Consolidation likely in short term; these 5 stocks can give 21-38% return

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26 Aug, 2025 12:21

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The market started consolidation after recent sharp fall, as investors look for triggers after pricing in geopolitical tensions and Infosys crisis.

The Nifty continued to be trading in a tight range of around 9,800 level and every upside is used as an opportunity to book profits, which indicated that there could be more downside in near term, though fundamentals and long term structural bull run are intact.

Timothy Wong, MD and Head-Group Research at DBS said India looks interesting with long term perspective as some global investors are already overweight on India.

But valuations currently are high as lot of positives already priced in. Hence, some consolidation is likely in short term, he feels.

He said urbanisation and industrialisation led by foreign investment are two important structural growth drivers for India.

Geoffrey Dennis, Head-Global Emerging Market Strategy at UBS also said, "The market is in a modest consolidation phase, but I do not expect a major correction."

The research house is overweight on India amongst global emerging market portfolio, he said.

"We expect 12 percent earnings per share (EPS) growth in FY18 and 15 percent EPS growth in FY19 for India," Dennis said.

FIIs were net sellers in August as they sold more than Rs 10,000 crore worth of shares on global weakness, which dented market sentiment but domestic institutional investors continued to lend their support to the market as they bought more than Rs 11,000 crore of shares in current month.

Coal India | Rating Buy | Target Rs 300, CMP Rs 238 | Upside 26%

Coal India's recent performance has been uninspiring. Flat offtake, lowest fuel supply agreement (FSA) realisations since Q3FY12 despite prices hikes, and weak e-auction premia - all this has weighed on the numbers with LTM (last twelve months) EBITDA down 27 percent and adjusted PAT (ex-OBR provisions) down 25 percent YoY.

Coal offtake should improve hereon, given restocking demand from power plants. Third party sampling for 100 percent of its dispatches, lower taxation and continued discounts given to landed parity prices should ensure bottoming out of realisations.

CIL witnessed strong volumes over FY15-16, as it restocked power plants from five days (September-2014) to around 20 days (July-2015). Flattish power demand thereafter led to poor growth offtake. Current low stocks at CEA-monitored power plants (11 days) should help CIL revert to strong volume growth, some of which is already visible in its numbers (July volumes up 6.9 percent YoY).

FSA pricing has suffered (Q1FY18: Rs 1,201 per tonne, lowest since Q3FY12), primarily on account of grade slippages. Coal Controller downgraded 177 mines by 1-2 grades for FY17, and Q1FY18 numbers reflected the full impact of this. Further, around 100 percent third party sampling being done now should imply FSA prices bottoming out.

The switch to GST led to a reduction in taxation from around 12 percent to 5 percent. CIL may hike prices owing to this elbow room provided by lower GST rates. We have built in similar hikes for FY19, but they can be implemented sooner.

Dish TV | Rating Buy | Target Rs 105, CMP Rs 76 | Upside 38%

Dish TV, a pioneer in India's DTH (direct-to-home) space is coming off a phase of under-performance (-22 percent in three months). Its weak FY17 performance (EBITDA fell 5 percent) was in stark contrast with Videocon D2H and Airtel DTH (which posted EBITDA growth in the 20s). Persistently inferior subscriber stability and ARPU have undermined Dish TV's performance.

The upcoming merger with Videocon D2H holds significant cost rationalisation potential (Rs 470 crore by FY20, around 23.7 percent of FY17 EBITDA).

We initiated coverage with buy and a target price of Rs 105. Our positive view on Dish TV derives from its inexpensive valuations, synergies from the merger, DAS IV digitisation and GST. Further benefits can accrue from a license fee reduction and TRAI’s tariff order.

Ashoka Buildcon | Rating Buy | Target Rs 235, CMP Rs 184 | Upside 28%

Much needed execution push in Eastern peripheral, Kharar Ludhiana and JNPT road projects (cumulative Rs 300 crore revenue contribution) led to Q1FY18 revenue beat of 23.4 percent. This along with 77bps EBIDTA margins expansion (to 13.5 percent), lower depreciation (-8.2 percent YoY) and taxes, resulted in 101 percent YoY APAT growth.

ABL's Q1FY18 order book stood at Rs 6,430 crore with no new order wins. ABL has guided for Rs 2,600 crore of EPC revenue and Rs 5,000 crore of new order intake for FY18. EBIDTA margins are expected to be in 12-12.5 percent band. Roads bidding activity is expected to pickup from Q3FY18 with Mumbai-Nagpur, Vadodara Expressway and NHAI HAM projects being bid out.

Jharkhand-Chaas project execution (Rs 500 crore) is expected to start by October-17 whilst Islampur project (Rs 270 crore) may get terminated.

Sadbhav Engineering | Rating Buy | Target Rs 360, CMP Rs 267 | Upside 35%

Sadbhav Engineering reported robust Q1FY18 financial performance with reported PAT beat of 31 percent, led by strong revenue growth in transportation segment (47 percent YoY). Revenue is expected to ramp up further, as execution of three (out of seven) HAM projects has begun, one more projects will start contributing from Q2FY18 and the balance three by Q3FY18.

SEL's net debt has reduced to Rs 1,450 crore (-Rs 180 crore QoQ), owing to recovery from roads EPC/irrigation projects and receipt of two HAM projects mobilisation advance. Debtors reduced to Rs 1,510 crore (-Rs 160 crore QoQ) and are expected to decrease further in FY18 as the HAM project’s pick pace.

SEL has guided for Rs 6,000-7,000 crore of new orders during FY18. The balance sheet remains stable, with net debt-to-equity at 0.87x versus 0.98x during Q4FY17. SEL expects to reduce debt further by Rs 200 crore in second half of FY18.

Jamna Auto | Rating Buy | Target Rs 303, CMP Rs 251 | Upside 21%

Jamna Auto’s Q1FY18 performance came in below estimates, owing to lower volumes (-19 percent YoY). Surprisingly however, gross margin was stable inspite of high raw material costs, owing to a richer product mix (parabolics' share at 24 percent versus 22 percent in Q1FY17). JMNA has consistently outperformed the domestic commercial vehicle (CV) industry. Also, with facilities located in close proximity to OEM plants, JMNA not only cuts down logistics' costs, but also makes it tough for new entrants to garner business from these plants.

With a shift to higher tonnage vehicles, parabolic springs will be more in flavour, resulting in higher margins and realisations (parabolics’ ASP higher by 20 percent versus conventional). Once the short-term hiccups of the GST transition subside in Q2, we expect JMNA's presence in the aftermarket to expand (current differential of 20-25 percent in prices versus the unorganised players). We cut FY18/19 estimates by 5-9 percent, to factor in volume pressure in the domestic CV market in 1HFY18, and introduce FY20 estimates.

High return on capital employed, strong cash flow, industry leading growth and margin performance augur well for the long-term, coupled with a recovery expected in M&HCV demand from second half of FY18.

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