The S&P BSE Sensex slipped below its crucial support of 32,000, while the Nifty was hovering around its support of 9,950, which suggests that bears are still in control of markets.
It is a welcome decline seen in the market after one-way rally is seen in the past few months. Both indices have gone up by more than 20 percent each so far in 2017, but the maximum correction seen this year was around 2.5 percent.
There are a lot of investors who are still waiting on the sidelines to get into Indian market, which offers both growth comfort to investors.
The S&P BSE Sensex slipped over 700 points from its record high of 32,686 recorded in July and any further dips can be used to buy into quality stocks on declines.
“The current correction was also on expected lines as earnings revival has not seen so far, even Q1 earnings were a mixed bag,” Mahesh Patil, the Co-CIO of Birla Sun Life AMC said in an interview with CNBC-TV18.
He expects some correction in the near-to-short term, which could be 6-7 percent (that can be called healthy correction) but he is positive on market with long term perspective.
We have compiled a list of ten stocks which are smart buys based on results for the quarter ended June from different brokerage firms:
Mirza International: BUY| Target Rs 205| Return 32%
Centrum Wealth Research maintains a buy rating on Mirza International with a 12-month target price of Rs 205 (23x FY19E EPS).
The company posted a healthy 118 percent growth in the domestic footwear sales as Bond Street and Red Tape sports shoes each contributed 6 percent to revenues. Centrum expects this contribution to increase in H2FY18 as the company expands its distribution and supply network.
In addition, the research house also expects its online sales contribution of 25 percent to increase as the company sets up warehouses in Mumbai and Bengaluru. It increased domestic sales estimates considering strong demand across categories.
Centrum believes that branded footwear sales can over take unbranded sales by FY20. The key downside risks would be lower-than-expected demand in the export markets.
Capital First: BUY | Target: Rs 779 | Return: 15%
Centrum Wealth Research maintains a buy rating on Capital First with a 12-month target price of Rs205 (23x FY19E EPS).
Capital First (CFL) continued to report a good set of numbers with a net interest income growing 49 percent on a YoY basis on the back of AUM growth of 24 percent to Rs 21,410 crore as on June 30, 2017.
The pre-provisioning profit and net profit grew 49 percent and 36 percent, respectively. The AUM growth of 24 percent was largely driven by retail loans growing 30 percent YoY to a Rs19,881 crore.
Considering the strong track record, focus on growing high yielding retail business and improving asset quality, Centrum believes that the stock will continue to attract higher valuation.
IOC: BUY| Target Rs505| Return 22%
Credit Suisse maintained an outperform rating on IOC with a 12-month target price of Rs 505. IOC on their earnings call suggested core GRM was US$6.4/bbl lower than our calculation of US$7.7/bbl. The difference is due to the impact of the fortnightly price lag, and management's number is a better reflection of underlying profitability.
IOC has upgraded their model for: (1) 20% stronger GRMs (ex-Paradip), (2) stronger marketing margins, (3) PnL GST impact (risk weighing it by 50%), (4) USDINR of 65. FY18/19E EPS increases 3/4%.
Greaves Cotton: BUY| Target Rs190| Return 21%
Sharekhan maintains a buy rating on Greaves Cotton with a 12-month target price of Rs 190. Greaves Cotton Limited (GCL) reported weak results for Q1FY2018 as subdued automotive volumes and higher input costs dragged PAT.
Improved macroeconomic scenario, new product introductions and price hikes could result in improved revenue and margins going forward. Sharekhan expects GCL to report double-digit earnings growth over FY2017-FY2019.
Relaxo Footwears: BUY| Target Rs560| Return 15%
Sharekhan maintains a buy rating on Relaxo Footwears with a target price of Rs 560. For Q1FY2018, Relaxo Footwears Limited’s (Relaxo) revenue grew by 19.8 percent on a YoY basis to Rs 490.5 crore.
The company witnessed increased volumes across all product categories and geographies. Gross margin contracted by 476BPS YoY to 53.4%, mainly led by higher rubber prices. Going ahead (in H2FY2018), gross margin is expected to remain stable due to benign input prices and change in revenue mix.
Apollo Tyres: BUY| Target Rs 315| Return 12%
ICICIdirect maintains a buy rating on Apollo Tyres (ATL) with a target of Rs 315. ATL is investing in more diversified, rapid growth areas coupled with a larger scale of business in coming years.
Further, the management expects demand to recover, going forward. Thus, ICICIdirect maintains a buy rating, valuing ATL at 13x FY19E EPS to arrive at a target price of Rs 315.
Tata Steel: BUY| Target Rs 720| Return 17%
Edelweiss maintains a buy rating on Tata Steel with a target price of Rs 720. Tata Steel’s (TSL) Q1FY18 EBITDA, at Rs 49.7 bn, surpassed consensus estimates owing to EBITDA beat in both domestic and Tata Steel Europe (TSE) operations and forex gain of Rs 5.4 bn in other subsidiaries.
Edelweiss remains upbeat on the stock as 1) consolidated EBITDA/t is likely to sustain at Rs 8,000-8,500 on a higher share of domestic shipments and improved profitability in TSE post restructuring; 2) better probability of resolution of pension liabilities, and 3) Rs 40-45bn free cash flow accretion over FY18-19.
Arvind: BUY| Target Rs 493| Return 30%
Edelweiss maintains a buy rating on Arvind with a target of Rs 493. Arvind's Q1FY18 revenue, at Rs 24.8 bn, grew by strong 18 percent on a YoY basis driven by 40 percent YoY growth in Brand & Retail (B&R), positively impacted by the consolidation of Tommy Hilfiger and Calvin Klein joint venture (JV).
Excluding this, revenue growth was still strong at 21 percent YoY with LTL growth of Power Brands/Unlimited coming in at 18%/39%.
Textile was stable with revenue growing 9 percent YoY and margins improving QoQ. Despite challenges, Arvind maintained its annual guidance and is on track to achieve it.
Sobha Ltd: BUY| Target Rs 425| Return 11%
Edelweiss maintains a buy rating on Sobha with a target of Rs 425. In Q1FY18, Sobha’s earnings beat analyst estimates, new sales were highest in past 9 quarters, collections were strong and net gearing fell QoQ.
Going ahead, brokerage firm expects the company’s operations to scale up in view of the steady execution of ongoing projects and likely uptick in Bangalore residential demand driven by strong office space leasing in past few years coupled with better affordability.
It has a well-diversified land bank, quality management and earns steady cash flows from the contractual business. Preference for organised players post RERA and tax incentives for affordable housing should provide tailwinds.
Nagarjuna Construction: BUY| Target Rs121| Return 35%
Edelweiss maintains a buy recommendation on Nagarjuna Construction with a target price of Rs 121. Nagarjuna Construction (NCC) reported 6 percent YoY top-line growth for Q1FY18 to Rs 20.1 billion. With EBITDA margin declining 20 bps YoY, adjusted PAT at Rs 510 million dipped 2.5 percent on a YoY basis.
The big positive was the surge in order intake to Rs 60 bn, which boosted order book to Rs 220 bn and book-to-bill to 2.5x (2.1x as at FY17 end). Going ahead, Edelweiss believes improving public sector capex will drive NCC’s order book higher, which is key to stock performance.
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