Street to be in wait-and-watch mode till polls; 10 fundamental bets by Angel Broking
Angel Broking has shortlisted 22 stocks that can be considered for investment with a one-year perspective. The brokerage house is overweight on TTK Prestige, Safari Industries, Bata and Blue Star, which are part of the list of 22 stocks.
“All of our top picks are backed by sound business model and are likely to do well in the coming years,” analysts at the firm wrote in their report.
Investors could also pick at the some of the overly corrected value stocks which offer high margin of safety. We also advise our investors to avoid bottom fishing stocks which are facing severe corporate governance/regulatory issues, they added.
The brokerage said the Street will be in wait-and-watch mode till general elections.
“The markets are still factoring in the current ruling party’s win in the upcoming election and hence, any unfavourable results for the ruling Centre party could draw a sharp negative reaction from the market,” they added.
However, this period could also offer opportunities to cherry pick some quality equity investments.
Angel Broking also expects some of the populist measures announced in Budget 2019 will boost consumption story in the economy, especially from the middle-class.
Moreover, the fiscal deficit target at 3.4% for FY19 wasin line with market expectations, analysts further added. For FY20, too, the fiscal deficit target is at 3.4% which includes Rs 75,000 crore allocation for the income support scheme (PM KISAN) to farmers.
Here are 10 stocks from the list of 22 stocks with highest return potential according to the brokerage:
Jindal Steel and Power | Upside: 91 percent
The company has increased its crude steel capacity more than double in last five years from 3.6 MTPA to 8.6 MTPA and currently running at ~50% utilization.
It is trading at attractive valuation to its peer, we value the stock based on asset based approach of Steel segment on EV/Tonne basis and Power segment on EV/MW basis
Aditya Birla Capital | Upside: 86.4 percent
The NBFC business contributes highest value in our SOTP valuation. It has recorded a strong CAGR of 42% over FY13-18. Despite aggressive growth in lending and migration to 90dpd for NPA recognition, GNPA has remained at 1%.
It expects financialization of savings, increasing penetration in Insurance &
Mutual funds would ensure steady growth.
Ashok Leyland | Upside: 85.7 percent
The brokerage observed how the company gained market share in domestic market between April and July 2018. Further, the company has reported 46.4% yoy growth (against 45% industry growth) during the same period due to strong pick up in construction and industrial activities.
“BS-VI emission norms and the vehicle scrappage policy are among the major triggers that can provide a fillip to the commercial vehicle industry over the next couple of years. Further, in our view, the change in axle load norms will not impact the CV demand scenario; hence the company will not witness any disruption in performance,” analysts said.
Siyaram Silk | Upside: 78.2 percent
Going forward, the company would be able to leverage its brand equity and continue to post strong performance.
The company is likely to report a net sales CAGR of 14% to Rs 2,272 crore and net profit CAGR of 14% to Rs 150 crore over FY2018-20E on back of market leadership in blended fabrics, strong brand building, wide distribution channel, strong presence in tier II and tier III cities and emphasis on latest designs and affordable pricing points.
GIC Housing Finance | Upside: 74.4 percent
The company has healthy capital adequacy, and is seeing an increase in demand for home loans. GICHF’s loan book is expected to report 18% loan growth over next two years.
Its asset quality is on the higher side compared to other HFCs (As on Q2FY19 GNPA-3.11%). This is primarily due to GICHF has not written off any bad asset and has not sold any bad assets to ARC.
Inox Wind | Upside: 71.4 percent
It expects Inox Wind to report exponential growth in top-line and bottom-line over FY19-20E. The growth would be led by changing renewable energy industry dynamics in favor of wind energy segment viz. changes in auction regime from Feed-In-Tariff (FIT) to Reverse auction regime and Government’s guidance for increasing wind energy capacity from 34GW current to 140GW by 2030.
It has assigned a multiple of 7.5X on FY20EPS to arrive at a target price of `120 (potential upside of 70% over a period of the next 12-18 months).
Shriram Transport | Upside: 68.9 percent
The company’s primary focus is on financing pre-owned commercial vehicles. CV/LCV sales grew by 20%/25% in FY18, respectively. It expects AUM to grow at healthy CAGR of 20% over FY2018-20E led by pick up in infra/ construction before 2019 elections, macro revival and Ramping up in rural distribution.
It sees loan book/PAT CAGR of 20%/45% respectively over FY2018-20E.
At 1.8x FY20E ABV, valuation appears reasonable.
Music Broadcast | Upside: 58.8 percent
The company grabbed the Number 1 position in Mumbai, Bengaluru and Delhi in terms of number of listeners. This is helping MBL to charge premium rate, which resulting into higher EBITDA margin (33.6%) compare to 22% of ENIL.
Capex for 39 licenses have been done for the next 15 years, hence no heavy incremental Capex requirement would emerge. Moreover, the maintenance Capex would be as low as Rs 5-10 crore. This would leave sufficient cash flow to distribute as dividend.
Amber Enterprises | Upside: 56.2 percent
In line with its strategy to capture more wallet share, it has made 2 acquisitions in the printed circuit board (PCB) manufacturing space over the last 1 year which will boost its manufacturing capabilties.
It expects Amber to report consolidated revenue/PAT CAGR of 28%/51% respectively over FY2018-20E. Its growing manufacturing capabilities and scale put it in a sweet spot to capture the underpenetrated RAC market in India.
Maruti Suzuki | Upside: 55.5 percent
Maruti Suzuki continues to hold 52% market share in the passenger vehicles. The launch of exciting models has helped the company to ride on the premiumization wave that is happening in the country.
Due to the favorable business mix, company has also been seeing improvement in the margins.
It believes that the company has further room to improve its margins.
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