Kshitij Anand Moneycontrol News
The mid & smallcap stocks came under pressure on Tuesday with some stocks correcting as much as 20 percent in intraday trade. The S&P BSE Midcap and Smallcap indices corrected over 2 percent compared to 0.5 percent fall in the Nifty50.
The fall in the mid and smallcap stocks was largely in line with expectations and investors should not get worried about the strength of the market. Instead, dips should be used to buy into quality stocks.
Many midcap companies were trading at valuations which some would term expensive; hence, some bit of consolidation was required. Investors should brace for some volatility in the broader market in near-term.
The fall was on expected lines. It is part of the regular bull market that we are going through. I don’t think there is any cause for worry, instead, it is time to get investors to get their shopping list out,” Sanjay Dutt, Director, Quantum Securities said in an interview with CNBC-TV18.
“The correction could last for some more time. I think 9,300-9400 on the Nifty50 should hold. A lot of people still have left out feeling and fresh money could start getting deployed at 9,200-9,300 levels,” he said.
We have collated a list of 10 stocks from different brokerage which investors can buy on dips for a minimum investment period of 12 months:
Brokerage Prabhudas Lilladher
Glenmark Pharma: BUY| Target Rs 974| Return 45%
The valuation of the company is severely impacted post tepid performance of Q4FY17 and it trades at a PER of 17x and 13x FY18E and FY19E earnings.
“We believe current valuation underestimates growth potential in core US portfolio, US$60-70m gZetia sales and gradual reduction in gross debt and overestimates multiple downside risks in ROW exposures,” said the Prabhudas Lilladher note. Nevertheless, domestic brokerage maintains buy with a target price of Rs974.
Indraprastha Gas Ltd: BUY| Target Rs 1,149| Return 16%
IGL is expected to report healthy volume growth over the medium term supported by the steady private vehicle and taxi conversion. Rising judicial activism in the light of increased pollution will make CNG the preferred fuel of choice.
Meanwhile, government focus to increase PNG penetration will increase domestic PNG volumes going forward. For 9MFY17, the overall volume growth is at 13 percent. Benign domestic gas prices along with soft spot LNG prices are to support volume growth over the medium term.
Jindal Steel & Power Ltd: BUY| Target Rs 180| Return 59%
Backed by rich value-added product portfolio in plates, RUBM, Rebar, MLSM; JSPL is best placed to exploit the demand from a turnkey oil refinery, windmill, railways, defense, and construction sector.
The stock trades at attractive valuations with P/B of 0.7x, EV/EBITDA of 6x and EV/T of US$710. The domestic brokerage firm values the stock at Rs180, valuing steel business at 6.5x FY19 and power operations (2,400MW) at Rs45m/MW.
JK Lakshmi Cement: BUY| Target Rs 625| Return 28%
JK Lakshmi cement (JKLC) is the 5th largest cement producer in North India with a ~7% market share in the region with a capacity of 6.6mtpa.
This backed by 1) one of the most efficient operations, 2) entry into the most profitable eastern region with a capacity of 2.7mtpa, and 3) increasing consolidation in Gujarat (40% of its total volumes) ranks JKLC as one of their top pick in the sector with a target of Rs625 at EV/EBITDA of 12x FY19E.
Sadbhav Engineering (SEL): BUY| Target Rs372| Return 17%
The stock is trading at core PE of 15.1x FY18E earnings. Prabhudas Lilladher continues to believe SEL will be the key beneficiary of strong outlook in road sector and improving outlook in Mining and Irrigation sector notwithstanding the current quarter's underperformance.
Healthy balance sheet and strong management continue to give us additional comfort. The brokerage firm expects the company to deliver 23 percent earning CAGR over FY16-18E.
Brokerage Name: Angel Broking
Alkem Laboratories: BUY| Target Rs 2257
Angel Broking maintains a buy recommendation on the stock with a target price of Rs2,257. Strong growth in domestic business due to its leadership in the acute therapeutic segment. Alkem expects to launch more products in the USA, which bodes for its international business, said the brokerage firm.
Dewan Housing Finance: BUY| Target Rs 520| Return 28%
Angel Broking maintains a buy recommendation on Dewan Housing with a target price of Rs 520. The company has a focus on the low and medium income (LMI) consumer segment. It has increased its presence in tier-II & III cities where the growth opportunity is immense.
Jagran Prakashan: BUY| Target Rs225| Return 23%
Angel Broking maintains a buy rating on Jagran Prakashan with a 12-month target price of Rs 225. Economic recovery is likely to have a favourable impact on advertising & circulation revenue growth.
Further, the acquisition of a radio business (Radio City) would also boost the company's revenue growth, said the Angel Broking report.
CESC: BUY| Target Rs 910| Return 7%
Edelweiss maintains a buy rating on CESC with a target price of Rs 910. CESC has demerged operations into 4 different business segments, namely generation, distribution, retail and IT & Mall.
While shareholding of the new entities would be similar to CESC’s, the demerger is a relatively logical split and one that seems fair to investors. It maintains the intrinsic value and potentially offers shareholders a more specific investment/play and some value/multiple enhancement.
“We believe the restructuring of business segments (demerger of generation, distribution, and retail) will reposition CESC in a manner where it will enhance focus on each business segment,” said the note.
Cholamandalam Invest & Finance: BUY| Target Rs 1140| Return 12%
Axis Securities maintains a buy recommendations on Cholamandalam (CIFC) with a 12-month target price of Rs 1140. CIFC is now a pan-India player with presence across 25 states via its over 700 branches and growing presence in Loan against property business (now 30% of AUM).
“We like CIFC’s diversified portfolio mix, expanding geographical presence and a balance between its Vehicle Finance and Home Equity business. While growth would be a key monitorable going ahead, we are not unduly worried on the asset quality front, given the management’s track record and conservative stance,” it said.
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