Webinar :Register now for webinar on 'Trade BankNifty in just 15 minutes a day' - By Asmita Patel

Slideshow | RIL, Tata Motors, ITC among 10 buying ideas that can return upto 46%

Here are 10 long-term plays on brokerages' radar
Jul 14, 2020 / 08:06 AM IST
On July 13 benchmark indices erased most of the intraday gains but ended on positive note helped by the IT, FMCG, metal and energy stocks. However, banking stocks remained under pressure.
After a strong opening, benchmark indices erased most intraday gains on July 13 but managed to end on a positive note backed by the IT, FMCG, metal and energy stocks. However, banking stocks remained under pressure.
Representative Image
Sadbhav Engineering | Brokerage: Sharekhan | Rating: Buy | Target: Rs 75 | LTP: Rs 51.20 | Upside: 46 percent | The company was affected by weak execution in the first nine months of FY2020, which is expected to improve from Q3 FY2021. The company has started to focus on bidding and execution of projects, which should aid in healthy earnings growth in FY2022. Sharekhan has revised FY2021 estimates downwards, factoring extended impact of COVID-19 on execution. Overall, the broking house expects the company to gradually return back to track with the execution of projects at an advanced stage and reduction in leverage.
Reliance Industries | Brokerage: Motilal Oswal | Rating: Buy | Target: Rs 2,000 | LTP: Rs | Upside: percent. Motilal Oswal believe the focus on the ‘oil-to-chemicals’ project would lead to huge potential upside from the standalone business. Considering the company would become a net debt free, broking house raised the multiple for refining and petrochemical from 6x to 7.5x. Consumption of petroleum products also appears to be normalizing. Making adjustments for the same, Motilal Oswal's valuation for refining and petrochemical increases from Rs 617/share to Rs 791/share. Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
Reliance Industries | Brokerage: Motilal Oswal | Rating: Buy | Target: Rs 2,000 | LTP: Rs 1,934 | Upside: 3 percent | Motilal Oswal believes the focus on the ‘oil-to-chemicals’ project would lead to huge potential upside from the standalone business. Considering the company would become net debt-free, the broking house raised the multiple for refining and petrochemical from 6x to 7.5x. Consumption of petroleum products also appears to be normalising. Making adjustments for the same, Motilal Oswal's valuation for refining and petrochemical increases from Rs 617/share to Rs 791/share. (Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.)
Bharat Electronics | Brokerage: AnandRathi | Rating: Buy | Target: Rs 120 | LTP: Rs | Upside: percent. For FY21, the company expects orders including EW Systems, avionics package for light combat aircraft and smart city business. Amid the COVID-19 crisis, broking house believe the company is likely to face short term challenges in terms of execution and order inflow. However over the medium to long term, the company remains well positioned for growth given its strong order book position, expertise in executing complex projects, healthy client base and cost reduction efforts. Also, the company should benefit from diversification initiatives as it remains focused on growing its non-defence business such as Homeland Security, Smart City, Space Electronics, Weather Radars, etc.
Bharat Electronics | Brokerage: AnandRathi | Rating: Buy | Target: Rs 120 | LTP: Rs 98.45 | Upside: 22 percent | For FY21, the company expects orders including EW Systems, avionics package for light combat aircraft and smart city business. Amid the COVID-19 crisis, the broking house believes the company is likely to face short term challenges in terms of execution and order inflow. However, over the medium to long term, the company remains well-positioned for growth given its strong order book position, expertise in executing complex projects, healthy client base and cost reduction efforts. Also, the company should benefit from diversification initiatives as it remains focused on growing its non-defence business such as Homeland Security, Smart City, Space Electronics, Weather Radars, etc.
JK Lakshmi Cement | Brokerage: Sharekhan | Rating: Buy | Target: Rs 372 | LTP: Rs | Upside: percent. The cement industry in general and JK Lakshmi Cement in particular have been affected by COVID-19-led demand disruptions in the near term. However, company, like other cement players, has started improving capacity utilisation. Broking house expect cement demand to start getting better from Q3FY2021 onwards with healthy bounce-back during FY2022. It expect company's cement sales volumes to clock a 12% CAGR over FY2021E-FY2023E.
JK Lakshmi Cement | Brokerage: Sharekhan | Rating: Buy | Target: Rs 372 | LTP: Rs 284 | Upside: 31 percent | The cement industry in general and JK Lakshmi Cement, in particular, have been affected by COVID-19-led demand disruptions in the near term. However, the company, like other cement players, has started improving capacity utilisation. Broking house expects cement demand to start getting better from Q3 FY2021 onwards with healthy bounce-back during FY2022. It expect the company's cement sales volumes to clock a 12 percent CAGR over FY2021E-FY2023E.
South Indian Bank | Brokerage: Prabhidas Lilladher | Rating: Buy | Target: Rs 11 | LTP: Rs | Upside: percent. Earnings of Rs 817 million (PLe: Rs 488 mn) was better than expected on lower provisions and better treasury income. NII growth was muted at 10% YoY but was largely in-line with expectations, while other income was helped by better treasury income but fees were down 9% YoY/20% QoQ. Provisioning levels came off to trends levels but continued to help improvement in PCR with asset quality being marginally better.
