Вы находитесь на странице: 1из 7

Moneycontrol News

Sunil Shankar Matkar


Samvat 2074 was a good year for the equity market as benchmark and broader indices
hit historic highs, but returns were in single digits. The Nifty, which was trading at
22.2 times forward earnings is now trading at 20 times.

The Sensex gained 8 percent, while Nifty surged 4 percent, but BSE Midcap and
Smallcap indices, which rallied around 50 percent last year, underperformed with a loss
of 8 percent and 16 percent, respectively.

Volatility in crude oil prices raised concerns of a widening fiscal deficit, weakness in the
rupee, while trade tensions between the world's largest economies US and China, NBFCs
liquidity crisis, Fed rate tightening etc dented sentiment. Yet, there was good news as
the Street is hopeful of earnings recovery and consistent DII inflows continued to
support the market despite FII outflow.

Coming to Samvat 2075, it is expected to be quite volatile year for the market due to
states and general elections going ahead, but earnings recovery, economy growth and
consistent DII flow are likely to come in defence, said experts who are positive on
India's long term growth story.

"Going forward, we believe Indian economy has undergone tremendous structural


change with reforms like GST and IBC. Also, we are on the cusp of earnings revival for
Indian corporate. Profit of listed Indian companies as a percentage of GDP is at lows,"
Vineeta Sharma, Head of Research at Narnolia Financial Advisors told Moneycontrol.

She believes price growth in Nifty going forward will mostly come through earnings
growth while valuation multiple will see continued contraction. "Nifty target for Samvat
2075 is 11,800 valuing it at 19times FY20 EPS of Rs 621."

Sumit Bilgaiyan, Founder of Equity99 said if the outcome of the elections is as per the
expectations of the market players he expects a bull run post elections otherwise he
believes that a market may see another 10-15 percent correction which shall recover
towards the end of Samvat 2075.

Crude oil prices, which surged to highest level since November 2014, traded around -73
a barrel levels.

Sumit expects the crude to stabilise in the range of -75 per barrel and USD-INR is
expected to stabilise around 71-72/dollar which shouldn't be a reason to worry for the
economy.
Prabhudas Lilladher said current volatility should be used as an opportunity
accumulates fundamentally strong stocks for long term.

Here is the list of top 15 Diwali phatakas which could give bomb like
return of 30-70 percent by Samvat 2075-end:

Expert: Sumit
Bilgaiyan, Founder of Equity99

L&T Infotech | Target: Rs 2,500 | Return: 49%


L&T Infotech (LTI) is India's sixth largest IT services company. We see the billion
threshold as a possible inflection point for LTI, with growth from (1) an increasing deal
pipe, (2) deeper penetration in large accounts, (3) headwinds receding in the energy
vertical and (4) improving quality of business (digital and platform-led growth) and (5)
depreciating rupee.
On account of these factors we expect the revenues to grow at 25 percent CAGR (from Rs
1,112 crore currently to Rs 1,640 crore by FY20).

South Indian Bank | Target: Rs 25 | Return: 70%


Founded in 1929, South Indian Bank is one of the oldest banks based out of Kerala. With
most of the provisioning of the stressed assets behind them and their focus on
aggressively growing its retail book, we expect the growth story to start unfolding.

The bank is actively working towards its target of opening 150 new branches. As a
result, we expect the loan book to grow at a 16 percent CAGR to Rs 72,810 crore by
FY20, driven by a 21 percent CAGR in the retail book.

Further we expect NPAs to normalise to historical levels and, as a result, revenues are
expected to grow at 14 percent CAGR.

NALCO | Target: Rs 67 | Return: 48%


Due to disruption in the channels of import of aluminium from Allunote and Rusal
(owing to measures by government of India) the prices of aluminium went up leading to
better realisations for NALCO. It is getting into various raw material related projects for
better backward integration, these projects include a caustic soda plant and a newly
conceived coal tar pitch plant.

Other than these, the company is also in the process of developing two coal mines,
which were allotted to it. As far as volume is concerned, NALCO aims to achieve 2.1
million tonne alumina output and 415kt aluminium metal output in FY19.

The company plans to spend Rs 1,100 crore capex in FY19. We expect alumina prices to
remain strong in the near to medium term, helping NALCO to put up a better
performance.

Birla Cable | Target: Rs 250 | Return: 41%


Birla Cable (formerly known as Birla Ericsson Optical Limited) is a premier company in
the field of telecommunication cables, which offers one of widest portfolio of copper and
fibre optic cables under its umbrella.

