- by Sayantan Das
- 26th Nov 2020
These 10 Stocks to Yield 16-53% Returns, Analysts Say
With the investors and sellers booking profits on November 25th, the benchmark indices saw selling pressure that day after a stellar run for around a fortnight. This, however, is not a thing to worry according to the experts who claim that such falls generally make bulls stronger to march ahead.
The day saw the indices correct 1.5% each after hitting their record high as Nifty crossed 13,100-levels intraday in the morning trade.
This was actually an expected consolidation after each of Nifty and Sensex rallied more than 70% from the March lows. The previous 14 sessions saw the indices rally over 10%.
The key driver of this rally is definitely foreign money. Improving macroeconomic data, more-than- expected earnings of the September quarter along with COVID-19 vaccines have also helped.
Chief Investment Strategist at Geojit Financial Services, VK Vijayakumar, said, “Declining dollar index is pushing FII flows and India is a major recipient of this huge capital flows. In November, till date, FIIs have invested a record Rs 55,553 crore in India. This frenzied buying is unprecedented. Even though lots of justifications - economic, political & policy-related- can be given for this massive global rally, the fact is that this rally is predominantly liquidity-driven. Mid-caps are likely to rise further,"
“Valuations are rich and in many cases approaching bubble territory,” he further added.
The expected growth in various sectors, especially after the latest quarter’s earnings and expected economic growth, coverage on several stocks have been begun by the brokerages.
Here are 10 such stocks:
● UTI Asset Management Company
With a buy rating and target price of Rs 700, JM Financial initiated coverage on UTI Asset Management Company. The company has many strong points now. It has a good brand recognition along with retail presence. The equity fund performance of the company is improving continuously. Cost moderation is also expected to drive up profitability. The above factors make UTI Asset Management Company a good place to invest in.
● Sudarshan Chemical
By operational efficacy, development of R&D capabilities, and expansion to new geographies, the company plans to become the third-largest pigment manufacturer globally. The brokerage said, "Two major global players shifting away from the pigment business could act as a tailwind for Indian pigment manufacturers. We believe SCIL is in a sweet spot to seize this opportunity by offering products similar to those of global players. We initiate coverage on the stock with a buy recommendation,"
● AU Small Finance Bank
With strong metrics and promising long-term outlook, AU Small Finance Bank is considered a good player by Sharekhan. The brokerage’s words were, “The bank caters to the niche below-radar borrower segment (low competition and blue-sky growth potential), has stable NIMs, and well-maintained asset quality,"
● Salzer Electronics
Khambatta Securities said," SEL registered a strong bounce-back in Q2 FY21 from the COVID-led slowdown in Q1 FY21. Going forward, management expects steady performance through the remainder of FY21. We have modelled resumption of growth in FY22 with margin improvement driven by expanding export revenues, better product mix and cost reduction. The company continues to focus on improving its working capital management, which will positively affect short-term borrowing requirement and consequently interest expense and cash flow," The brokerage also added that improvements are expected in the return ratios and solid earnings growth in FY22. They value SEL at 8.0x FY22E EPS at a price target of Rs 162.
● Sharda Motor Industries
Sushil Finance said," SMIL is a leading auto-ancillary company supplying exhaust and suspension systems to major OEMs. The company is well placed to be benefited from implementation of BS VI emission norms which rolled out from April 01, 2020. Further, the JV with Eberspaecher for production of exhaust systems for commercial vehicles is likely to drive the business. This debt-free company holds substantial cash; has healthy return ratios & strong growth prospects," Value-driven growth and rise in profitability are expected from the company on account of contributions from JV. The company is further expected to deliver an EPS of Rs 155.9 in FY23. A target price of Rs 1871 is arrived with a target multiple of 12x, with an 18-24 months investment horizon.
● V-Mart Retail
Dolat Capital said," V-Mart a leading value fashion retailer in UP & Bihar market (56% of store foot-print) is well-poised to capture the significant growth potential in tier 2-4 cities with aggressive store openings. V-Mart's ethos of prudence and agility, proactive costs, cash flows and vendor management during COVID, cluster-based approach of store expansions and debt-free BS provides the necessary ammunition to tap the large addressable market opportunities," It was further added that V-mart has aced the brick-and-mortar value fashion business. Sourcing, logistics and assortment, everything is excelled by them. Its ‘better fashion at better value’ or ‘Price “less” fashion’ concepts have been quite successful.
● Alkem Labs
A coverage on Alkem Labs was initiated by HDFC Securities based on a number of factors:
1. Given its dominant position in the segment of acute therapies, a recovery in the segment is likely to benefit Alkem Labs the most.
2. Higher growth and profitability will contribute to steady market share gains in chronic (in the last five years, it has been over +50 bps)
3. Around 20% contribution to FY23 EBITDA as compared to single-digit in FY20 would be the rising scale in US generics ($300 million, double-digit CAGR growth)
● Heidelberg Cement
With a buy recommendation and a target price of Rs 230, Axis Securities initiated coverage on Heidelberg Cement India.
The capacity of the company recently increased to 6.26 mntpa from 5.4 through the de-bottlenecking process. This will take care of the volume and revenue growth of the company for the upcoming two years and enhancing the revenue visibility in the process. Higher realization and controlled costs helped the company report decent Q2FY21 results despite marginally low revenue and volume on a YoY basis.
The brokerage said, “With the capacity expansion, presence in relatively better placed Central region, better monitoring of cost drivers and increased realization, HCIL is expected to report revenue, EBITDA and adjusted PAT CAGR of 8%, 14% and 19% respectively between FY20-FY23 driven by volume CAGR of 6.2% and improvement in realization CAGR of 2% between FY20-FY23. We see strong re-rating potential on the back of healthy growth,"
JM Financial said, “Order intake continues to be strong with company reporting net new wins of $360 million in Q2FY21 (versus $259 million QoQ/$ 174 million), marking the 3rd quarter in a row of over $200 million TCV bookings and providing confidence in growth momentum sustaining in the Direct business,"
They further said, “Company remains confident of its prospects citing strong pipeline (+75% YoY) and success at client mining which has reflected in strong client metrics performance and benefit at vendor consolidation exercises in recent past. We find valuations cheap on a relative basis at 18x FY21E P/E given solid growth momentum in the direct business and predictable margin profile,"
● Shree Digvijay Cement
Arihant Capital Markets said, “Company has been unique trendsetter in providing superior quality of ordinary & special Portland cement. Company has high growth potential in cement sector backed by 1) Strong Brand image; 2) Monopoly in oil well cement brand 3) Better operational efficiency 4) Good Management team,”
As per the expectations of the brokerage, the company is expected to grow at a CAGR of 10.6% over the FY20-22 as the improvement in realization along with the increase in cement demand is likely to help as infrastructure and construction activities start getting a boost. Better operational efficiency and low raw material cost would help margin improvement.