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Last Updated : Aug 17, 2017 02:56 PM IST | Source: Moneycontrol.com

Nifty eyes Mount 11K in next 12 months; top 15 stocks which could outperform index

We have collated a list of 12 stock from large and midcap space from various experts which are likely to outperform benchmark indices in the next 12 months.

 
 
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The Indian market is witnessed a slight dip in momentum earlier in the month of August when benchmark indices fell by about 3.5 percent but that has not changed the overall trend for market.

Analysts on D-Street do not see Nifty50 on steroids for the next 12 months but a return anywhere between 10-12 percent is something which can be on cards.

Market valuations look expensive when compared to long term averages but earnings recovery is likely to drive the next leg of the rally, suggest experts. Hence, investors will be better off investing in individual stocks which are likely to hog the limelight.

“Market Valuations appears expensive but only optically. Companies which are witnessing earnings growth are the ones which are appreciating in price,” Sahil Kapoor, Chief Market Strategist at Edelweiss Broking said.

“Price to Earnings multiples of Indian stocks have expanded to 18x. The next leg of the uptick is expected to be driven by revival in earnings,” he said.

Kapoor further added that the Nifty is likely to touch 11,500 in CY18 based on blended EPS growth of 15-20 percent over the next one year. The Nifty EPS FY17/18 – 535/645.

Investors should not get worried about intermediate dips because corrections are part of bulls markets which gives an opportunity to investors who were not able to buy at lower levels.

Investors should resist the urge to decrease their equity allocation on concerns of further erosion of wealth. Instead, investors should look at the future.

It is not possible to time market bottom or a market top but disciplined approach towards investing always creates wealth for investors.

The rise in global and domestic liquidity is likely to keep the momentum going for Indian markets and any dips should be used to average out your conviction stocks.

“The domestic flows are much more sustainable going forward and will help in stabilising the market. India is still a buy on dips market but investors need to moderate their return expectations keeping in view what the current CPI is and where the 10-Year bond yields are,” Mahesh Nandurkar, India Strategist, CLSA said in an interview with CNBC-TV18.

“With CPI of around 4-4.5 percent and Bond Yields at 6.5 percent or so, one should be happy with a return of 10-12 percent from equity markets which we think is likely in the next 12 months,” said Nandurkar.

We have collated a list of 15 stock from large and midcap space from various experts which are likely to outperform benchmark indices in the next 12 months. Investors can look at buying these stocks on dips:

Analyst: Alok Ranjan, Head of Research, Way2Wealth Brokers Pvt. Ltd.

Britannia Industries

While the environment has been challenging for the sector with the implementation of GST the company successfully weathered it with various initiatives that helped it to grow. The company is confident with its market strength and its strong product portfolio.

The company has outlined its focus areas to drive profitable growth in the future. With the GST rollout, the company will see some traction in the long-term as organised players see market share gains.

The company plans to launch a new category every year, and leverage on new technologies as well as geographies to drive growth. The biscuit & bakery space is seeing a shift from the value segment towards the premium segment and we believe Britannia is well poised for riding this wave. The company is in investment mode to drive future growth.

Mahindra & Mahindra

The company expects tractor industry growth of 12 percent YoY in FY2018E. The company had launched a new 24 HP tractor Jivo in April 2017, which is designed particularly for horticulture applications and will launch a completely new platform under Swaraj brand in FY2018E.

In the utility vehicle segment, the company will launch a new MPV (code named U321) in 2HFY18; and another new product based on SsangYong’s Tivoli platform in FY2019E.The company has strong growth plans in farm equipment globally over the next five years.

Farm equipment revenues from overseas markets account for 35 percent of overall segmental revenues for the consolidated entity; M&M is targeting to increase this to 50 percent over the next three years.

The company’s recent acquisition of a stake in Mitsubishi Agriculture Machinery, Sampo in Finland and Hisarlar in Turkey will help the company increase its addressable market size and presence in global markets.

Analyst: D K Aggarwal, Chairman, and MD, SMC Investments and Advisors Ltd

Bharat Electronics

Government’s greater emphasis on ‘Make in India’ initiative in Defence sector provides a great opportunity for the Company to enhance its indigenisation efforts and to address the opportunities in Indian Defence sector.

Healthy order book and orders in the pipeline, capacity enhancements and creation of new test facilities help the company in achieving the targeted growth and also would continue to drive the growth in the coming 4 to 5 years.

Hindustan Zinc

The company is focusing on value-added products such as die cast alloys in zinc and value-added products in silver. Management expressed confidence that in the next 3-5 years, all zinc slabs will be rolled into valued-added products.

Moreover, it would maintain operational growth over the next few years as it executes the next phase of growth, which will enhance global market share in zinc, lead, and silver.

South Indian Bank

The Bank has been focusing on various Retail segments such as Agriculture, MSME, Home Loans and Auto Loans have registered substantial growth YoY.

