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Last Updated : Dec 13, 2019 01:01 PM IST | Source: Moneycontrol.com

Market in consolidation, brokerages bet on these 10 stocks for 10-60% return

Rising food prices have pushed retail inflation in November to a three-year high of 5.54 percent.

 
 
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The market witnessed consolidation during the week, staying in the 11,800-12,000 range ahead of the release of domestic data, including CPI and IIP numbers, the UK election and the US-China tariff deadline.

Rising food prices pushed the retail inflation in November to over three-year high of 5.54 percent, while the industrial sector output contracted third month in a row by 3.8 percent in October against a 4.3 percent contraction in September.

In the UK, British Prime Minister Boris Johnson on December 13 was on course to a big win that would deliver a swift Brexit.

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The US Federal Reserve, two days earlier, held interest rates steady in the range of 1.5 percent to 1.7 percent.

"The bulls were active in the trade and pushed the index higher towards the resistance zone. If bulls manage to push the Nifty beyond 12,050 and close above it, the current consolidation is likely to end," said Manav Chopra, CMT, Head Research-Equity, Indiabulls Ventures.

"Till the mentioned zone is not breached on the upside, the index continues to remain in the consolidation phase between 11,700-12,000 zone."

Moneycontrol has collated a list of 10 stocks that brokerages expect will return 10-60 percent on the closing price of December 12:

Aurobindo Pharma | Brokerage: Geojit Financial Services | Target: Rs 492 | LTP: Rs 447 | Upside: 10 percent

The research house expects the pharma company to continue its steady performance in FY20E and post strong EPS growth of 21.3% year on year (YoY) in FY21E. Near-term catalysts include strong pipeline, Sandoz deal closure and potential approvals from USFDA.

The company received seven observations from USFDA in October and 14 after the inspection of its injectable manufacturing facility in Hyderabad the next month.

In Q2FY20, the company filed 20 abbreviated new drug applications (ANDAs), including two for injectable products. The company also launched 10 products, including three injectables, and received final approval for three ANDAs.

Larsen and Toubro | Brokerage: Motilal Oswal | Target: Rs 1,680 | LTP: Rs 1,279 | Upside: 31 percent

The broking house cut core E&C EPS estimates by 1.5%/3.4% for FY20/FY21, incorporating lower order inflow and revenue growth assumption.

It also lowered target P/E multiple on core business to 20x from 22x on account of macro uncertainties.

The company's order book growth has been led by the hydrocarbon segment (+85% YoY) and the power segment (+63%), while the infrastructure space declined 1% YoY.

Motilal Oswal expects order inflow to rebound next year to 8.8%. The outlook for the hydrocarbon segment remains strong, with some large-ticket orders in the pipeline. The power segment may see opportunities arising from FGD orders.

INOX Leisure | Brokerage: Sharekhan | Target: Rs 415 | LTP: Rs 365 | Upside: 13 percent

Sharekhan remains positive on INOX Leisure as it has a strong balance sheet (net-debt free) along with a healthy cash-flow generation profile. Its treasury shares (Rs 158 crore at current market price) along with non-core assets (valued at Rs 350 crore) represent around 14 percent of its current market capitalisation.

The management reiterated its target of adding 70 screens (27 added till date) for FY2020E. The company has signed agreements with the real estate developers to add 900 screens in the coming years, with an average of 80-90 screens per year from FY2021E.

The management says a major part of the expansion will be funded through internal accruals.

DCB Bank | Brokerage: Reliance Securities | Target: Rs 230 | LTP: Rs 174| Upside: 32 percent

Even as the recent loan growth has been muted (12-13% YoY over the last two quarters), the bank has been doubling its loan book every 3-3½ years, and management expects the momentum to continue.

The company’s niche presence among self-employed individuals and low formal financing penetration in the segment should aid its growth trajectory.

With branch expansion drive done with, the brokerage expects an improvement in cost to income ratio to aid profitability, with CI ratio expected to decline by 400 bps over the next two fiscals to 53%.

NTPC | Brokerage: Motilal Oswal | Target: Rs 164 | LTP: Rs 114 | Upside: 44 percent

The results of the Security Constrained Economic Dispatch (SCED) scheme have been encouraging. Total savings of R 3.1 billion were achieved for 3MFY20.

According to CERC, 50% of these savings will be shared with generators. Analysis suggests that NTPC’s share stands at Rs 1 billion for 3MFY20, implying an annual Rs 4 billion benefit for the company.

The CERC has directed that benefits within the SCED pool should be shared equally between the participating generators and DISCOMs.

Amber Enterprises | Brokerage: AnandRathi | Target: Rs 1,631 | LTP: Rs 1,015 | Upside: 60 percent

The brokerage expects 18% and 23% CAGRs over FY20-22 in revenue and PAT, respectively.

Amber Enterprises is the top pick because of high growth expected in room air-conditioners in FY20, increasing export potential through Japanese and Korean customers and robust order inflows for Sidwal, and growth potential in the railways and metro-rail categories.

The risks include unseasonal rains, a prolonged winter and a slowdown in Sidwal’s pace of project execution.

Blue Star | Brokerage: AnandRathi | Target: Rs 1,147 | LTP: Rs 790 | Upside: 45 percent

The company is well placed to increase returns over FY20-FY22 because of its ideal position in room-ACs, where it enjoys a 12.5% market share and booking of orders of Rs 17.6 billion, up 22% YoY, leading to a Rs 29.4 billion order book, seeing revenue growth in its project business.

Unseasonal rain and prolonged winters, slowdown in order inflows and project execution are key risks.

Jindal Steel & Power | Brokerage: ICICI Securities | Target: Rs 215 | LTP: Rs 142 | Upside: 51 percent

The company’s net debt in Q2FY20 stood at Rs 361 billion (versus Rs 376 billion in Q1FY20). The company has been able to deliver Rs 5 bn-10 billion per quarter, depending on the working capital intensity and the same remains the sole investment thesis of the company.

Inability to source coal over the longer run and consequent increase in leverage can cause JSPL to forego the benefit of lower fixed costs. This remains the biggest risk to JSPL’s business model.

Jubilant FoodWorks | Brokerage: ICICI Securities | Target: Rs 1,850 | LTP: Rs 1,601 | Upside: 15 percent

Jubilant FoodWorks pays a lower commission versus other restaurants and this could potentially change as the company's looks to expand in new cities.

One comfort for the company is the difference in penetration in primarily smaller cities, which would have a lower average spend, limiting the impact. Also, the potential entry of Amazon in food delivery could result in increased competition among food aggregators, tipping the scales back in the company’s favour.

At a target price of Rs 1,850, the stock will trade at 42x P/E Sep-21E. Key risks include pressure on margins from new-store expansion.

Tata Motors | Brokerage: Motilal Oswal | Target: Rs 195 | LTP: Rs 173 | Upside: 12 percent

The stock trades at 13.7x FY21E consolidated EPS and 0.8x P/B. The brokerage maintains a buy rating, with a target price of Rs 195 per share (Sep’21 SOTP-based).

JLR’s wholesale volumes declined by 2.4% YoY to 48.1 k units in November.

JLR’s retail volumes declined 3.4% YoY in November, as the recovery in China (+29%) and North America (+5%) was offset by the fall in the UK (-11%), Europe (-17%) and RoW (-17%).

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Dec 13, 2019 01:01 pm
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