3 hot stock picks from Geojit Financial Services

Here are stocks recommendations from Geojit Financial Services:

Havells India

Rating: Accumulate CMP: Rs500 TP: Rs555

Havells India Ltd (HAVL) is a leading player in electrical consumer goods in India. Its key verticals include switchgears, cables & wires, lighting fixtures and consumer appliances.

Overall revenue grew by 22% YoY, however revenue growth (excluding Lloyd) was modest at 4% YoY due to extension of GST overhang. EBITDA margin (excluding Lloyd) improved by 180bps YoY to 15.8% due to inventory gain & cost rationalisation.

PAT grew by 20% YoY, (excluding Lloyd) grew by 9% YoY. Given higher GST rates and sharp increase in commodity prices, we expect that the near term demand headwinds likely to be extended in coming quarters also. However, we expect growth to normalise as GST impact fades. Despite this we factor earnings to grow at robust 20% CAGR over FY17-19E.

Amara Raja Batteries

Rating: Accumulate CMP: Rs787 TP: Rs886

Amara Raja Batteries (ARBL) is India’s second largest Lead-acid battery manufacturer. Its segment includes automotive and industrial lead acid batteries, with market leadership in Telecom segment.

ARBL's Q2FY18 revenue grew by 7%YoY which was largely driven by automotive segment (~60% of the revenue) but industrial segment remained subdued. EBITDA margin declined in Q2FY18 due to increase in lead price, but is being addressed by price hikes and effective cost strategies.

ARBL should continue to be preferred supplier to OEM due to its excellent track record & robust capex plan. We expect revenue to grow at a CAGR of 15% over FY17-19E due to normalization of business in the industrial segment and higher auto sales. We value the stock at 24x on FY19E EPS.

Jyothy Laboratories

Rating: Buy CMP: Rs368 TP: Rs388

Jyothy Laboratories (JLL) is an Indian FMCG player with products across Fabric care, Dishwashing, Mosquito repellents & Personal Care.

JLL reported a revenue growth of 10%YoY and 90bps YoY expansion in EBITDA margin for Q2FY18 on GST comparable basis. Revenue growth was led by dishwashing segment (12% YoY), while the largest segment -Fabric care (4% YoY) was impacted by muted growth in Ujala (0.4% YoY) due to GST led disruptions.

German FMCG major Henkel has not exercised the option to buy 26% equity in JLL, but mutually exploring other possibilities to work together. We expect healthy pickup in revenue across the segments as GST led headwinds recede.