Most Nifty companies are hitting 52-week low amid COVID-19 fall – Are you scared to buy or are you tempted to buy?
Most companies in Nifty has hot their multi year low . FIIs have pulled out approx INR 60000 crores from Indian market in March 2020, but DII has been buying. Note that these are uncertain times and markets can even go lower from here. So, you should think about buying only from long term perspective.
Here are some of the good stocks that you can consider adding to your portfolio gradually.
– Reliance Industries
– HDFC Bank
– Bajaj Finance
– Asian Paints
– Axis Bank
Stocks for Long term Investments
You can also consider the following stocks for long term investments:
Dr Lal Pathlabs
ICICI Securities is positive on the long-term outlook, considering the company’s strong brand franchise with sustainable growth, expansion potential, healthy FCFF generation and strong return ratios. The company has consistently reported strong growth with incremental free cash flows in the normal course of business.
- We expect Dr Lal to outperform the industry growth and register revenue, EBITDA and PAT growth at CAGRs of 13.4 percent, 14.8 percent and 17.7 percent, respectively, over FY20-FY22E.
- We expect free cash flow generation of nearly Rs 780 crore over the next two years,”
- “RoE and RoCE would remain strong at 24.3 % and 22.9 %, respectively, in FY22E whereas RoIC would move to 95.3%
HDFC Bank has efficiently focused on retail business and has strong liability franchise to yield superior profitability over the years. Prudent asset quality has been core to the bank. The same has safeguarded the bank from NPA issues faced by the industry in recent fiscals. RoA at about 1.5% and RoE at 15-18 % remain consistent for the bank with valuations expected to remain at a premium.
Kotak Mahindra Bank
Kotak Mahindra Bank has built a network of 1,539 branches. It has Increased focus on retailisation of loans and that has enabled the bank to earn the best NIM in industry at 4.7%. Overall asset quality remained resilient with GNPA ratio at 2.46 percent in Q3FY20.
Titan Company is the market leader in the Indian jewellery market through its flagship brand Tanishq. The company also has a presence in watches and eyewear segments. The company has also entered the online jewellery market by acquiring caratlane.com.
Dabur India with a turnover of more than Rs 8,500 crore and earnings of more than Rs 1,400 crore has a strong portfolio of brands (Dabur Chyawanprash, Real, Hajmola, Vatika, Amla, Fem, Honey, Meswak, Dabur Red) with a focus largely on ayurvedic and healthcare offerings. The rural segment contributes around 45 percent of its sales, so it is well-placed to take advantage of the rural recovery.
Petronet LNG’s volumes have remained well above contracted levels historically and are expected to increase further with commissioning of Kochi pipeline post- lockdown and further expansion of Dahej. Kotak expects the company to continue paying higher dividends, pending investment in proposed overseas projects.
“Valuations remain compelling with the stock now trading at nearly 5 times FY2022 EV/EBITDA. At 15 times EBITDA multiple on FY2022, domestic segment accounts for entire market cap, with no value ascribed to the US.”, Kotak Said.
Kotak has cut FY2020-22E forecasts to factor in coronavirus impact, lower crude prices and weaker macros. The stock has corrected 35 percent in the past month notwithstanding significant RM tailwinds and it is trading at 24 times FY2022E PE, implying 40 percent valuation discount to APNT versus 15-20 percent historically.
With rising cases of cough/cold and respiratory illnesses, there is an increased requirement of antibiotics in the case of Alkem. Alkem is one of the companies with higher exposure (two-thirds of the business) to the domestic formulation, which is a strong industry outperformer. It has lower exposure to US generics (nearly 25 percent), which is driven by new launches.
The stock price is nearly 60% down YTD. As a result. the stock now trades at 13.2 times FY20 EPS of Rs 4.7. Nomura India finds it attractive, given the free cash flow (FCF) yields of 7% in FY20. The brokerage has a ‘buy’ rating on the stock with a target of Rs 157, suggesting nearly 150% potential upside. Edelweiss has a target of Rs 143, an 130 % upside from its current price of Rs 62. Motilal has a target price of Rs 108.
Motilal Oswal retained a ‘buy’ call on likely strong average revenue per user (ARPU) which has not been captured in the stock price yet. Target price is 40% above CMP. Details
Amara Raja & Exide
Kotak Institutional Equities has upgraded automobile battery manufacturers Exide Industries and Amara Raja Batteries to ‘buy’. Details
Automotive replacement segment forms 38-49 percent of total revenues and 55-70 percent of EBITDA for Exide and Amara Raja respectively. Even during the 2008 global crisis, both Amara Raja and Exide Industries gross revenues grew by 17 percent YoY in FY2009 and 7 percent YoY in FY2010 mainly led by strong auto replacement segment demand.
However, Kotak slashed its price target for Amara Raja to Rs 650 (from Rs 780 earlier) and Exide Industries to Rs 165 (from Rs 180) due to cut in EPS estimates amid COVID-19-led impact.
Amara Raja Batteries was at Rs 483.90 and Exide Industries at Rs 130.80 on the BSE.
