Kshitij Anand Moneycontrol News
Indian market climbed a wall of worries with respect to geopolitical concerns, earnings growth, weak macro triggers and is on track to hit fresh record highs.
Markets are driven by massive liquidity from domestic investors as well as the optimism of a double digit earnings growth which could well start reflecting in the numbers of India Inc. in the next two quarters.
We are in a bull market and there will be an intermittent correction but any dips, if any, should be used as an opportunity to buy into quality stocks, suggest experts.
"This is a bull market and, therefore, we continue to be a buyer, especially on any dips, albeit we expect a moderation in returns in the months ahead. Midcap valuations look stretched. Additionally, stocks of some high-quality companies look rich too." Ridham Desai of Morgan Stanley said in a note.
"Cyclically adjusted valuations are now nudging 5-year highs, as is the market cap to GDP. Most other valuation metrics look reasonable, though valuations on their own - unless at extreme points - rarely give a clue of where stocks are heading," he said.
Desai further added that it doesn’t look like that the market is pricing in a multi-year growth cycle, implying meaningful upside potential to stocks over the next 3-5 years.
We have collated a list of top ten stocks which could create wealth for investors in long term. If investors hold them for 1 year they could give up to 37% return:
Brokerage firm: Angel Broking
Dewan Housing Finance: Accumulate| Target Rs 610| Return 10.5%
Backed by healthy capital adequacy and increasing demand for home loans DHFL’s loan book is expected to report 23 percent loan growth over next two three years.
Angel Broking expects the company’s loan growth to remain 23 percent over next two years and earnings growth is likely to be more than 28 percent. The stock currently trades at 1.8x FY2018E ABV.
Karur Vysya Bank: BUY| Target Rs 180| Return 19%
Karur Vysya Bank (KVB) had a fairly strong loan CAGR of 14.9 percent over FY11-17.However, FY17 was year of consolidation and loan book grew by only 4.7 percent.
The domestic brokerage firm expects loan growth to pick up to 11 percent over FY17-19. Deposit growth is expected at 9 percent during the period.
There were 25 bps improvements in NIM during FY17, with a share of CASA growing and cost of fund coming down NIM is expected to improve further going ahead.
Angel Broking expects KVB to post a strong loan book and earnings CAGR of 11 percent & 22 percent over FY2017-19E. The stock currently trades at 1.7x FY2019E ABV.
TV Today Network (TTNL): BUY| Target Rs 344| Return 30%
TTNL enjoys a strong viewership ranking in the Hindi and English news channel categories. The company’s Hindi news channel – Aaj Tak has maintained its market leadership position occupying the No.1 rank for several consecutive years in terms of viewership.
TTNL's English news channel - India Today has been continuously gaining viewership; it has now captured the No. 2 ranking from No. 4 earlier. Its other channels like Dilli Aaj Tak and Tez are also popular among viewers.
Angel Broking expects TTNL to report a net revenue CAGR of 9 percent to Rs727 crore and net profit CAGR of 13 percent to Rs121 crore over FY2017-19E.
KEI Industries: BUY| Target Rs371| Return 26%
KEI’s current order book (OB) stands at Rs 3,233 crore (segmental break-up: Rs 2,154cr in EPC, Rs667cr in Cable, Rs200cr in EHV, Rs49cr in Substation, rest in EPC L1 business). Its overseas business grew by 28 percent in the last 3 years due to strong order inflows from State Electricity Boards, Power grid, etc.
KEI’s export (FY17 – 8-10% of revenue) is expected to reach a level of 14% to 15% in the next two years with higher order execution from current OB of Rs180cr and participation in various international tenders worth Rs500cr.
We expect a strong 26 percent growth CAGR over FY2017-19 in exports. Angel Broking expects KEI to report net revenue CAGR of 14% to Rs 3,392 crore and net profit CAGR of 13 percent to Rs125 crore over FY2017-19E.
GIC Housing Finance: BUY| Target Rs655| Return 25%
Backed by the new management, GICHF is aiming for 2.0x growth in the loan book over the period of FY16-FY19E to Rs 16,000 crore. GICHF has healthy capital adequacy and is seeing an increase in demand for home loans.
GICHF’s loan book is expected to report 24.3% loan growth over next two year. Angel Broking expects the GICHF’s loan growth to grow at a CAGR of 24.3 percent over the next two years and RoA/RoE to improve from 1.7%/19.0% in FY17 to 2.0%/23.0% in FY19E. The stock is currently trading at 2.4x FY2019E ABV.
Brokerage Firm: SMC Global
Engineers India Ltd (EIL): BUY| Target Rs187| Return 18%
EIL has a healthy balance sheet and strong cash balance. The company is best placed to benefit from a revival in Oil & Gas capex, given its dominant position in the segment.
The company’s order inflows have improved in the last one-two years. The company has a healthy mix of domestic and overseas orders.
Thus, it is expected that the stock will see a price target of Rs.187 in 8 to 10 months’ time frame on a target P/E of 32.87x and FY18 (E) EPS of Rs.5.7.
Jain Irrigation Systems Ltd: BUY| Target Rs144| Return 37%
The company has a very good order book in hand, it has almost Rs.2,100 crore of orders, out of which close to Rs.1,300 crore are in Hi-Tech Agri Input division, about Rs.300 crore in the food division and about Rs.500 crore in the plastic division.
The company is looking at a quite significant revenue growth in India and outside. The management expects about 25 percent increase at the EBITDA level earnings and expect to maintain debt at the levels which achieved in FY17 and that is now reaching a comfortable post and that would allow to further reduce the interest cost, any stress on the balance sheet.
Thus, it is expected that the stock will see a price target of Rs.144 in 8 to 10 months’ time frame on a target P/E of 21x and FY18 (E) EPS of Rs.6.88.
Suprajit Engineering Ltd: BUY| Target Rs349| Return 22%
The company is the most preferred manufacturer of cables and meets the demand of virtually every major OEM in the automotive sector. It would more focus on cables in the export market for better positioning.
Steady demand from specific OEMs and the shoring up of control-cable growth in the auto and non-auto markets, exports and replacements would guide the further growth to the company.
According to the management, its profitability would improve in coming years as its capacity expansion and integration with the acquired companies is almost done. SMC expects the stock to see a price target of Rs 349 in 8 to 10 months’ time frame on a target P/E of 31.95x and FY18 (E) earnings of Rs.10.91.
Techno Electric & Engineering Ltd: BUY| Target Rs461| Return 29%
The management of the company is confident of the company’s potential to expand the EPC segment on the back of capex revival, led by PGCIL and SEBs, with strong visibility of traction in the order book and healthy revenue due to healthy trade receivables.
In FY18, the management has said that it would focus on the closure of projects, which it believes will prune retention money and improve working capital cycle.
Thus, it is expected that the company would see good growth going forward and the stock will see a price target of Rs.461 in 8 to 10 months’ time frame on a one-year average P/E of 22.34x and FY18 (E) earnings of Rs.20.63.
Arvind: BUY| Target Rs464| Return 13%
The company enjoys a global leadership position in textiles as well as Carries an unmatched domestic portfolio of apparel brands and retail formats.
Lower investments in brands and repositioning of Unlimited, management of the company expects the operating margin to improve in near term.
Company’s capability in manufacturing garments, coupled with its positioning of the most preferred franchise/distribution partner in India.
It is poised to benefit from an increase in demand for apparels, thus it is expected that the stock will see a price target of Rs.464 in 8 to 10 months’ time frame on three-year average P/E of 22.50x and FY18 (E) earnings of Rs.20.62.
Disclaimer: The views and investment tips expressed by investment experts 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.
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