The demand for optical fibre in India has already touched in 2017 to the tune of more
than 28 million fibre kilometers as per the latest CRU reports and is expected to grow in
a very brisk pace, riding on the wave of huge optical fibre network expansion projects
by both government and private telecom operators.

Company has posted robust numbers for FY18 and Q1FY19. For Q1FY19, it has reported
PAT of Rs 11.06 crore against loss of Rs 0.33 crore on 128 percent higher sales of Rs
117.48 crore. Technological changes and quality issue and competition are main risk
factor for this industry.
The company has posted healthy growth in last four quarters and we are expecting
robust growth in next 2-3 years, we recommend a buy on the stock with target price of
Rs 250.

Expert: Vineeta Sharma, Head of Research, Narnolia Financial Advisors

Federal Bank | Target: Rs 110 | Return: 33%


Federal Bank has up fronted its loan book growth by an average of 26 percent in the last
2 years. Refraining itself from lending riskier large corporate loans in last few years,
management is focused on better rated corporate, retail and SME portfolio.

A better rated corporate advances form 71 percent to the total corporate advances.
Higher stressed loans have declined to 2 percent level from 3.4 percent in FY16.

Brokerage: HDFC Securities

HOEC | Target: Rs 177 | Return: 33%


The company is debt free, with net cash balances of Rs 35 crore and Rs 53 crore invested
in its subsidiary. Over the next two years, company expects significant ramp up in
volumes which would ensure growth visibility going ahead.

Company had done capex of around Rs 60 crore last year. In the current year, it is
expected to be around Rs 60-70 crore. In first half of FY19, company has posted stellar
numbers, with around Rs 99 crore revenues and PAT at around Rs 66 crore. In FY18,
revenues were at Rs 49 crore and PAT at around Rs 38 crore.

We expect growth momentum to continue in the second half of FY19 as well. We


estimate that the company will post Rs 208 crore revenues and Rs 133 crore PAT in
FY20. Given strong management, a robust balance sheet and stellar growth expected
over the next two-three years, we recommend buy on Hindustan Oil Exploration
(HOEC) at Rs 130, and add on dips to Rs 108 with target price of Rs 177 till next Diwali.

Brokerage: Prabhudas Lilladher

Petronet LNG | Target: Rs 300 | Return: 37%


PLNG is India's largest regasification player with capacity of 20 MTPA. PLNG is a play
on rising domestic gas demand across user industries.

PLNG with first mover advantage in a gas starved country will see earnings grow at a
CAGR of 21 percent over FY18-20E led by 1) steady demand for

imported LNG (50 percent of demand) given sluggish domestic supplies 2) capacity
additions in Dahej 3) ramp up in Kochi terminal post completion of pipeline network to
Mangalore and 4) low tariff by PLNG given low capital cost.
With large scale capex largely behind, cash flow generation will likely be robust. We
have a DCF based price target of Rs 300.

Heidelberg Cement | Target: Rs 200 | Return: 36%


HEIM is one of the largest players in the Central region, has witnessed a significant
improvement in its operations over the last couple of years with the completion of its
expansion-cum-modernisation program.

We continue to maintain that Central region holds the best outlook among the regions
on the back of strong demand from infrastructure & affordable housing projects and
limited capacity addition.

Led by strong outlook on Central region, quality operations and attractive valuations, we
reiterate buy with target of Rs 200, EV/EBITDA of 9x FY20e.

Brokerage: Rudra Shares and Stock Brokers

ICICI Bank | Target: Rs 470 | Return: 34%


Barring its tepid profitability, September quarter results surprised on other key
parameters for ICICI Bank as uptick in growth and NIMs sustained. Robust fee growth,
curtailed cost and lower provisions along with sequentially lower fresh slippages &
substantial improvement in PCR led to a strong operating performance despite treasury
loss.

Looking forward, need to kept an eye on NIMs trend as funding cost to go up due to
which NIMs may come under pressure and we expect bank to deliver sustained
improvement in operating metrics led by dwindling headwinds on asset quality front
and improving balance sheet especially in Retail segment.

Bank to be a major gainer of current crisis in NBFC space, as it has best-in-class liability
franchises along with superior customer outreach across business segments, helped the
stock to outperform within whole sector & may continue in the coming period too.

Threats: Next half of financial year is expected to be challenging due to slow down in
growth, increase in interest rates and liquidity squeeze following the default by IL&FS.