South Indian Bank | Brokerage: Prabhidas Lilladher | Rating: Buy | Target: Rs 11 | LTP: Rs 7.82 | Upside: 40 percent | Earnings of Rs 817 million (PLe: Rs 488 mn) was better than expected on lower provisions and better treasury income. NII growth was muted at 10 percent YoY but was largely in-line with expectations, while other income was helped by better treasury income but fees were down 9% YoY/20% QoQ. Provisioning levels came off to trends levels but continued to help improvement in PCR with asset quality being marginally better.
Ashok Leyland | Brokerage: Geojit | Rating: Buy | Target: Rs 59 | LTP: Rs | Upside: percent. Geojit lower its revenue & PAT estimate to factor in subdued demand in the near term. However any significant policy action from the government will spur the demand. Broking house believe that the short term headwinds has been factored in the stock price and not expecting any meaningful decline as the volume numbers are currently running at 5 years low.
Ashok Leyland | Brokerage: Geojit | Rating: Buy | Target: Rs 59 | LTP: Rs 50.80 | Upside: 16 percent. Geojit lowered its revenue & PAT estimate to factor in subdued demand in the near term. However, any significant policy action from the government will spur the demand. The broking house believes that the short-term headwinds has been factored in the stock price and is not expecting any meaningful decline as the volume numbers are currently running at a 5 year low.
Inox Leisure | Brokerage: AnandRathi | Rating: Buy | Target: Rs 292 | LTP: Rs | Upside: percent. While movie exhibitors will suffer in the short term and the pace of recovery will be slower, AnandRathi believe they will rebound and gain from pentup demand as home-sheltering subsides and people seek a communal experience on return of normalcy. Broking house structurally positive on multiplexes, though wary of their re-opening. However, risks include high contingent liabilities (company-specific), poor content, gradual mall development, and closed cinemas.
Inox Leisure | Brokerage: AnandRathi | Rating: Buy | Target: Rs 292 | LTP: Rs 227 | Upside: 28 percent | While movie exhibitors will suffer in the short-term and the pace of recovery will be slower, AnandRathi believes they will rebound and gain from pent-up demand as home-sheltering subsides and people seek a communal experience on the return of normalcy. Broking house structurally positive on multiplexes, though wary of their re-opening. However, risks include high contingent liabilities (company-specific), poor content, gradual mall development, and closed cinemas.
 Tata Motors | Brokerage: Motilal Oswal | Rating: Buy | Target: Rs 126 | LTP: Rs | Upside: percent. Over 95% of JLR’s retailers worldwide have totally/partially restarted their operations by now; moreover, all of the company’s plants have resumed manufacturing, with the exception of the Castle Bromwich facility, which would gradually start up again in August. Post the resumption of operations, the Range Rover Sport, the new Range Rover Evoque, and the Land Rover Discovery Sport emerged as the bestselling vehicles.
Tata Motors | Brokerage: Motilal Oswal | Rating: Buy | Target: Rs 126 | LTP: Rs 108 | Upside: 17 percent | Over 95% of JLR’s retailers worldwide have totally/partially restarted their operations by now. Moreover, all of the company’s plants have resumed manufacturing, with the exception of the Castle Bromwich facility, which would gradually start up again in August. Post the resumption of operations, the Range Rover Sport, the new Range Rover Evoque, and the Land Rover Discovery Sport emerged as the bestselling vehicles.
ITC | Brokerage: Axis Securities | Rating: Buy | Target: Rs 230 | LTP: Rs | Upside: percent. With revision in dividend policy to paying out 80-85% of profits as dividend, we expect ITCs dividend yield to be at healthy 5%+ going ahead. Moreover a cash rich, debt free balance sheet (Rs. 300bn cash as of FY20) and strong cash flows aided by favourable working capital movement at 54 days as of FY20 from 65 days in FY19 is a positive in current unprecedented times. At CMP, ITC trades at 15.3x FY22E EPS which is attractive in light of +5% dividend yield, steady return ratios and strong cash rich balance sheet that bodes well for investors from a long term perspective.
ITC | Brokerage: Axis Securities | Rating: Buy | Target: Rs 230 | LTP: Rs 197 | Upside: 16 percent  | With revision in dividend policy of paying out 80-85 %, we expect ITCs dividend yield to be at healthy 5%+ going ahead. Moreover, a cash-rich, debt-free balance sheet (Rs 300 billion as of FY20) and strong cash flows aided by favourable working capital movement at 54 days as of FY20 from 65 days in FY19 is a positive in current unprecedented times. At CMP, ITC trades at 15.3x FY22E EPS which is attractive in light of +5% dividend yield, steady return ratios and strong cash-rich balance sheet that bodes well for investors from a long term perspective.
Munjal Showa | Brokerage: ICICIdirect | Rating: Buy | Target: Rs 130 | LTP: Rs | Upside: percent. ICICIdirect expect base case valuations to prevail at stock and assign buy rating, valuing the stock at Rs 130 i.e. 4x EV/EBITDA with implied P/B at 0.8x FY20 numbers. However, broking house do not view stock as a long term portfolio play, given the slow pace of client additions, muted margin profile versus peers and parallel existence of Showa Corporation in Indian as well as exports markets.
Munjal Showa | Brokerage: ICICIdirect | Rating: Buy | Target: Rs 130 | LTP: Rs 100 | Upside: 30 percent | ICICIdirect expect base case valuations to prevail at stock and assign buy rating, valuing the stock at Rs 130 i.e. 4x EV/EBITDA with implied P/B at 0.8x FY20 numbers. However, broking house does not view stock as a long term portfolio play, given the slow pace of client additions, muted margin profile versus peers and parallel existence of Showa Corporation in Indian as well as exports markets.
Moneycontrol News
first published: Jul 14, 2020 08:06 am

stay updated

Get Daily News on your Browser
Sections