Shares to buy today: Here are the top five counters that investors can bet upon, say experts
Market experts are of the opinion that fundamentals of these five stocks — Sonata Software, Amber Enterprises, Mahindra & Mahindra, Alkem Labs and Dilip Buildcon Limited — are quite strong
FII's in the third quarter have been net sellers in the Indian equity market. The month of October had seen the worst sell off to the tune of 28,921 crores. A tepid inflow of 5981 crores and 3143 crores followed in November and December. The Net selling by FII's had been on the backdrop of volatile crude and depreciating rupee. The strengthening dollar and rising US yields also aided to the cause.
Hence, market experts are advising investors to get inside each and every minute details of the counter before making any investment decision. On the basis of their detailed research, here are the five stocks that investors can think of before making any final decision in regard to stock trade:
1] Amber Enterprises
Amber Enterprise reported revenue growth of around 15%, largely driven by 19% growth in air conditioners (15% volume growth and 3.5% hike in average realization). Key drag was 23% revenue contraction in AC components business due to loss of customers, and EBITDA decline by 20%, dragging margin by near 220 bp from 7.1% to 4.9% YoY, primarily due to cost inflation. The company has been successful in passing cost inflation to customers, thereby protecting margin. The company reported a profit of Rs 38.5mn against 1.1mn in Q3FY18. The company is confident of delivering on its earlier FY19 guidance of 10% volume growth of 2.1mn units vs 1.9mn units in FY18, implying 41% volume growth in Q4FY19 (0.95mn units vs 0.67mn units in Q4FY18) due to strong order book and new customer additions.
On suggestion to the traders in regard to the counter Pankaj Chhaochharia, Analyst at Elara Securities told in a detailed research report, "The scrip looks positive from the fundamental perspective and has potential for near 41 per cent upside. An investor can buy the scrip for target of Rs 975 per stock levels." Currently, the counter is oscillating in the vicinity of Rs 692 per stock levels.
2] Mahindra & Mahindra
M&M EBIDTA grew just 1% YoY at Rs 17bn (8% below market estimates) while margin declined 150bp YoY at 13.2% (100bp below our est). M&M+MVML revenue grew 12% YoY at Rs 128.9bn (In-line with our est) led by 11% YoY total volume growth; EBIT margin in FES segment came in at 19.2% (down 130bp YoY) while auto segment EBIT margin came in at 5.8% (down 260bp YoY) mainly due to launch related expenses which should continue in Q4. Automotive net realization remained flat YoY while FES realization increased 1% YoY. Experts believe M&M’s UVs volume growth to accelerate with the recent launches and upcoming XUV 300 in Q4FY19. While the UV portfolio is subdued till now. They are impressed with the LCV, M&HCV, 3W and export segments which have pulled up the YTDFY19 total automotive volume growth to 13%, despite UV growth being flat. Experts remain cautious on the tractor growth outlook for FY20-21E owing to cyclicality and have assumed a 4% CAGR over FY20-21E.
On suggestion to the market investors in regard to M&M counter Jay Kale, CFA at Elara Securities told in a detailed research report, "The fundamentals of the counter suggests an upside potential of 30 per cent. An investor can buy the scrip for Rs 893 target." Right now, the scrip is revolving around Rs 683/counter.
3] Alkem Labs, Sonata Software
Alkem’s 3QFY19 performance was in line with our expectations. A softer acute season led to a 1% fall in the domestic business, while the 44% jump in the US helped in maintaining 10% plus YoY top line growth. Poor business mix (lower India sales) and increased raw material cost led to a ~680bps drop in gross margin. As a result, EBITDA margin shrunk 450bps YoY and EBITDA declined 13% to Rs 3.1bn. Reported PAT at Rs 2.1bn was up 14% YoY owing to higher taxes in 3QFY18. Despite reporting dismal performance in FY19, experts remain optimistic about Alkem as they believe the effect of raw material price hike will alleviate in FY20.
On suggestion to the investors in regard to counter Amey Chalke, Analyst at HDFC Securities told, "The fundamentals of the scrip suggests an upside potential of near 22 per cent. An investor can maintain a buy position in the scrip for the target of Rs 2,340/stock levels." Currently, the scrip is oscillating around Rs 1900/counter levels.
4] Sonata Software
Sonata Software delivered a good quarter, international IT services (IITS) revenue was up 4.3% QoQ (+5.0% CC) to $40.8mn, in-line with our est of $40.3mn. Growth was led by IP-led revenue (+10.7% QoQ) and continued traction in Top-5 accounts (+10.5% in 9MFY19). IITS margin expanded 779bps QoQ to 28.4% (highest ever) led by cut in high cost sub-con expenses, higher utilisation and operational efficiency. The sustainable margin range for IITS is 23-24% (9MFY19 23.8%). Total revenue stood at Rs 8.44bn, +42.3/10.1% QoQ/YoY, led by growth in Domestic Product & Services’ +(DPS) revenue (Rs 5.63bn, +72.8/6.2% QoQ/YoY).
Speaking on the fundamentals of the Sonata software as a counter Amit Chandra and Apurva Prasad, Analyst at HDFC Securities informed, "Fundamentals of the scrip suggests an upside potential for around 39 per cent. An investor can buy the scrip for the target of Rs 466/stock." Currently, the counter is oscillating at Rs 334/counter levels.
5] Dilip Buildcon Limited
DBL has continued to post strong earning numbers as the revenue was up by 28% YoY with stable EBITDA margin. Going forward, we expect, the revenue growth momentum will continue to remain strong on back of robust order book with superior execution and early completion of projects will help to keep EBITDA margin healthy. The company has completed financial closure of all the 12 HAM projects and appointment date of 4 has been already received. Another couple of projects will receive appointment date in Q4FY19 and reaming 6 projects is expected to receive in Q1 of next year. Working capital days have improved from high of 137 days to 83 days and it will further rationalize by way of implementation of SAP.
Speaking on the fundamentals of the counter Sandip Jabuani and Ketan Mehrotra, Research Analyst at Narnolia Financial Advisors informed in a detailed research report,"Fundamentals of the scrip suggests an upside swing of around 58 per cent. An investor can buy the scrip for the target of Rs 530 per stock." Currently, the stock is oscillating around Rs 335 per counter.