India Markets open in 4 hrs 54 mins

These top 10 stocks can return up to 55% in 1 year

Sunil Matkar
1 / 1

Podcast | Stock Picks of the Day: 3 buys that could return 7-8%

The index is currently trading above its 20, 50, 100 and 200-day daily moving average, indicating a bullish trend on all time frames. It has been forming higher tops and bottoms on the daily charts, confirming a bullish set up.

Moneycontrol News

After a recent run-up, the market has been consolidating as investors digest outcome of the Karnataka election. It has started monitoring corporate earnings and the movement of the rupee and crude oil prices.

The rupee stabilised after hitting a fresh 16-month low of 68.15 against the dollar while the crude oil prices inched towards the $80 per barrel.

Analysts feel India, which imports more than 80 percent of its oil requirements, can manage to absorb up to $80 per barrel but beyond that it could be a major risk. “Along with geopolitical tensions, crude, rupee-dollar and rising US bond yields are some major risk to India.”

However, they are betting on an earnings recovery in FY19.

Nomura too is betting on an earnings recovery to take markets higher.

The global investment bank sees Nifty hitting fresh record highs in 2018. It expects the index to surpass its earlier record high of 11,171 recorded in January. “We see the Nifty scaling levels of around 11,380 by December,” it said in a strategy note.

Here is the list of 10 stocks that can return up to 55 percent over the next 12 months:

Brokerage: HDFC Securities

Lupin: Buy | Target - Rs 1,190 | Return - 55%

After taking Gavis acquisition related impairment of Rs 1,400 crore, Lupin reported loss of Rs 780 crore in Q4FY18. Adjusted for Gavis write off, PAT stood at Rs 350 crore, in line with estimates.

Lupin's US business performance was encouraging as revenues grew 5 percent QoQ to USD 224 million in Q4FY18. It was largely led by new product approvals during last two quarters and strong flu season. Although gSynthroid approval has been delayed to second half of FY19, we expect Lupin's US revenues to grow at least in mid-single digit in FY19, along with strong double digit growth in emerging market segments (including India).

With moderated R&D spend (10 percent of sales) and lucrative opportunities like gRanexa and gSythroid, we expect Lupin to largely maintain EBITDA margin in FY19. Lending strong support from valuations (20x P/E on FY18 EPS, 19x FY19E and 13x FY20E) which is at significant discount to peers, we maintain Buy rating on the stock with a target price of Rs 1,190 (20x FY20E).

Brokerage: Prabhudas Lilladher

RPP Infra Projects: Buy | Target - Rs 379 | Return - 50%

RPP reported strong result in Q4FY18 led by better execution and improved margins. The company achieved its guidance of Rs5bn sales and Rs 1,200 crore order book for FY18. It is guiding for Rs 700 crore sales and Rs 1,600 crore order book for FY19.

Positives also included improvement in working capital by 26 days led by significant reduction in debtor’s days. It further expects to reduce working capital by 10-15 days in FY19.

We believe the company is a good play on government’s increasing focus on improving rural infrastructure. We expect RPP to deliver sales and PAT CAGR of 31/35 percent, respectively, over FY17-20E. We maintain Buy at a target price of Rs 379.

Brokerage: ICICI Securities

Magma Fincorp: Buy | Target - Rs 230 | Return - 26%

Magma Fincorp was trading at subdued valuations due to its slippages from FY14 and peaking in FY16. The stock is currently trading close to 1.9x trailing book value and 1.5x FY20E book value. Considering the strong retail portfolio with 60-65 percent book classified for PSL category offering securitisation benefits, these valuations look reasonable.

We believe that for return on equity of 11-12 percent and return on assets of more than 2 percent by FY20, the stock can trade at 2.3x FY20 P/ABV. Exposure to general insurance business through Magma HDI remains an added positive.

