Want to make money on Dalal Street? These 10 stocks can give 14% to 44% returns
It’s all about hedging funds and placing bets, because when markets are down, it is actually right moment to buy value equities.
The bears have taken over the Indian markets, with the Sensex and Nifty leaving even their over 39,000 and 11,500 levels. On Wednesday, Sensex ended at 38,557.04 down by 173.78 points or 0.45%, while the Nifty 50 was below 57 points or 0.49% finishing at 11,498.90. Gainers on Sensex were stocks like Yes Bank, Sun Pharma, Kotak Mahindra Bank, ICICI Bank and HDFC Bank. While losers list was coupled with stocks like Bajaj Finance, Tata Steel, Tata Motors and Axis Bank. Major sectors like NBFC, banking, autos, FMCG and IT have witnessed selling pressure. In the midst of all this, buying right stock holds the key this month. It’s all about hedging funds and placing bets, because when markets are down it is actually right moment to buy value equities.
(Image source: Karvy Stock Broking)
According to Karvy Stock Broking’s research note, there are 10 stocks which are seen as value investment in July 2019, on Dalal Street. One can buy them now, as they are seen to give returns in the range of 14% to massive 44%.
1. Apollo Tyres - In Karvy’s note, the expert stated that, Apollo Tyres is valued at a P/E of 13x for FY21E EPS of Rs. 19.6 for a target price of Rs. 254, representing an upside potential of 26%. However, the downside risk to our call arises from the prevailing low demand condition in India and Europe. Also, increasing the share of imports from Thailand could be a concern. Still, they believe that demand revival for both domestic and exports is on the horizon and expect capacity expansion plans to start yielding by FY20E-21E.
2. IPCA Laboratories - The note said, “We reduce our Revenues by 3.4%/2.7% for FY20E/ FY21E due to downgrade in Generics and Branded business. We upgrade our EBITDAM for FY20E/FY21E by 180 bps for both the years to 21.6% / 22.4% respectively due to better product mix, lower remediation costs and R & D costs. We upgrade our EPS estimates by 8.2% /6.2% to Rs. 46.9/Rs. 58.3 for FY20E/FY21E. We maintain our “BUY” rating and price target of Rs. 1090 based on 18.6x FY21E.”
3. JK Cement - JK Cement Ltd is currently trading at EV/EBITDA of 7.62x of FY21E. So Karvy recommend a “BUY” rating, valuing at 10.25x EV/EBITDA (5 years average forward multiple) on FY21E EBITDA for the target price of Rs. 1173, representing an upside of 18%. Key risks are increase in raw material cost and rise in power & fuel cost.
4. KEC International LTD - Expect the existing strong order book to boost revenues at 14% CAGR during FY19-21E. The non T&D business segments are also expected to post good numbers and are expected to grow at 21% CAGR during FY19-21E. Karvy values KEC on 14x to FY21 EPS for a target price of Rs. 364 reiterating our “BUY” rating for an upside potential of 15%.
5. KRBL Ltd - Given the staple rice status of basmati rice in Middle East region, its demand continues to be strong. We believe that KRBL with great brand recall and dominant presence, is well positioned to capitalize on the opportunity. Besides, increasing trend in basmati consumption in domestic market augurs well for the company. Karvy value the stock at PE 15.9x of FY21E EPS which gives TP of Rs. 403 with potential upside of 28%. Risk to valuation could be escalating of pesticide issue in Saudi Arabia and Europe.
6. MOIL Ltd - Value the stock on 5 years average PE 10.3x of FY21E EPS which gives TP of Rs. 223 with potential upside of 44% and reiterate our “BUY” rating on the stock. However, key risks to valuation could be a slowdown in domestic economy and lingering of global trade war.
7. NIIT Technologies - NIIT Tech’s strong growth momentum to continue in the future given its strong deal momentum and order book. As of Q4FY19, its order book stands at $390 Mn executable over the period of next 12 months with $170 Mn as fresh order intake during Q4FY19. Revenues were up by 22% in Q4FY19 to Rs.9722 Mn. Recommend a “BUY” rating to NIIT Tech with target price of Rs. 1650, an upside potential of 24% based on 3 year historical average P/E of 17x to its FY21E EPS of Rs. 98.3.
8. Sobha Ltd - Expect Sobha to be a major beneficiary of post RERA scenario which has resulted in consolidation in real estate industry wherein reputed players backed by execution track record stand to gain market share from unorganized players. The current liquidity crisis will strengthen the position of large developers having minimal dependency on external funding for project completion. Our NAV model yields a per-share value of Rs. 790 and we have valued Sobha at 20% discount to NAV, resulting in a target price of Rs. 632/share.
9. Subros Ltd - Remain positive on Subros growth prospects in its Car and Non Car business segment. Karvy expect Subros to report 12.3% sales CAGR and 35.6% PAT CAGR over FY19-21E. At CMP of Rs. 235, Subros is quoting at PER of 10.9x FY21E earnings. Maintain our “BUY” rating on the stock with a revised target price of Rs. 336 (PER of 15xFY21E Earnings). Prolonged weakness in domestic car market remains risk to our earnings estimates and recommendation.
10. Triveni Turbine Ltd - Expect earnings for Triveni to grow by CAGR of 26% to Rs. 4.8, RoCE to average over 25% and cumulative FCF of Rs. 1.67 Bn during FY19-21E. Hence, recommend ‘BUY’ rating on Triveni by valuing it at 27.5x FY21E earnings (3 year fwd earnings average) for a target of Rs. 134.