Friday, May 17News That Matters

Here are top 10 stocks for new year


Here are the top 10 stocks recommended from five leading broking firms based on fundamentals.

Broker Stock Target CMP Upside Rationale
ICICIDirect Bajaj Finserv 2308 1745 32% Bajaj Finserv reported an increase in loan book by 4x from FY2011-15 and also 36 per cent growth in 9MFY16 YoY backed by a surge in earnings. It is the most profitable and efficient player in the sector. The pick-up in the life insurance business could lead to a valuation upgrade. At 11.6x FY2017 estimated earnings, the stock is reasonably valued. 
ICICIDirect Mahindra & Mahindra 1470 1195 23% M&M has launched nine vehicles this year. The company was affected by the loss of market share on the automotive side and the sudden decline in farm equipment business in FY2015. However, it has sustained profitability at a respectable level amid pressures. We value the core business at 9x EV/EBITDA FY17 estimate to Rs 909 and subsidiaries at Rs 561.
IndiaNivesh Reliance Industries 1300 1033 26% The capex done by RIL in the last 3-5 years will come into play this year and next year. The overhang of their telecom venture diminishes as it is likely to be launched soon. RIL’s GRMs and margins are very well maintained. Valuation wise it is very cheap at 10x EPS one-year forward compared to its historical average of 15x EPS one year forward.
IndiaNivesh Tata Motors 495 380 30% China sales are not growing but JLR is doing far better in other markets like the US and Europe. In the last three months, the local business has also started turning around. M&HCV sales have been robust and LCV is also picking up. This means that the stock is ripe for a re-rating.
Angel Broking Amara raja 1040 885 18% Amara Raja has a strong presence across the automotive and the industrial segment and a broad OEM as well as replacement customer base. Given the economic recovery and market share gains, the company is expected to grow at a CAGR of 18 per cent over the next two years. It is a high quality stock to play the auto sector revival and has a P/E of 28x its FY2017 estimated earnings.
Angel Broking Jagran Prakashan 189 158 20% Dainik Jagran has a strong presence in the rapidly growing Hindi market so JPL should benefit from an eventual recovery in the Indian economy. We expect JPL to register a net sales CAGR of about 15 per cent over FY2015-2017 because of strong growth in advertising revenue due to improvement in GDP growth and an improvement in circulation revenue.


Also see: 6 Specialty chemicals stocks to bet in 2016


Motilal Oswal HPCL 1299 795 63% HPCL’s marketing division profitability should grow rapidly because of benign commodity prices and end-product pricing flexibility. An increase in diesel marketing margin should increase FY2016 estimated EPS by 32 per cent as it has more marketing volumes than refining volumes. We value HPCLBSE 0.97 % at 5.5x for refining and 8x for marketing.
Motilal Oswal Sintex 145 80 81% Sintex is a good play on the government’s Swachh Bharat Abhiyan and CSR spending by corporates. Q4 FY2016 is generally a strong quarter and this year there could be an improvement in Q1 FY2017 because of the 7th Pay Commission Recommendation. We remain positive on the company for the longer term since its business fundamentals have strong potential.
IDBI Capital Finolex Industries 450 367 23% We remain optimistic on company’s strategy to move into the PVC piping segment, increasing revenue share of high margin fittings, debt reduction and better working capital management. The stock currently trades at a 16.3x its FY2017 estimated earnings.
IDBI Capital the Ramco Cements 565 401 41% Strong growth prospects, highest EBITDA/tonne in industry amid cheap valuation make Ramco a compelling buy. Its performance is much better than its peers. Further, faster recovery in Southern market will help improve its performance. At EBITDA/tonne at Rs 1,488— Ramco looks like the best in India. Currently, the stock is trading at 9.5x FY18 consensus EV/EBITDA and we expect a sharp rerating in the stock.


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