L&T Finance Holdings | Target: Rs 175 | Return: 30%


Company is leveraging its extensive experience as a well-diversified NBFC to focus on
improving ROE after initial high growth. Company's strategy to focus on
high–yielding rural products and low-risk housing & wholesale products help stabilise
its asset quality while maintaining yields.

Having achieved ROE of 18.45 percent in Q1FY19, LTFH has maintained its profitability
with 18.47 percent ROE in Q2FY19 on the back of AUM growth, strong NIMs plus fee
income, strict control on cost and improved asset quality . LTFH’s gross stress loan
ratio improved from 7.93 percent in Q1 FY19 to 7.1 percent in Q2 FY19.

With its focused management and strong execution skills, company is set to deliver an
15-18 percent loan CAGR over next two year driven by growth in rural and housing
finance segments. In addition, continued origination and down-selling in infra finance
book will drive company’s fee income traction, resulting in an elevated ROE.

Although, recent events in financial markets have had a bearing on the NBFC sector,
there could be new RBI regulations on various aspects including ALM. Given its strong
parentage and multiple financial relationships, LTFH would come out of this situation
better than most peers.

Himadri Speciality Chemicals | Target: Rs 178 | Return: 35%


HSCL, the only Indian player manufacturing advance carbon material and one of the
very few global corporations to make anode material using coal tar. It have built a very
strong market presence in existing products like coal tar pitch, carbon black,
naphthalene, SNF etc which are the existing core businesses around which the Company
has delivered strong set of numbers. It had Doubled naphthalene capacity and an SNF
manufacturer(to benefit from anti-dumping duty on Chinese chemical import) with an
installed capacity of 68,000 MTPA , will give a room to replace imports in the country.

As one of the only three producers of anode material through the coal tar route, Himadri
is expected to benefit from the exponentially rising demand. Recent expansion in this
segment will add on share of value-added products and further strengthen profitability.

Considering the product leadership, strong clientele, growing end markets, well build
R&D, and high value product pipeline with improved product mix & better realizations,
we recommend to buy with a target of Rs 178.

Brokerage: Reliance Securities

Sonata Software | Target: Rs 420 | Return: 35%


We like Sonata's differentiated business, quality balance sheet, high RoE and lack of
equity dilution for last 17 years.

We expect the MS Alliance to be a key growth driver, and Sonata has conducted MS
showcases in Dubai, London, the US and India, and won deals as well. Acquisitive
opportunities are also being closely evaluated with potential -25 million size, mainly in
the MS ecosystem.

The stock currently trades at 12.0x FY20E EPS, on a healthy 18.8 percent EPS CAGR over
FY18-FY20E. We have a buy recommendation on the stock with a target price of Rs 420.

Engineers India | Target: Rs 169 | Return: 43%


We believe ENGR will remain highly cash-rich and maintain its dividend payout of
around 50 percent during FY18-20E. At CMP, the stock trades at 17.0x FY19E and 13.9x
FY20E earnings respectively.

Considering sizeable growth potential in sector, huge imminent capex in hydrocarbon


sector, asset-light business model, foray into newer segments/sectors, debt-free
balance-sheet, healthy revenue and earnings growth and robust return ratios, we
believe that the stock is trading at

attractive valuation for investment. We maintain our BUY recommendation on the stock
with a target price of Rs 169.

Escorts | Target: Rs 1,015 | Return: 51%


Looking forward, we expect ESC’s revenue to clock 16 percent CAGR through FY18-
20E, supported by incremental revenues from spares and new segments, its EBITDA
margin is expected to expand to 12.1 percent in FY20E from 11.2 percent in FY18.

In view of strong industry performance, better traction from railway business and
healthy margin profile, we reiterate buy recommendation

on the stock with target price of Rs 1,015, valuing it at 16.5x FY20E EPS.

NBCC (India) | Target: Rs 103 | Return: 65%


We continue to view NBCC as a robust growth story owing to its PWO status and niche
presence in redevelopment of government’s old colonies. Further, a debt-free
balance-sheet and superior return ratios augur well for the company.

Following sharp correction in last four months, current valuations at 23x and 16x EPS
FY19E and FY20E, respectively appear to be attractive. We maintain buy
recommendation on the stock with a target price of Rs 103.

Disclaimer: The views and investment tips expressed by investment experts and
brokerages on moneycontrol.com are their own and not that of the website or its
management. Moneycontrol.com advises users to check with certified experts before
taking any investment decisions.