Factoring in the new focused management and improving margins and return ratios we value Magma at Rs 230 per share, i.e. 2.3x ABV and 16x P/E on an FY20E basis. We have a Buy recommendation from a 12-15 month’s perspective.

Magma Fincorp was incorporated in 1988 and began by offering vehicle and equipment financing solutions to individuals and small businesses in India. It later included commercial vehicle, tractor finance, SME loans as well as insurance.

Brokerage: Edelweiss

Karnataka Bank: Buy | Target - Rs 163 | Return - 39%

Karnataka Bank (KBL) reported Q4FY18 PAT of Rs 11.8 crore, lower than estimate on higher credit cost, even while core profitability surpassed estimate. Slippages rose to more than 9 percent given RBI's recent asset reclassification norm and divergence impact.

Operationally, Q4FY18 clocked improving performance and was characterised by better revenue traction and controlled opex (up less than 8 percent YoY). Key monitorables: a) soft CASA accretion

(less than 7 percent YoY) at sub-28 percent; and b) around 40 percent coverage ratio, which will keep credit cost high.

While better revenue traction and controlled opex are likely to aid operating profit growth, elevated credit cost could cap earnings growth. However, higher share of retail (around 45 percent) and current valuation of 0.7x FY20E P/ABV lend comfort. Maintain Buy.

JSW Steel: Buy | Target - Rs 390 | Return - 16%

JSW Steel’s (JSTL) Q4FY18 EBITDA (adjusted for VAT incentives for prior years) came 11 percent ahead of consensus driven by better spreads.

Going ahead, we are upbeat on the company’s hunger for growth led by: 1) capacity addition of 6.7mt via INR444bn capex commitment through to FY21E; 2) USD 500 million investment in a US pipe & plate mill through to FY21E; 3) acquisition of 3mtpa Acero Junction Holdings in the US; and 4) potential acquisition of Lucchini Rail mill in Italy.

Taking cognizance of Q4FY18 numbers, we revise up FY19/FY20E EBITDA 5/14 percent. Maintain Buy with revised target price of Rs 390 (earlier Rs 340), implying exit multiple of 7x FY20E EBITDA. At CMP, the stock is trading at 6.5x FY20E EBITDA.

ACC: Buy | Target - Rs 1,817 | Return - 29%

ACC, a leading brand with pan India presence (8 percent market share), is set to benefit from the expected rise in industry clinker utilisation. While ramp up of its new Jamul unit led to 14 percent volume growth in CY17 (fastest in past six years), in the absence of fresh capacity addition, volume growth is expected to moderate to around 5 percent CAGR over CY18-19.

However, on upcoming cement price hikes (mirroring rise in industry clinker utilisations), EBITDA is estimated to increase at 16 percent CAGR over the mentioned period. With plans to merge ACC with parent company, Ambuja Cement (ACEM) shelved, both companies have agreed to enter into a master supply agreement (MSA) to trade goods and services.

While initial synergy benefit estimates (around 3-5 percent of PBT) appear insipid, calling off the merger will see both players pursuing expansions independently – a medium to long term positive. Factoring in strong balance sheet (around Rs 2,600 crore net cash) and return on equity (RoE) improvement, we value ACC at 12x CY19E EV/EBITDA. Maintain Buy with a target price of Rs 1,817.

JK Cement: Buy | Target - Rs 1,209 | Return - 26%

JK Cement (JKCE) is favoured mid-cap play owing to: 1) superior RoEs (around 16 percent) despite sub-optimal profitability in grey cement (around 50 percent of EBITDA) at less than Rs 500 per tonne; and 2) undemanding grey cement valuation of USD 78 FY19E EV/t (assuming 10x FY19E EV/EBITDA for white segment) turning further attractive to around USD 47 post completion of 4.2mtpa capex by FY20E end.

While JKCE has yet to finalise its capex funding mix, we see little cause for concern over potential equity dilution (if any).

