The easing geopolitical tensions between the US and Iran, and expectations of signing of phase one trade deal by the US and China this week lifted the sentiment on the Street. Infosys' robust earnings further boosted the the IT pack, and benchmark indices hit fresh record high on January 13.
The Nifty has rallied more than 15 percent to cross psychological 12,300 levels while the Nifty Midcap has surged nearly 14 percent from the day of corporate tax cut announcement in September 2019.
The Street expects more sops in the Union Budget 2020 scheduled to be presented on February 1.
All these positive triggers made the investors overlook the weak economic signs and rising inflation.
Experts expect the momentum to continue in coming quarters with a healthy correction.
"Though inflation is likely to bounce much above the RBI's comfort level, market is buoyant due to positive expectation on the Union Budget & possible improvement in the trajectory of earnings growth as per the Q3FY20 preview," Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.
"IT has provided a good start to the season and FIIs are maintaining its risk-on strategy with positive inflows in Emerging Market, expecting no hike in US Fed rate and improvement in EMs economies during CY2020," he said.
Ajit Mishra, VP - Research at Religare Broking expects stock specific activity will be on a higher side in coming days.
Moneycontrol collated 14 stocks where brokerages initiated coverage in January with a buy call. They are expected to give 15-44 percent return in the next 12-18 months.
Apollo Hospitals Enterprises: Buy | Target: Rs 1,755 | Return: 18 percent
Stewart & Mackertich has initiated coverage on Apollo Hospitals with a buy rating, citing no major capex cycle, increase in capacity utilisation, reduction in promoter pledge and pharmacy restructuring.
Apollo Hospitals has emerged as Asia's foremost integrated healthcare services provider and has a robust presence across the healthcare ecosystem, including Hospitals, Pharmacies, Primary Care & Diagnostic
Clinics and several Retail Health models, the brokerage said, adding as the nation's first corporate hospital, Apollo Hospitals is acclaimed for pioneering the private healthcare revolution in the country.
The research firm valued the stock at 15x FY22E EV/EBITDA to arrive at a target price of Rs 1,755.
The Anup Engineering: Buy | Target: Rs 668 | Return: 27 percent
PhillipCapital has initiated coverage with a buy call and target price of Rs 668 on the stock as it has a potential of re-rating based on promising outlook and strong operating performance.
Based on existing environment and management's focused approach, the brokerage expects topline to grow by CAGR of 21.5 percent for next 3 years (against 33 percent CAGR growth expected by the company).
"We like the company due to demerger which acted as a catalyst to participate in an emerging opportunity, robust operating performance, its aspiration to reach Rs 1,000 crore revenue over next 5 years, strong opening order book and green field plant expansion," said the research firm in its note on January 9.
"The Anup has started FY20 on very strong order book of Rs 300 crore, executable over next 3-4 quarters, management is confident of 30 percent revenue growth in FY20," the brokerage said.
Security and Intelligence Services: Buy | Target: Rs 1,190 | Return: 17 percent
Axis Direct has initiated coverage with a buy call on Security and Intelligence Services and target price of Rs 1,190, implying 21 percent potential upside from current levels.
It cited expanding India security services, increasing demand for security services in Australia, strong foot prints of facility management services, rising demand for cash logistics services and robust infrastructure and superior technology driven process.
Security and Intelligence Services (SIS) is a leading security services company in India and Australia with leadership positions in cash logistics and facility management services. SIS operates mainly into four segment areas viz. Security Services – India, Security Services – International, Facility management and Cash Logistics services.
Hawkins Cooker: Buy | Target: Rs 4,353 | Return: 16 percent
Angel Broking initiated coverage on Hawkins Cooker (HCL) with a buy recommendation and target price of Rs 4,353 as it forecast HCL to report healthy topline CAGR of around 14 percent to Rs 976 crore over FY19-22E on the back of government initiatives, new product launches, strong brand name and wide distribution network.
On the bottomline front (reported PAT), the brokerage estimates around 23 percent CAGR to Rs 100 crore due to strong revenue and operating margin improvement (on the back of correction in raw material prices).
Neuland Laboratories: Buy | Target: Rs 663 | Return: 41 percent
BP Equities initiated coverage on the stock and recommended buy rating with a target price of Rs 663 per share. With a washout in FY18 and growth resumption in FY19, the brokerage believes that the CMP (down 45 percent from 52-week high) offers an attractive opportunity for investors to time an entry.
It foresees 13.8 percent revenue CAGR, 744bps margin expansion and 73.2 percent growth in earnings over FY19-22. "The balance of portfolio among high value and high volume products will help it clock a faster growth in earnings. We believe the stock will see a gradual re-rating on the back of stronger products pipeline and improved return ratios."
While generic API manufacturing remains the pillar of NLL’s overall business, the ramp-up in the CMS segment (API CRAMS); especially given the fertile product opportunities (like Bilastine and Peptide product) is expected to drive next phase of growth going forward, according to the brokerage which believes NLL will continue to strengthen its balance sheet with strong operating cash flow generation of Rs 245 crore over FY19-22.
Orient Electric: Buy | Target: Rs 240 | Return: 24 percent
SPA Securities initiated coverage with a buy call and target price of Rs 240 on Orient Electric (OEL), a strong #2 player in domestic fans market & largest exporter of fans from India.
With focus on premium segment, OEL dominates this segment with around 50 percent market share. Lighting and domestic appliances are other product categories where OEL is present.