Yes Securities – top 10 picks to buy (updated 23-Mar-2020)
- ABB India: ABB is a key supplier of critical electrical equipment like motors, transformers, rectifiers, inverters etcto rolling stock manufacturers around the world. With Indian railways moving towards procurement of electric locomotives, ABB is likely to see strong business momentum over next 3 years.
- Birla Corporation: BCORP has brought down RM costs in Chanderia plant despite annual increase in fly ash etc. Operational efficiencies is expected to go up by 7-8%. Phase 1 capex is planned to increase capacity from 15.4 MT to 20.5MT by 2021-22.
- Colgate Pamolive: It is leading oral care company in India with 53% share in toothpaste category and 45% share in toothbrush category. The company enjoy strong brand and the market share is expected to improve further in next 3-4 next years. Currently, the share is trading at a valuation of 24X FY23E P/E.
Godrej Industries: Godrej industries has 3 key subsidiaries which are expected to do well. it is trading at 55% discount to its stakein these companies.
- Godrej Consumer products – Among top 3 players in its category. Valuation is 24x FY23 PE
- Godrej Agrovet
- Godrej Properties – Access to large land banks, strong brand recall.
HDFC Bank: Diversified retail franchise, solid deposit profile. Expected that NIM to gradually improve with strengthening pricing power. Current valuation is 2.3X P/ABV and 12.5x FY22 PE
- KNR Constructions: At end of Dec 19, the order book stood healthy at Rs 59 billion. Expectation of 14% revenue CAGR during FY19-22.
- PNC Infratech: PNC has secured orders worth Rs 50 billion post Q3FY20 and its Order book stands at Rs 157 billion With the robus NHAI tender pipeline, it may now go selective. Valuation is premium as compared to peers, but the growth visibility is strong.
- Polycab India: It is the largest player in C&W space (domestic share of 12%). it has tremendous scope in terms of market and product range and the segment is expected to witness 25% revenue CAGR over next 3 years. The current valuation of 18.1x FY20E is attractive.
- Reliance Industries: RIL has corrected 40% in last 3 months. Once COVID-19 subsidises, the demand will improve benchmark GRMs. Its retail business has strong growth momentum. Expected increase in ARPU will aid Jio business.
- Tata Consumer Products: It is on its way to become a diversified FMCG Cpmpany with strong food portfolio – Tata Chemicals (salt, pulses, spices) to its already strong tea, coffee and water portfolio. SOTP based TP is Rs 381.
Top 5 stock ideas by BP Equities for 44-118% returns in 12-18 months (Source)
- La Opala RG: Buy on dips | CMP: Rs 151 | Target: Rs 230 | Return: 50% – La Opala is the segment leader with a healthy balance sheet. Changing Industry dynamics, higher-margin products and more discretionary spending on their products translate into good earnings growth for the company going forward.
- GM Breweries: Buy on dips | CMP: Rs 330 | Target: Rs 476 | Return: 44% – Consumer outreach provides visibility and higher thrust for future growth. Estimate revenue and PAT to grow at 12% and 15% CAGR for FY19- FY21E respectively.
- IG Petrochemicals: Buy | CMP: Rs 102 | Target: Rs 223 | Return: 118% – Possibility of further contraction in the margin is minimal and the brokerage sees a positive reversal in margin going forward as spreads improve. Stock is available at 4.9x FY21E EPS of Rs 20.2. Value the stock based on a 15-year average P/E of 11x to its FY21E earnings.
- BSE Ltd: Buy | CMP: Rs 296 | Target: Rs 444 | Return: 50% – The brokerage expects BSE’s revenue to increase at a CAGR of 11.5% driven by its investment in future growth drivers like INX, Insurance distribution, SME and StAR MF over FY20-22E. It is a debt-free company with healthy liquidity with a very attractive dividend yield of 12%.
- CDSL Ltd: Buy | CMP: Rs 217 | Target: Rs 329 | Return: 51% – Strong business model, diversified revenue stream, robust cash flow generation, new avenues of insurance and academics provides significant opportunity to increase its revenue and expand margins, the brokerage feels. Transactions charges/KYC revenue is expected to revive with retail participation and improve market sentiments. New revenue streams like NAD and e-warehouse receipts are future growth drivers, it said.
Paint Stocks are a safer bet – IDBI capital
Brokerage firm IDBI Capital highlights that the paint sector has consistently outperformed consumer staples during the last 20 years in wealth creation (25-32 percent CAGR in market cap) led by superior growth opportunities. As per IDBI Capital, revenue and operating profit of paint sector grew at 13 percent against 8 percent for consumer staples, and 17 percent against 10 percent for consumer staples, respectively, during FY2001-19.
Even though the earnings of the companies from this sector are likely to be downgraded, paint stocks are value stocks and such tough times are an opportunity to invest in these stocks, as they are likely to recover faster once the economic recovery resumes.
- Nirmal Bang Picks: Asian Paints and Berger Paints
- IDBI Capital: Asian Paints (Buy) and Kansai Nerolac Paints (Hold)
Sectors to buy now
- Specialty chemicals: UPL, Aarti Industries and Kiri Industries.
- FMCG: Asian Paints, Berger Paints, Jyothy Lab and Bajaj Consumer Care