Our scenario analysis, assuming around 7-10 percent equity dilution (around Rs 500-700 crore fund raising), suggests no major change to target price. While increase in net debt levels is inevitable (irrespective of funding mix), we believe the rocksteady white segment entails potential to cushion against any volatility in grey cement.

Calibrating for FY18 performance, recent trends in cement prices and fuel costs, while we prune FY19E EBITDA by 6 percent, we keep it largely unchanged for FY20E. Maintain Buy with target price of Rs 1,209.

Shree Cement: Buy | Target - Rs 20,544 | Return - 25%

Shree Cement (SRCM) is an investors' delight given positives like: 1) continuous gain in market share; 2) sharp focus on cost driving margins superior to peers; and 3) sustainable high RoEs (more than 17 percent). SRCM will also benefit from ~70% capacity exposure to North region where industry clinker utilisations are turning lucrative.

SRCM recently announced an acquisition of UAE-based Union Cement Company (UCC) at enterprise value (EV) of USD 305 million (EV/t of USD 76). Given strong balance sheet (net cash of around Rs 2,900 crore in FY17) and robust cash flows, there could be concerns of future global acquisitions.

However, these are overplayed as: a) management is focused to generate RoEs (for acquired companies) at least at par with the investment yield; and b) there’s no compromise on capex for targeted volume growth in India.

With multiple positives, we value SRCM’s robust India business at 16x FY20E EV/EBITDA and UCC at 8x. Maintain Buy with target price of Rs 20,544.

Muthoot Finance: Buy | Target - Rs 568 | Return - 35%

Muthoot Finance reported in-line PAT of Rs 450 crore (flat QoQ) in Q4FY18. Key highlights: a) modest gold loan AUM growth due to weak underlying demand; b) revenue momentum sustained benefiting from lower borrowing cost & higher recoveries from six-months’ overdue loans; c) borrower-wise classification norms led to further rise in GNPLs to 7.0 percent (5.6 percent in Q3FY18); and d) Cenvat credit (Rs 16 crore) & redemption of ULIP (keyman insurance of Rs 30 crore) supported earnings.

Muthoot’s other businesses—home finance, Belstar, insurance broking—scaling up well (10 percent of AUM). Given stability in the business along with RoA/RoE profile of more than 5/20 percent, we maintain Buy.

Tata Steel: Buy | Target - Rs 903 | Return - 45%

Tata Steel’s (TSL) Q4FY18 EBITDA at around Rs 6,500 crore surpassed consensus estimate, despite certain operating challenges, due to highest-ever standalone EBITDA of Rs 4,800 crore and domestic EBITDA per tonne of Rs 15,872—highest in 25 quarters.

Going ahead, we envisage the performance to improve as: 1) Kalinganagar (KPO) is back on track post an unscheduled shutdown in February; 2) Tata Steel Europe’s (TSE) downstream units are back on track; and 3) stable spreads in domestic & overseas operations.

In the medium term, we see following drivers: a) value realisation from the Bhushan Steel transaction; and b) definitive agreement with ThyssenKrupp (TK) on JV for European assets. Maintain Buy with target price of Rs 903, implying an exit multiple of 7.0x FY20E EBITDA.

Disclaimer: The views and investment tips expressed by investment experts on are his own and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.

  • Dow, S&P fall as earnings season picks up; tech boosts Nasdaq

    Dow, S&P fall as earnings season picks up; tech boosts Nasdaq

    The S&P 500 and the Dow fell in choppy trading on Monday as energy and financial stocks lost ground and caution grew ahead of a slew of earnings reports this week. Technology sector gains limited losses on the S&P 500 and helped to lift the Nasdaq. The beaten-down S&P technology index was up 0.8 percent

  • Dow, S&P 500 fall as dollar rises, yield curve flat

    Dow, S&P 500 fall as dollar rises, yield curve flat

    U.S. stocks closed lower after choppy trade on Monday, as some investors showed signs of earnings season nerves, while political worries in Europe led the dollar to strengthen against the euro and sterling. The euro continued its slide on uncertainty over Italy's budget and the British pound fell

