Sensex down 2K from 52-wk high, time to go cherry-picking: 5 stocks to look at
The S&P BSE Sensex might be down over 2,000 points from its 52-week high of 29,077 hit in September 2016 and about 800 points since the government announced demonetisation on November 8.
But that might be what some of the discerning investors were waiting for to buy quality stocks on dips.
“Staying on the sidelines is not the best strategy. So cherry-picking is the name of the game,” Sindhu Sameer, Emkay Global Financial ServicesBSE -1.52 %, said in an interview with ETNow.
“The first derivative of demonetisation is demand destruction. If you are ready to look beyond six months, then there is definitely some good news out there and good developments are about to happen, and will happen,” he said.
In separate notes to their clients, global brokerage firms such as CLSA, Goldman Sachs and Credit Suisse have maintained either buy or outperform ratings on the following five stocks.
CLSA has maintained a buy recommendation on IPCA Laboratories BSE 0.91 % and raised its 12-month target price to Rs 650 from Rs 500 earlier. The India business is well placed to grow in double digits over the next few years with improved therapy mix, the CLSA note said.
A pickup in export formulations was weaker than expected which resulted in slower EBITDA margin expansion. While USFDA resolution will take time, regulatory compliance with other agencies is likely to help capacity utilisation.
Maruti Suzuki India: Buy | Target price Rs 6,246
Goldman Sachs added Maruti Suzuki to its conviction list with a 12-month target price of Rs 6,246. The global investment bank believes that Maruti has enough firepower with order backlog, launches, and lower inventory.
Maruti will not only protect volumes, margins but also gain market share, said the Goldman note. The global investment bank sees market share gains back to 14 yr highs in the medium-term.
NTPC: Outperform | Target price Rs 180
Credit Suisse has maintained an outperform rating on NTPC with a 12-month target price of Rs 180. The global investment bank expects NTPC to attain installation target of 4880MW in FY17.
Several states are power surplus and are reluctant to start paying fixed charges. It personally finds stock unexciting, but contextually is well placed as the beneficiary of falling yields and instability. Credit Suisse also prefers Power GridBSE -0.48 % as well as NTPC which have given stronger RoE and growth visibility.
Tata Motors: Buy | Target price Rs 585
CLSA has maintained a buy rating on Tata Motors but slashed its 12-month target price to Rs 585 from Rs 635 earlier. The UK subsidiary, JLR should deliver strong mid-teens volume growth over FY18-19 driven by strong product pipeline.
The margins for the first half of the financial year disappointed but CLSA believes that weak-GBP driven margin surge is a question of when and not if. The India business outlook clouded by demonetisation and the global investment bank expects business to turn profitable only by FY19.
It slashed FY17-18 earnings per share (EPS) by 16-37% factoring in 2Q results miss and demonetisation impact. However, after recent share price decline, the valuations appear attractive at seven times 19CL PE.
Adani Ports: Buy | Target price Rs 375
CLSA has maintained a buy rating on Adani Ports with a 12-month target price of Rs 375. ADSEZ has a master plan to increase the capacity of Dhamra port to 315mt vs 27mt currently which will act as key positive for the stock.
Dhamra’s cargo mix, growth trajectory should start to resemble that of Mundra. Dhamra as a strategic asset is a play on ‘value migration’ in the ports sector, said the CLSA note.