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: 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. |
