Top 7 Diwali picks: AnandRathi bets on HDFC & Bajaj Corp

AnandRathi has come out with its report on top Diwali picks.

Swaraj Engines: With additional capacity expected to be on-stream by Dec’12, and on expectations of a tractor-cycle recovery in FY14, Swaraj stands to benefit. It operates at a near negative working-capital cycle, is debt free, and would see good earnings growth in the next 2-3 years. Our price target of the stock is Rs. 527 based on 8.5x FY15e EPS of 62 (in line with the last five-year median). Bayer Cropscience: With new product is expected to be launched in FY 14-FY 15, we believe company is building strong platform for sustainable growth in future. Bayer Corp (Parent) is focusing on cost rationalization globally which will be reflected in Indian subsidiary too. We strongly believe stock price is much undervalued vis a vis growth potential. Our FY 14 target value of the stock is 1402 based on 9.5 EV/EBIDTA (median of last 7 years). Bajaj Corp: Most of the FMCG companies are quoting around 20-25x for FY 15 PE multiple. However Bajaj Cor. is attractively valued in-spite of its attractive growth. We valued the stock at 18x for FY15 earning 20% discount to sector median P/E. We value the stock at Rs. 247, at a target PE of 18x FY15e earnings. GMDC: In PE term stock is quoting at 8.5x FY15E EPS of Rs 24.7 and 9.5x FY14E EPS of Rs 22.1. We see the price target of Rs. 264 based on FY 15, EPS. (Value based on 5 years median PE multiple.) Karur Vysya Bank:  At the current price of Rs. 468, the stock trades at a PABV of 1.18 x for FY15e and 1.40x for FY14e. Our target price of Rs. 574 is based on target P/ABV of 1.45 for FY 15 ABV. HDFC: At the current price of Rs. 793, the stock trades at a PBV of 3.4x for FY15e and 3.9x for FY14e. Our target price of Rs. 947 is based on target P/BV of 4.10 for FY 15 BV.( last 3 years Average.) Havells India: We strongly believe over medium term (3-4 years) company valuation multiple will also improve. As of now co. is treated as player in capital good segment hence commands lower multiple. We expect the stock is ready for re-reating. We valued the company at 16x for FY 15 which gives our target price of Rs. 715. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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. To read the full report click on the attachment

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