  • Royal-Enfield Interceptor 650, Continental GT 650 bookings open in India

    Royal-Enfield Interceptor 650, Continental GT 650 bookings open in India

    The Royal Enfield Interceptor 650 and Continental GT 650, set to launch in India next month, are now available for pre-orders. Royal Enfield dealers have started accepting bookings for the bikes for a token amount of Rs. 5,000. Notably, dealers have promised deliveries in mid-December but this still

  • Why you should choose credit cards over debit cards

    Why you should choose credit cards over debit cards

    On the surface, both credit and debit cards are almost identical- both are plastic money, carry 16-digit card number, expiry date and PIN codes.The difference lies in the way they function. With debit cards, you use your own funds available in your bank accounts, but with credit cards you borrow money

  • Gold falters as rising dollar dents appeal

    Gold falters as rising dollar dents appeal

    Spot gold fell 0.3 percent to $1,222.13 per ounce at 14:46 p.m. EDT (1646 GMT), having hit a 2-1/2-month peak last week at $1,233.26 per ounce. U.S. gold futures fell 0.3 percent to $1,224.80. "The strength of the dollar and the gold market's inability to trade above the 100 day moving average

  • Stocks To Watch: Asian Paints, Syndicate Bank, Welspun
    Bloomberg Quint

    Stocks To Watch: Asian Paints, Syndicate Bank, Welspun

    Here are the stocks to watch in Tuesday’s trading session.

  • Sujangarh Mahotsav: Connecting people to their cultural roots

    Sujangarh Mahotsav: Connecting people to their cultural roots

    In a bid to revive the connection with their roots, a number of Non-Resident Indians and migrated residents flew back to attend a 3-day festival 'Sukshem' in Sujangarh city of Rajasthan.The event graced 40 renowned personalities from Sujangarh who are acclaimed worldwide for their contribution

  • Dear Corporate India, Your Silence On #MeToo is Deafening
    The Quint

    Dear Corporate India, Your Silence On #MeToo is Deafening

    Why are India’s corporates and corporate honchos silent on #MeToo?

  • Netflix adds to growing debt pile with $2 billion bond issue

    Netflix adds to growing debt pile with $2 billion bond issue

    Netflix Chief Executive Reed Hastings has been explicit about the Los Gatos, California-based company's plan to fund content acquisition by raising debt. "We'll continue to finance our capital needs in the high-yield market," Hastings wrote in his second-quarter shareholder letter.

  • SEBI Issues Framework On Total Expenses, Performance Disclosure Of Mutual Funds
    Bloomberg Quint

    SEBI Issues Framework On Total Expenses, Performance Disclosure Of Mutual Funds

    SEBI asked AMCs to adopt full trail model of commission in all schemes without payment of any upfront commission.

  • Yandex shares fall on Russian plan to curb foreign ownership of news division

    Yandex shares fall on Russian plan to curb foreign ownership of news division

    Shares in Russian search engine Yandex fell on Monday after a report from the Interfax newsagency said the government was proposing to limit foreign ownership in online news aggregators to 20 percent. Shares in Yandex N.V., the parent company of Yandex group which is registered in Netherlands, were

  • Finance

    Syndicate Bank receives Rs 728 cr capital infusion

    Mumbai, Oct 22 (IANS) Public sector lender Syndicate Bank has received a capital infusion of Rs 728 crore from the Central government. The bank informed the BSE in a regulatory filing on Monday that the capital infusion has been made towards contribution of the Central government in the preferential

  • Vigilance Commission’s TM Bhasin On Loopholes That Lead To Banking Frauds
    Bloomberg Quint

    Vigilance Commission’s TM Bhasin On Loopholes That Lead To Banking Frauds

    Banks, related authorities need to carry out ground-level checks to combat frauds, said the Vigilance Commissioner of India.

