The S&P BSE Sensex topped Mount 37K for the first time in history to hit a record high of 37,014, while the Nifty rose to a fresh record high of 11,172 in the first one hour of the trading session.
The S&P BSE Sensex rallied by about 8 percent so far in the year 2018 while the Nifty gained 6 percent in the same period. Experts advise investors to stay with companies, which are looking fundamentally robust and are showing strong signs of growth.
They further say that earnings will play a big role in pushing the market to new frontiers but stock specific action will continue. Sectors expected to hog the limelight include IT, pharma, consumer discretionary, and private banking.
“Nifty and Sensex are at all-time high levels, but one is not sensing the exuberance or excitement across participants as the rally has been primarily led by heavyweights such as TCS, Reliance Industries etc,” said Hemang Jani, head - advisory, Sharekhan by BNP Paribas.
“We feel that from here on earnings will play a major role in determining further upside. Factors such as global trade wars and upcoming general elections in India will keep investors cautious in the short term,” he said.
Jani further added that the longer-term picture for Indian equities looks positive and we continue to prefer sectors such as private banking, consumer discretionary, Information technology and Pharma.
Here is a list of top 10 stocks from various brokerage firms which could give up to 15-30% return in the next 1 year:
Analyst: Vinod Nair at Geojit Financial Services Mahindra CIE Automotive Ltd: Buy| CMP: Rs 245| Target Price: Rs 281| Return 15 percent
MCIE is among the top global forging players with a strong presence in both Europe and India. Revenue for the quarter grew by 29 percent YoY largely driven by strong European sales of 32 percent & India business growing at 26 percent year-on-year.
Operating margin improved by 120bps at 14.7 percent due to superior geographical mix and cost control initiatives. Going forward, new launches from the key customer and healthy order book from European subsidiary will drive growth for the company. We expect consolidated revenue to grow at 16 percent CAGR over CY17-19E.
Federal Bank Accumulate| CMP: Rs 87| Target Price: Rs101| Return 16 percent
Federal Bank Limited is a major Indian commercial bank in the private sector headquartered at Kerala with a loan book size of Rs 92,000 crore.
Strong growth across Retail, SME and Corporate segments led to 24% year-on-year growth in Loan book. GNPA is stable at 3 percent quarter over quarter and NNPA ratio has slightly increased from 1.69 percent in Q4FY18 to 1.72 percent in Q1FY19.
We remain positive in the wake of lower slippages coupled with strong earnings growth. We factor 30 percent CAGR in earnings supported by 22 percent CAGR in loan book over FY18-20E. We value FB on FY20E Adj PBV at 1.6X and maintain our target price to Rs101 and recommend to Accumulate.
Analyst: Siddharth Sedani, Anand Rathi Shares, and Stock Brokers Mastek: Rating: Buy | LTP: 545| Target: Rs 730| Return 33 percent
Mastek is an information technology (IT) solutions provider. The company and its subsidiaries are providers of vertically focused enterprise technology solutions. The company specializes in developing, maintaining and managing digital solutions for clients in government, health, retail and financial services.
Mastek reported revenue of $ 36.1 million, up 4 percent QoQ (~6.7 percent in Constant Currency dollar terms). It ended Q1 FY19 with a 12-month order book of $75m, up 40 percent YoY. The EBITDA margin came at 12.7 percent, up 60 bps YoY.
The tax rate has moved lower toward 22 percent (tax rates are lower in all three regions: the US, the UK, and India). This and currency movements lead to a further increase in FY19e earnings by 9 percent and FY20e (estimated) by 12 percent.
The TAIS Tech investments are now largely complete; hence, we expect a gradual margin expansion in sync with revenue growth. Majesco stake contributes Rs 90 a share.
We factor into our estimates primarily the favorable exchange rate and tax rate benefits, resulting in higher earnings.
Given the persistently greater growth, we continue to value the business at 15x FY20e EPS of 42.60 and its investment in Majesco US at a 10 percent discount to its market cap ($270 million), contributing Rs 90 of our target of Rs 730
Mphasis: Rating: Buy | CMP: 1173| Target 1350| Return 15 percent
Mphasis Ltd. is an IT services company with expertise in Application Development and Maintenance, Infrastructure Outsourcing, and Business & Knowledge Process Outsourcing.
The Company is making efforts to increase revenue from fixed-price projects (FPP), which will Increase contribution and act as a strong margin lever for the company going forward. As of March 18, 74 percent of the revenues were attributable to time & materials model & 26 percent from FPP model.
We expect the company to report revenue CAGR of 14.18 percent over the next two financial years. On the profitability front, we expect the company to report operating margins of around 16.7 percent in FY19E and 17 percent in FY20E.
Sterlite Technologies: Rating: Buy | CMP: Rs 336| Target: Rs 400| Return 19 percent
The company manufactures optical fiber, and is forward integrated to offer broadband services and network and telecom software as solutions. During the quarter, Sterlite Tech has acquired, through its wholly-owned Italian subsidiary Sterlite Technologies S.p.A, 100 percent stake in Metallurgica Bresciana S.p.A (Metallurgica).
The company has reported a revenue growth of 22.5 percent YoY for Q1FY19 at Rs 876 crores versus Rs 716 crores. The growth in revenues was mainly driven by growth in products business and greater execution of projects business.
