly election.

Investment bank UBS said in a report that investors will consider the outcome of the Karnataka election (voting on May 12; results on May 15) to be a near-term indicator of sentiment on the political front.

As for the market, volatility is seen rising on D-Street and investors could use this volatility to buy quality stocks as and when they correct or dip.

India VIX, after some consolidation around 12, has steadily risen to over 14. Experts fear that it is likely to rise more as the Karnataka election draws closer. Volatility and price move in opposite directions.

"Going forward, we expect the Nifty to form a strong base in the broader range of 10,500–10,750 and eventually move out of the upper band of consolidation (10,750) to head towards 10,950 levels," Dharmesh Shah, Head Technical, AVP at ICICI Direct.com Research told Moneycontrol.

"We expect the index to continue with its base formation in the broader range of 10,750-10,500 in the near-term, with stock specific activity remaining in focus amid elevated volatility as we approach the upcoming Karnataka elections," he said.

Here are 10 stocks recommended by different brokerages that could return up to 47 percent:

Dewan Housing Finance: Accumulate| Target: Rs730| Return 17%

Angel Broking maintains a buy rating on Dewan Housing Finance with a 12-month target price of Rs 730. The domestic brokerage firm is of the view that DHFL’s loan book is expected to report 23 percent loan growth over next two-three years, led by an increase in demand.

It expects the company’s loan growth to remain 23 percent over the next two years and earnings growth is likely to be more than 28 percent.

Safari Industries: Buy| Target: Rs 720| Return 14%

Angel Broking maintains a buy rating on Safari Industries with a target price of Rs 720. Safari Industries Ltd (Safari) is the third largest branded player in the Indian luggage industry.

Post the management change in 2012, Safari has grown its revenue by 6x in the last 7 years. This has been achieved by foraying in many new categories like the backpack, school bags (via the acquisition of Genius and Genie) and improvement in distribution networks.

The domestic brokerage firm expects its revenue to grow by 23 percent CAGR over FY2017-20E on the back of growth in its recently introduced new products.

HSIL: Buy| Target: Rs 510| Return 33%

Angel Broking maintains a buy rating on HSIL with a target price of Rs 510. HSIL Limited (HSIL) is an Indian company, which offers sanitaryware products, faucets and glass bottles.

The company has entered into new segments like consumer, pipes and caps and closures which will drive the further growth. The brokerage firm expects HSIL to report a net revenue CAGR of 12 percent to Rs 2,905 crore over FY2017-20E.

On the bottom-line front, Angel Broking expects CAGR of 15 percent to Rs 154 crore over FY2017-20E owing to improvement in operating margins.

Siyaram Silk Mills: Buy| Target: Rs 851| Return 29%

Angel Broking maintains a buy rating on Siyaram Silk Mills (SSML) with a target price of Rs603. SSML has strong brands which cater to premium as well as popular mass segments of the market. Further, SSML entered the ladies' salwar kameez and ethnic wear segment.

Going forward, Angel Broking expects SSML to report a net sales CAGR of 12 percent to Rs 1,981 crore and adj.net profit CAGR of 16 percent to Rs 123 crore over FY2017-19E on the back of market leadership in blended fabrics, strong brand building, wide distribution channel, strong presence in tier II and tier III cities and emphasis on latest designs and affordable pricing points.

Maruti Suzuki : Buy| Target Rs 10,619| Return 21%

Angel Broking maintains a buy rating on Maruti Suzuki India Ltd with a target price of Rs10,619. The Automobile sector is expected to benefit from the GST implementation. The sector has seen a pick up in the volumes in FY17 as there were several positive factors like a normal monsoon and lower interest rates.

Due to the favorable business mix, the company has also been seeing improvement in the margins. The company has already moved from ~11-12 percent EBITDA margin range in FY14 to current 17 percent margin range in 2QFY18.

Together with higher operating leverage at Gujarat plant, increasing Nexa outlets, and improving business mix, Angel Broking believe that company has further room to improve its margins.

Bharat Electronics : BUY| Target Rs180| Return 35%

Sharekhan maintains a buy rating on Bharat Electronics with a 12-month target price of Rs 180. The stock price of Bharat Electronics Limited (BEL) has corrected sharply by 22 percent over the past three months due to earnings contraction in Q3FY2018 and delay in order booking.

At the end of Q3FY2018, the total order book of BEL stood at Rs. 40,469 crore, up 20 percent y-o-y. The margins are expected to taper off in FY2019E but would pick up in FY2020. BEL continues to remain our preferred pick in the domestic defence play.

IRB Infrastructure Developers : BUY| Target Rs 270| Return 4%

Sharekhan maintains a buy rating on IRB Infrastructure with a 12-month target price of Rs 270. Honorable CBI Judge at Pune Court has discharged the charge sheet, which has come as a major relief for IRB Infrastructure.

IRB Infrastructure bagged projects worth Rs. 8,908 crore during March 2018, thus improving its bill-to-book ratio.

ZEE Entertainment Enterprises: Buy| Target: Rs 680| Return 15%

Sharekhan maintains a buy rating on ZEE Entertainment Enterprises with a target price of Rs 680. The newly launched Indian OTT platform has the competency to become one of the leading digital content providers to the semi-urban/rural Hindi and regional market.

The success of its OTT platform can be measured depending on its execution, the success of its original content and strategies to enhance its market share in the digital space.

Sharekhan expects strong ad revenue growth for Q4FY2018, while margins are expected to witness pressure due to the launch of ZEE.

Petronet LNG: Buy| Target Rs 320| Return 47%

Sharekhan maintains a buy rating on Petronet LNG with a target price of Rs 320. Petroleum and Natural Gas Regulatory Board issued draft regulations for establishment and operation of LNG terminals.

The draft regulations will have a neutral impact on Petronet LNG as the regulation does not talk about regulating re-gas tariffs.

Sharekhan believes that the long-term volume growth outlook of PLNG remains robust and hence, maintain our Buy rating on the stock with unchanged target price of Rs. 320.

Cipla: Buy| Target Rs685| Return 16%

Sharekhan maintains a buy rating on Cipla with a target price of Rs 685. The formulation plant of Cipla Ltd (Cipla) at Indore was inspected by USFDA during April 02-13, 2018.

The pharma regulatory body issued Form 483 with three observations, which Cipla has said are not critical. Though the news is sentimentally negative as yet another facility gets Form 483, but the fact that none of the observations are repetitive, critical or data related is a big relief.

Sharekhan expects the company to report sales growth of 10.5 percent during the Q4FY2018E and maintain our Buy rating with unchanged price target (PT) of Rs. 685.

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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