  • Finance

    Welspun India's Q2 consolidated net profit up by over 21%

    Mumbai, Oct 22 (IANS) Home textiles firm Welspun India on Monday reported a rise of 21.38 per cent in its consolidated net profit for the second quarter (Q2) of 2018-19. As per the company's regulatory filing to the BSE, the consolidated net profit during the period under review rose to Rs 121.69

  • Former CBI ‘Insider’ Calls For Removal Of Two Top Feuding Officers
    Bloomberg Quint

    Former CBI ‘Insider’ Calls For Removal Of Two Top Feuding Officers

    CBI should not be burdened with investigating their own, says agency’s former Joint Director Shantonu Sen.

  • Finance

    Global sugar supply to turn to deficit in 2018/19 - Datagro

    The global sugar supply balance is expected to swing to a deficit in the 2018/19 season, a change from earlier forecasts for another year of surplus, Sao Paulo-based consultancy Datagro said on Monday. Datagro now sees a 710,000-tonne supply deficit, compared to a previous projection for a surplus of

  • Three Held For Blackmailing Paytm Boss With Stolen Personal Data
    Bloomberg Quint

    Three Held For Blackmailing Paytm Boss With Stolen Personal Data

    Two Paytm employees were among three arrested for allegedly trying to extort Rs 20 crore from the company’s founder Vijay Sharma.

  • Finance

    Libya's NOC says production has increased at Abu Attifel oil field

    Libya's National Oil Corporation has increased output at the Abu Attifel field, a company statement said on Monday. Enhancement and maintenance work carried out by Mellitah Oil and Gas, the operator of Abu Attifel, increased condensate production by 2,000 barrels per day to 9,500 bpd, NOC said.

  • Finance

    Piramal Group refutes rumours of loan defaults by developers

    Mumbai, Oct 22 (IANS) Piramal Enterprises (PEL) on Monday strongly refuted as "baseless rumours" reports of loan defaults by real estate developers to its lending arm Piramal Capital & Housing ...

  • Finance

    ReNew Power to set up 3 MW floating solar project in Vizag

    Gurugram, Oct 22 (IANS) Private renewable energy producer ReNew Power said on Monday that it has won an order for developing a 3 MW floating solar photovoltaic (PV) project in Visakhapatnam in Andhra Pradesh. ...

  • Is The CBI At War With Itself?
    Bloomberg Quint

    Is The CBI At War With Itself?

    Is The CBI At War With Itself?

  • Finance

    Italian rating relief short lived as European shares turn lower

    European shares fell at the end of a choppy trading session on Monday, as relief over Moody's decision to keep Italy's sovereign rating outlook stable proved short lived and the focus turned to Europe's response to Rome's budget plans. The European benchmark index had risen as much as

  • Oil little changed despite Saudi pledge to boost output

    Oil little changed despite Saudi pledge to boost output

    Oil futures were little changed on Monday after paring earlier losses despite Saudi Arabia's pledge to raise crude production to a record high, two weeks before U.S. sanctions potentially choke off Iranian supplies. Saudi Energy Minister Khalid al-Falih told Russia's TASS news agency that his

  • Finance

    Mexico to consider all actions in response to Canadian steel tariffs

    Mexico will consider all possible actions in response to Canadian steel tariffs, including the possibility of going to the World Trade Organization, Deputy Economy Minister Juan Carlos Baker said on Monday. ...

  • Harris Associates takes 3.08 percent stake in Thyssenkrupp

    Harris Associates takes 3.08 percent stake in Thyssenkrupp

    United States-based fund manager Harris Associates L.P has taken a 3.08 percent stake in ThyssenKrupp, a regulatory filing on Monday showed, as the German conglomerate struggles to reform itself amid activist pressure. Harris declared it had accumulated the stake on October 15, according to the filing