Geojit Financial Services recommends the following stocks:
Ujjivan Financial Services Ltd Rating: Buy
Ujjivan Financial Services is the third largest NBFC microfinance (MFI) in India and is among the first group of companies to procure small finance bank (SFB) licence. Ujjivan has a network of 457 branches across 24 states.
Small finance bank (SFB) licence opens up long-term growth opportunities through larger ticket size loans, new products and deposit mobilization. Ujjivan’s prospective business model provides long-term growth visibility, though earnings may witness medium-term headwinds post demonetization and transition to SFB. Microfinance will continue to drive loan growth in the next two years, while individual loans, new products & high ticket size loans in SFB business would be future growth triggers. Loan growth is expected to grow at a healthy 25 percent CAGR over FY17-19E.
Bharat Electronics Ltd Rating: Buy
Bharat Electronics (BEL) is a Navaratna enterprise having 37 percent market share in Indian Defence Electronics. BEL’s core capabilities are in radar & weapons systems, defence communication & electronic warfare.
BEL will emerge as key beneficiary from on-going defence modernisation programmes & GoI focus on indigenisation. Order inflow in Q4FY17 grew by 172 percent YoY to Rs 10,000 crore. The current order backlog of Rs 40,000 crore is 5.3x FY17 sales, which has significantly improved the earnings outlook. We factor order book to grow at 15 percent CAGR, consequently earnings is expected to grow by 14 percent CAGR over FY17-FY19E. We value BEL at P/E of 22x on FY19E on improved order inflow outlook.
Finolex Cables Ltd Rating: Hold
Finolex Cables (FCL) is India's largest manufacturer of electrical (85 percent of revenue) and telecommunication cables (9 percent). FCL has a wide distribution network with a high brand recall.
The GST rate for cables & wire has been kept at higher slab 28 percent from 18 percent earlier, which is expected to impact near term volumes. Further, there is possibility of near term pressure on EBITDA margins due to higher GST rate & increase in copper prices. However, FCL’s current focus is to expand its products portfolio, retail penetration and high brand recall is expected to drive future growth. We have a 'hold' rating on the stock.
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