Orient Electric is a part of the diversified CK Birla Group & is a distinguished name in the consumer electrical space. The company got demerged from Orient Paper & Industries 2 years back.
Relatively younger profile of businesses other than fans & focus on innovative and premiumised product categories enables it to outperform peers in terms of topline growth as well as gross margins, said the brokerage which estimates revenue & PAT CAGR of 19 & 25 percent respectively during FY19-22.
Axis Bank: Buy | Target: Rs 902 | Return: 22 percent
Anand Rathi initiated coverage on Axis Bank with a buy rating and a target price of Rs 902 per share.
Considering the improving asset quality trends and strategy focus, the bank is well poised to deliver consistently with improving return ratios, said the brokerage.
The management has given the guidance that they expect their loan book to grow at 5-7 percent faster than the industry growth rate and that credit costs would revert to long term average. On margins front, management has given the guidance that Net Interest Margin (NIM) for FY20 to be higher than NIM in FY19 and also reiterated their medium term range of 3.5-3.8 percent on NIM. Management also aims to bring operating expenses to assets down to around 2 percent with the intention of achieving an overall return on equity (RoE) of 18 percent.
Axis bank has delivered strong double digit growth in advances as well as deposits in the past.
Avenue Supermarts: Buy | Target: Rs 2,200 | Return: 15 percent
Ambit has initiated coverage on D-Mart operator with a buy rating and target price of Rs 2,200.
"D-Mart posted 35 percent EBITDA CAGR in FY14-20 versus less than 20 percent by leading peers. RoCE of around 20 percent consistently beats peer average. This justifies 40 percent premium over Titan and other consumption names. Even if DMart's 1-year forward P/E de-rates 50 percent, exit multiple of 27x will drive 12 percent stock CAGR in the next 10 years on 23 percent EPS CAGR. Entry into cash & carry could drive further upside," said the brokerage.
Ambit feels longevity of efficient retailers like DMart is under-appreciated in India.
"DMart’s investments in building leadership talent, distress in real estate prices and opening itself to leasing model would gradually accelerate store expansion. Valuations of 68x/54x FY21/FY22 EPS will fade quickly as earnings compound 23 percent over next decade," it added.
Arvind: Buy | Target: Rs 56 | Return: 26 percent
Going forward Sushil Finance believes that the revival of the denims business and the capex that has been incurred for the garments business will provide considerable growth to the textiles business segment.
In addition to the textile business, advance materials business also provides strong growth prospects to the company, said the brokerage which valued the company at 5.5X its FY21 EPS and arrived at a target price of Rs 56 which makes it a buy with an investment horizon of 15-17 Months.
Transport Corporation of India: Buy | Target: Rs 355 | Return: 31 percent
TCI being one of the fastest growing logistics service providers is a likely beneficiary of Government initiatives like GST implementation, Bharatmala & Sagarmala Pariyojana etc, said SKP Securities, adding the company is well positioned to capitalize on the growing market opportunities due to better business mix because of its focus on value added business, leading to improvement in operating efficiencies, better margins and higher return ratios.
The brokerage has valued TCI on SOTP basis and recommended a buy on the stock with a target price of Rs 355 in 18 months.
Mishra Dhatu Nigam: Buy | Target: Rs 242 | Return: 44 percent
Mishra Dhatu Nigam (Midhani) is an super alloy and titanium alloy manufacturer, catering to the very niche segment of maraging/super alloy steel segment in India.
"Increase in Indian space expenditure budget has been one of the key tailwinds for MIDHANI. Significant expenditure budget CAGR towards space (15.8 percent CAGR over the past six years), joint product development with Indian Space Research Organisation (ISRO) for strategically important materials, relatively small scale of operations, all tilt the risk reward in favour of MIDHANI," said ICICI Securities.
The research house initiated coverage on the stock with a buy rating and a target price of Rs 242 per share. Sudden drop in space contract inflow/execution is the key risk to the call, it said.
RITES: Buy | Target: Rs 370 | Return: 20 percent
Anand Rathi said considering the company's impressive performance over the years, strong order book, sound financials, decent execution capabilities and favourable industry traits, it believes that the company is well positioned for long term growth.
The brokerage initiated coverage on the company with a buy rating and a target price of Rs 370 per share.
RITES has a very healthy order book which is led by consultancy and turnkey segments, contributing to around 42 percent and 40 percent respectively. It has negligible borrowings and aims to maintain a similar level of debt in the next 3-5 years.
Coromandel International: Buy | Target: Rs 656 | Return: 21 percent
Coromandel's PAT is expected to grow by at a CAGR of 17 percent over FY19-FY22 on the back of increase in the share of unique grade phosphatic fertilizers and lower raw material cost, said Geojit, adding the better-than-expected rainfall in company's home markets of Andhra Pradesh and Telangana are expected to improve volumes in the coming quarters this year.
It feels EBITDA margins are expected to expand by 250 bps by FY22 as raw material costs are expected to decline due to backward integration. The brokerage initiated coverage valuing Coromandel at 16x on FY22E EPS with a target price of Rs 656 and recommend to buy.
State Bank of India: Buy | Target: Rs 456 | Return: 38 percent
State Bank of India realising its mammoth size, trims operational inefficiencies and competes aggressively with private peers to boost its returns.
Forseeing the bank's vast recoveries going ahead, increasing home loans, xpress credit and personal loan growth along with the corporate tax rate cuts and significant liquidity in hand for core business growth, Arihant Capital initiated coverage on SBI with a buy recommendation and target price of Rs 456.
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