Sterlite Tech continues to witness strong order inflow owing to better industry prospects; its unexecuted order book now stands at Rs 6,033 crore, reflecting ~1.9x of the FY18 revenues and 92 percent growth over Q1-FY18.
Its ~75 percent of order book consists of high margin product segment. We remain positive on the company and maintain our BUY rating on the stock with a target price of Rs 400 per share.
Brokerage Firm: Motilal Oswal L&T: Buy| LTP: 1320| Target: Rs 1540| Return 17 percent
The net profit (adjusted for one-offs) of Rs 1,580 crore in 1QFY19 was ahead of our estimate of Rs 1,460 crore. While we had only built in Rs 350 crore of profit on sale of the Kattupalli port in our estimates, there were additional one-offs relating to (a) Rs 400 crore profit/loss reversal on road INVIT, (b) write-down/provisioning in realty amounting to Rs 750 crore, (c) impairment charge on hydel projects of Rs 100 and (d) Ind-AS impact on realty profit of Rs 80 crore (post-tax).
Motilal Oswal maintains a buy call on L&T with a SOTP-based target price of Rs 1,540 (E&C business at 22x FY20E EPS, at the higher end of the five-year trading band, to which we add Rs 530 for subsidiaries).
JSW Steel: Buy| CMP: Rs 317| Target: Rs 385| Return 22 percent
Motilal Oswal maintains a buy rating on JSW Steel with a target price of Rs Rs 317 post Q1 results. JSW Steel (JSTL) reported better-than-expected 1QFY19 results.
Insulating the impact of regrouping and one-offs related to GST in 4QFY18, spreads (between steel prices and RM cost) increased Rs 2,488/t QoQ, which was offset by Rs 400/t increase in power & fuel cost and other operating cost.
On a net basis, EBITDA per ton increased by Rs 1,510 QoQ to INR12,590/t (USD194) for the standalone business. Consolidated EBITDA grew 4 percent QoQ and 86 percent YoY to Rs 5100 crore, even as volumes declined 9 percent QoQ to 3.8mt in a seasonally weak quarter.
The domestic brokerage firm is factoring in 23 percent lower EBITDA/t w.r.t. 1QFY19 in our FY20 estimates given market volatility.
Granules India: Buy| CMP: Rs 93| Target: Rs 130| Return 40 percent
Motilal Oswal maintains a buy rating on Granules India post Q1 results with a target price of Rs 130. Granules India 1QFY19 sales grew 17 percent YoY to Rs 450 crore, led by finished dosages and APIs.
Gross margin declined from 53 percent in 1QFY18 to 45 percent primarily due to increase in raw material prices. However, Granules India has been able to pass on the raw material price hike to customers and there has been some cooling off QoQ; hence, gross margin has improved sequentially. EBITDA declined 14 percent YoY to Rs 72.6 crore.
"We believe Granules India capex cycle is close to over and its efforts should start to deliver hereon. The management expects margin recovery in coming quarters on the ramp-up of new capacity utilization, passing on of high RM cost, and key launches in the US," said the report.
The domestic brokerage firm expects the EBITDA and PAT to grow by over 25 percent CAGR over FY18-20. It increased FY19E EPS by 7 percent on the back of higher other income and increase in income from JVs.
Brokerage Firm: Edelweiss Securities Ltd
Lupin (LPC) has been on an investment overdrive for the past four years with cumulative investments of $ 2.9 billion to-date towards:
Lupin: Buy| CMP: Rs 799| Target: Rs 920| Return 15 percent R&D (complex generics) capital expenditure (capacity expansion) acquisitions (Gavis and Symbiomix). Consequently, during the period: balance sheet expanded significantly with a gross block at 2.4x; RoCE tumbled to 10% from the peak of 40%; earnings fell 36% and free cash flow slid 57%; market cap reduced to almost one-third.
The moot point is whether LPC’s earnings and stock price have bottomed out. In our view, the company will encounter some more pain in H1FY19 owing to erosion of US business.
However, the stock offers limited downside from current levels as the pain is priced in and upside from the respiratory and specialty pipelines are set to pan out from H2FY19 albeit back ended.
V-Mart Retail: Buy| LTP: Rs 2,429| Target: Rs 2,883| Return 18%
V-MART Retail (VMart) posted inline Q1FY19 revenue growth of 14.6 percent YoY, while EBITDA and PAT growth of 16.5 percent/11.2 percent YoY surpassed our estimates.
The net store addition remained strong – eight stores were added in Q1FY19 and management is confident of adding 35 stores in FY19. The proportion of private labels remained at over 50 percent and the target is to augment this share to ~75-80% over the next few years.
This, coupled with multiple micro-initiatives (in-house design team, focus on full-price sales, penetration to tier IV towns, etc) and an attractive opportunity landscape instills confidence. We thus raise our FY20E EV/EBITDA target multiple to 25x (22.5x earlier), giving us a revised target price of Rs 2,883 from 2,636 earlier.
Disclaimer: The views and investment tips expressed by investment experts are their own and not that of the website or its management. Users are advised to check with certified experts before taking any investment decisions. Moneycontrol.com