Kshitij Anand Moneycontrol News
The momentum which propelled the Nifty50 to reclaim Mount 31K, up 17 percent so far in the year 2017 could well slow down, but there will be plenty of stock specific action.
The index is languishing in a narrow range and most of the stocks have already corrected in double digits in the past 10 days. Hence, if there is a dip, analysts advise investors to pick up quality stocks which have a good fundamental story.
Most experts have a target of 32,000 – 33,000 on the S&P BSE Sensex which translates into an upside of about 5 percent. Investors will be better off staying with stocks which can outperform markets by a wide margin.
“Well, our target is based on fiscal year ending (March). We have a base target of 33,000 for Sensex as on March 2018, which is a marginal return of 5% from the current level,” Vinod Nair, Head of Research, Geojit Financial Services told Moneycontrol.
“This target is based on one year forward P/E of 17.5x assuming that valuation will continue to be on the upper end led by earnings growth. We have a Sensex EPS CAGR of 15% for FY17-19,” he said.
Here is a list of top 10 stocks which investors can look at on dips for a minimum period of 12 months
Dr Reddy's Labs: BUY| Target Rs3280| Return 22%
CLSA maintains a buy rating on Dr Reddy’s Laboratories with a 12-month target price of Rs 3280. The Asia-focused broker said the company expects continued progress on regulatory compliance in FY18.
According to research house, the company can file & launch complex drugs in the US that can drive operating leverage. It has maintained its buy call on the stock, with a target price of Rs 3,280. It feels biosimilars will drive scale-up in emerging markets.
Shriram Transport Finance: BUY| Target Rs1159| Return 16%
Reliance Securities maintains a buy rating on Shriram Transport Finance (STFC) with a 12-month target price of Rs1,159. “We expect STFC’s operating environment would improve post completion of remonetisation process and implementation of BS-IV emission norms for vehicles and rollout of Goods & Services Tax (GST),” said the report.
Disbursements improved by 29.5 percent on a QoQ basis to Rs105.2bn in 4QFY17 as against Rs81.2bn in 3QFY17 primarily due to the revival of the demand post demonetisation.
Further, Government’s effort to revive growth in the infrastructure sector and rural economy in Budget 2017-18 augurs well for STFC. As overhang of demonetization is behind, we expect gradual improvement in performance over next few quarters and reiterate our BUY.
HDFC: BUY| Target Rs1786| Return 10%
Reliance Securities maintain a buy rating on HDFC with a target price of Rs1786. Over the last few years, HDFC Ltd has proven its competitive edge over its peers through decent growth in business, stable spreads, well-managed asset quality and better performance in other financial business subsidiaries.
“Visible sign of a pick-up in the demand for mortgage loan led by improving affordability, attractive incentive from PMAY scheme and introduction of RERA augur well for sustained growth in loan book for HDFC over next 3-5 years,” said the report.
The domestic brokerage firm expects further improvement in operating performance in coming quarters on the back of healthy net interest income (NII) growth and a listing of insurance arm.
Infosys: BUY| Target Rs1040| Return 10%
Reliance Securities maintains a buy rating on Infosys with a 12-month target price of Rs 1040. Infosys’ revenue rose by 0.7 percent QoQ in 4QFY17; a positive factor was the healthy 4.1 percent QoQ growth in the ECS vertical, with Communications & Services growing nearly 10 percent QoQ and accounting for nearly 10 percent of revenue, the highest proportion since 2QFY13.
“We expect automation benefits to start to reflect on margins. Reasonable valuation, a likely share buy-back, higher amount of cash return to shareholders and lowered street expectations provide a cushion,” said the report. The stock trades at a reasonable valuation of 13.4x FY19E EPS.
Maruti Suzuki India: BUY| Target Rs7900| Return 9%
Sharekhan maintains a buy rating on Maruti Suzuki with a target price of Rs7,900. Maruti Suzuki India Ltd (MSIL) has fast tracked production at the new Gujarat plant in wake of strong demand for the recent launches.
MSIL plans to produce 165,000-175,000 units in Gujarat in FY2018 as against earlier guidance of 125,000-130,000 units. Enhanced production at Gujarat will ease up the capacity constraints and enable MSIL to bring down the waiting periods on its models (Baleno, Brezza, Ertiga, Ignis and Dzire).
The domestic brokerage firm raised their FY2018 and FY2019 earnings estimates by 3 percent and 4 percent respectively given the increased production capacity.
Graphite India: BUY| Target 165| Return 15%
Centrum Broking Ltd initiated a coverage on Graphite India with a buy rating and a target price of Rs 165, as it sees earnings at an inflexion point with improved industry demand-supply outlook led by closures, consolidation and reduced Chinese exports of both steel & electrodes.
After several years of stagnation, Electric Arc Furnace (EAF) steel production is expected to grow at a CAGR of 4.6% during CY16-18E and drive incremental annual electrode demand of 60kt by CY18E.
“With recent commissioning of key technology up gradation projects providing an improved and flexible production base coupled with sharp improvement in gross profit/t, GIL is set to take a big leap in EBITDA/t over FY17-19E,” it said.
Manappuram Finance: BUY| Target Rs 113| Return 21%
HDFC Securities maintains a buy rating on Manappuram Finance (MFL) with a target price of Rs 113 and a time horizon of 2-3 quarters.
MFL has its re-aligned its gold loan portfolio and added shorter tenure loans of 3-6-9 months as compared to a single product offering of 12 months loan. It has also linked the product LTVs to the tenure of the loan thereby reducing its risk.
Earlier for a typical 12-month loan and LTV of 75 percent the total principal and interest at the end of the year was 93%. In the case of default, the company used to lose interest for 2 months during the auction period bringing the total cost to 96 percent.
The introduction of shorter duration of loans and linking the LTV to the tenure has resulted in a margin of safety for a 12-month loan increasing to 23 percent from 4 percent earlier.
Alkem Laboratories: BUY| Target Rs2161| Return 15%
Angel Broking maintains a buy rating on Alkem Laboratories with a target price of Rs 2161. Strong growth in domestic business due to its leadership in the acute therapeutic segment will help the company. Alkem expects to launch more products in the USA, which bodes for its international business.
Blue Star: BUY| Target Rs447| Return 7%
Angel Broking maintains a buy rating on Blue Star with a target price of Rs 447. Favourable outlook for the AC industry is likely to augur well for Cooling products business which is out pacing the market growth. EMPPAC division's profitability to improve once operating environment turns around.
Dewan Housing Finance: BUY| Target Rs520| Return 13%
Angel Broking maintains a buy rating on Dewan Housing Finance with a target price of Rs 520. The company’s focus on the low and medium income (LMI) consumer segment, the company has increased its presence in tier-II & III cities where the growth opportunity is immense.
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