Business performance of the bank such as domestic loan growth, overall corporate advances, retail loan growth, CASA ratios are continuously improving. Moreover, the Bank would focus on fully leveraging existing resources and infrastructure.

Larsen and Turbo

The Company continues to focus on profitable execution of the large Order Book, selective order picking, on-time deliveries & operational excellence through digitalization.

The management is also emphasizing on cost competitiveness, continuous optimization of working capital, restructuring of its business portfolio and value creation with an aim to enhance its Return on Equity.

Implementation of GST is expected to have far reaching effects by bringing large parts of the informal economy into the formal system where compliance and accountability standards are of a higher order.

Engineers India

The company 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.

Analyst: Dinesh Rohira, Founder & CEO, 5nance.com

Pidilite Industries

With over 70 per cent in market share in India, Pidilite Industries is one of the dominant players in adhesive and industrial chemical segment. Its major segments, consumer & bazaar a specialty industrial chemical have grown at a CAGR of about 15 per cent in last 5 years on a standalone basis.

Despite sluggish revenue growth reported in the last two-quarter, it is expected to see a turnaround in business with the implementation of GST. Being under organized segment, the GST expected to uproot unorganized segment which hampered the business.

Indo Count Industries

With its competitive advantage over peers due to surplus cotton status coupled with favourable cost dynamic and skilled labour advantage, Indo Count Industries Limited has forayed into new product segment & geographical presence.

The company is an India-based home textile company engaged in the activity of manufacture of textile products involved in the manufacture of bedding, quilts, pillows, etc… including blended cotton.

Ultratech Cement

Ultratech Cement is engaged in the business of cement that cater to construction needs from foundation to finish. The Company focuses on various areas and it has over 10 integrated cement units which are expected to expand further across geographic.

The acquisition of Jaypee Cement plant in June is expected to further boost its presence which is aligned with government’s infrastructure reforms. The company reported a favour double digit growth in June quarter with net profit rising at 15.1 per cent.

With its new wave expansion mode in the pipeline, the company is excepted to create a huge brand, innovation as a major market player.

Hindustan Unilever

The Indian economy driven by consumption theme than spending in the recent period is expected to continue for a longer duration. With the smooth rollout of GST coupled with above average monsoon, it is expected to further boost the consumption story in Indian economy.

Hindustan Unilever engaged in consumer goods comprising of home & personal care, foods and refreshment and its geographic presence across the different segment, the changing regime strongly favours its business proposition in longer duration.

Edelweiss Securities:

Maharashtra Seamless

Based on exploration activities in hand, ONGC and OIL are expected to raise capex per year to INR 35,000cr for FY18E/FY19E compared to INR 25-30,000cr in FY14-17. Correspondingly, demand for carbon/alloys (OCTG) seamless pipes used in drilling oil and gas is expected to be closer to 8-9 lakh tpa compared to 6-7 lakh tpa during FY13-16.

Edelweiss values MSL (ex investments) at a previous upcycle 2-year forward average EV/EBIDTA of 7x, to arrive at a target price of Rs439/share. Successful deployment of oil rig assets may trigger further upside to the stock price.

Ratnamani Metals & Tubes

Ratnamani Metals & Tubes Ltd (RMTL), currently has an ongoing investment of Rs350cr with an objective to enhance its leadership in the stainless steel (SS) tubes/pipes segment.

This new capacity will enable RMTL to capture the significant opportunity emerging from the government’s policy of encouraging imports substitution and preferring domestic suppliers over imports in PSU contracts particularly in sectors such as oil and gas, defence, aerospace, nuclear energy — an opportunity valued at least at Rs 1,000-1,500cr beyond its present market of Rs1,500cr pa.

In the past decade, RMTL has consistently posted RoCE of 20 percent, which we believe can be grown to 23 percent in FY20E as the current demand leads to improved realizations. Edelweiss recommends a ‘BUY’on the stock with a target price of Rs954/share.

GIC Housing Finance

GIC Housing Finance (GICHFL) is a well capitalised retail HFC with over 97 percent of loans financed to individuals and up to Rs15lakh loans constituting 50 percent of the loan book.

While housing loans account for 83 percent of loan book, balance are LAP. Company’ prefers to finance the salaried class, which forms 77 percent of the loan book.

We have projected loan book CAGR of 25 percent over FY16-19, while NII, operating profit and PAT are estimated to grow 24%, 26% and 27%, respectively

Trident

Commencing operations as a yarn player, the company has shifted to the higher margin home textile segment (71% of FY19E revenues vs 46% in FY16).

We envisage Trident’s EBITDA margin to increase due to the shift from a yarn manufacturer to the higher margin home textiles, improved performance from the paper division and increasing utilisation.

The stock trades at an inexpensive valuation of 8x FY19E P/E inspite of improving financials and a leadership position in home textiles and branded copier paper.

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 decision.

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First Published on Aug 17, 2017 08:40 am
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