Thursday 25 January 2018

Drishtee Capital Recommendations - January

Sector: Oil and Gas

Company: IOCL

Call: Buy at CMP


CMP: 388


Target: 520 in 12 months


Stop loss: 340


Rationale:

1. IOCL EBIDTA rose 11% YOY with GRM of $7.98/BBL (Which is comparable to its peers except for RIL).
2. ROCE more than peers, profit margin increased by 3 percentage points YOY.
3. IOCL is expected to have heavy cash flow in 2 years from Paradip refinery as well as investment in Israel.
4. The stock is expected to trade at 9.5X FY19 EPS of Rs 43.6; besides that ban on plastic waste import will lead to the heavy demand of petchem from China.


Sector: Information Technology


Company: Tata Consultancy Services


Call: Buy at CMP


CMP: 2773


Target: 2900 in 6 months


Stop Loss: 2650


Rationale:

The IT sector has been stagnant for quite a while now. But things seems to turning around. Given the fact that all the IT majors are retraining their workforce in the field of data analytics. TCS has even bagged a $2 Billion deal with Transamerica for third party administration. TCS is one of the biggest companies in India with a market cap of 531,473.24 Cr and has performed steadily over the years. The net profit for the last financial year was 23,653.00 Cr. P/E = 20.54 and the industry P/E is 21.06


Sector: Autombile


Company: Tata Motors


Call: Buy at CMP

CMP: 436


Target Price: 593


Stop Loss: 390



Rationale:

Tata Motors has recently launched AMT version of Tiago in Bangladesh and also launched 'Tata Motors Genuine Oil' for its CV range. Tata Motors has delivered the first batch of 250 Evs to EESL in December which is part of a total deal of 9500 EVs. Tata Motors' JLR achieved record global sales in 2017 with retails of 621,109 vehicles, up 6.5% YoY. Tata Motors group had total global wholesale sales of 116,677 units, up 23% YoY and total Domestic sales of 54,627 units, up 52% YoY. EBITDA stood at Rs 8938 Cr. Expected growth of 65.5% and 85.2% in Net profit for the years 2018 and 2019 respectively. 


Sector: Power


Company: NTPC


Call: Buy at CMP


CMP: 172


Target Price: 211


Stop Loss: 163


Rationale:

The revised regulatory norms will reduce risks to its earnings from lower plant load factors. As capitalization outpaces capex, return on equity will get a boost and the stock will be rerated. CAGR is expected to grow at 14% over FY 17-20. Swapping/flexible coal linkages has reduced the landed cost of coal. P/E = 14.02, Industry P/E = 16.17, Dividend Yield = 2.77%


Sector: Banking


Company: DHFL


Current Mkt Price - 614

Call: Buy at CMP


STOP loss/ TGT PRICE - 595 /720

52 Week high / low ----------   Rs 651/214


ROE – 14.9  


DIVIDEND YIELD – 0.65


INFLATION – 4-5 % and MF return on Avg -8-9


P/E – 6.39 


Industry P/E – 28.06


P/B – 2.48


EPS – 96.16


Beta – 2.01


Rationale:


1. Healthy capital as it has an AUM of Rs 941 Bn as on 2QFY18 and still growing.


2. Cost of borrowing has been decreasing for the company.


3. NBFC catering retail clients so problem of NPA is not that worrisome unlike major banks


4. Home loans are picking up which will boost company topline and bottom line (PAT)


5. Disbursements grew by 42 %. Its strong presence in tier 2 and tier 3 cities targeting both the salaried and self-employed sections. Its major loan is coming from western part of the country. It is still taping other parts of the company so there is an upside .


6. Its branches have expanded to 345 from 226 in FY 12.



7. Govt. Boost to affordable housing is giving a boost to the sector. As major fund houses have it in their kitty.


SECTOR: PHARMA


Company : Aurobindo Pharma Ltd

CMP: 640

Target: 770


Stop Loss: 610


Investment Period: 12 months


Investment Rationale:


1.Top 3  In India among pharmaceutical companies and Top 6 In the US  generic company by volume. (2017 data)
2. As compared to its peers which saw a decline in US business, Aurobindo pharma's US business revenues posted strong result with a robust growth of 21% (owing to the launch of generic Renvela).
3. EU & RoW increased significantly by 37% YoY.
4. It has no pending regulatory issue.
5. Adjusted EBITDA increased 30.6% q-o-q and 20.3% y-o-y to Rs 11,276 mn during 2Q FY18.
6. Adjusted diluted EPS was Rs 13.4 in 2Q FY18 compared to Rs 10.1in 2Q FY 17 and Rs 9.0 in 1Q FY18.
7.Strong US pipeline and  diversified product mix

SECTOR: INFRASTRUCTURE



Company
Larsen & Toubro Ltd.

CMP

1412

Target Price

1540

Stop Loss

1375
Rationale

1. L&T has diversified segments in which each sector played a prominent role in 26% increase in its net profit for the Q2 2017 quarter.
2. For the financial year 2016-17, L&T reported an order inflow of Rs 1,430 billion, witnessing a growth rate of 5 per cent on a year-on-year basis. In the first three quarters of 2017-18, L&T has announced orders worth Rs 659.21 billion, compared to Rs 524.33-billion orders reported in the same period last year.
4. P/E=50.77 and industry P/E=24.02. Industry P/E < L&T P/E (L&T can be good performer in future).
5. EBITDA and revenue may grow by 20% and 12% CAGR over the next two fiscals due to strong margin recovery through power, heavy engg, electrical and automation.
6. Key risks include (a) a sharp slowdown in government spending and (b) a sharp fall in oil prices in the Middle East.