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Last Updated : Dec 14, 2016 08:25 AM IST | Source: Moneycontrol.com

Loosen purse strings! 6 largecap stocks for high returns in 2017

CLSA has handpicked six stocks for 2017 to play consumption, value and earnings visibility. The brokerage firm believes slowdown due to demonetisation is unlikely to last materially beyond March 217 and the stocks fallen due to the scare offer good buying opportunities.

 
 
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Moneycontrol Bureau

Investors are busy stock picking as market braces to welcome a new year. The market has not fared so well in 2016 so far. Reeling under both global and domestic worries, both Sensex and Nifty are mildly up 2 and 3 percent respectively in year-to-date.


CLSA has handpicked six stocks for 2017 to play consumption, value and earnings visibility. The brokerage firm believes slowdown due to demonetisation is unlikely to last materially beyond March 217 and the stocks fallen due to the scare offer good buying opportunities.


“ITC, Maruti and Zee fall under this theme. ICICI and Vedanta fit well with the globally trending value theme and both benefit from stable to rising commodity prices. Power Grid is a solid stock that offers predictable earnings growth,” the brokerage firm says.

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So, here are 6 stocks to buy:


ITC

ITC’s 12 percent correction over last three months factors in most risks related to demonetisation as well as GST rate uncertainty. CLSA expects a steady improvement in cigarette volumes and model in 4-5 percent YoY growth in volumes from April 17 onwards. ITC’s valuations are reasonable at 26x one-year forward earnings, which is at almost one standard deviation below the past five-year average.

Maruti

CLSA sees 12 percent volume CAGR over FY17-19 driven by multiple new products, easing capacity constraints and demand normalisation post the demonetisation fall. It forecasts healthy 15 percent EPS CAGR over FY17-19 and see potential for faster earnings growth if the demonetisation impact is softer than expected. CLSA views Maruti as the best large-cap play on Indian discretionary consumption.

ICICI Bank

Completion of key asset sale transactions (JPA and Essar) should ease currently elevated stressed loans at 9 percent of total. It says core franchise remains strong, with a CASA ratio of 46 percent, highest in the sector. The stock is attractively priced, with valuations 30-50 percent below peers, it says.

Power Grid

CLSA forecasts a 50 percent rise in Power Grid’s regulated equity during FY16-19 which will not only accelerate earnings growth but also reduce the risk of equity dilution. The firm is well positioned to deliver a 14 percent EPS CAGR over FY17-19. “Stock looks inexpensive despite a 30 percent rally year-to-date (YTD) trading at PE and PB of 11.5x and 1.8x FY18CL respectively on over 16 percent return on earnings (RoE), lower than its long-term multiples,” it adds. 

Vedanta

 
According to CLSA, Vedanta will deliver strong volume growth over next two years driven by ramp-up of its new aluminum and power capacities. It feels Improving commodity price trends can lead to strong FCF generation which could turn Vedanta into a net cash company by FY19. It forecasts 32 percent earnings per share (EPS) CAGR over FY17-19. It has a target of Rs 300.

Posted by Nasrin Sultana
Follow @NasrinzStory



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First Published on Dec 13, 2016 12:27 pm
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