Diwali 2017: Top investment picks from Geojit Research (2024)

According to Geojit Research, the top Diwali 2017 picks include names like Yes Bank, KNR Constructions, NBCC, Aurobindo Pharma, Tata Motors, JK Lakshmi Cement, Aarti Industries, Bharat Electronics and UPL.

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It was not the begining which investors or traders expected to be for Samvat 2074. The Nifty and the Sensex saw the biggest fall in recent years during the auspicious Muhurat trading day with the Nifty50 falling 64.30 points or 0.63 percent while the Sensex dipped 0.6 percent or 194.39 points. Bank Nifty was the biggest lower, down 1.25 percent led by ICICI Bank and Kotak Mahindra Bank.

Research and broking firm Geojit Research has come out with investment picks for Diwali 2017 which can give handsome returns.

Yes Bank: Rating: Buy CMP: Rs. 370 Target: Rs. 443 Return: 20%

According to the research firm, advances will maintain strong momentum and continue to grow ahead of industry. It factors advances to grow at 27 percent CAGR over the next two years. On robust business growth and stable asset quality, earnings are expected to grow at a healthy 25 percent CAGR over FY17-19E and deliver an ROE of 19 percent.

At CMP, the stock is trading at P/Adj.BV of 3.3x and 2.8x on FY18E and FY19E, respectively. Considering the positive outlook on the operating metrics, the firm believes that the stock is likely to trade at a premium over its historical average. Geojit values Yes Bank at 3.4x FY19E Adj.BV and recommend Buy with a target price of Rs 443.

KNR Constructions Ltd: Rating: Buy CMP: Rs. 208 Target: Rs. 242 Return: 16%

Geojit expects execution will ramp up as most of the projects are now operational which continue to construct growth. EBITDA margin improved by 317bps to 17.6 percent in Q1FY18 due to better operational performance. The company continues to maintain their order inflow target of Rs 2,000 crore to Rs 2,500 crore in FY18E which is a key trigger to monitor for re-rating.

Consequently, the firm expects order intake to grow at a CAGR of 35 percent over FY17-19E. With better visibility on execution and better operating performance, it increased FY18E/FY19E PAT estimate by 12 percent and 6 percent respectively.

NBCC: Rating: Buy CMP: Rs. 243 Target: Rs. 283 Return: 16%

According to Geojit, with pick up in execution we factored earnings to grow at 42 percent CAGR over FY17-19E supported by 60bps improvement in EBITDA margin. Considering the asset light PMC segment, less leveraged balance sheet and robust opportunities in the pipeline, NBCC will command premium valuation in the construction space. The research firm values NBCC’s core business at a P/E of 32x on FY19E and book value of land parcel at Rs 29/share to arrive at SOTP target price of Rs 283 and assign Buy rating

Tata Motors: Rating: Buy CMP: Rs.424 Target: Rs. 508 Return: 20%

Geojit projects JLR (ex-China) volumes to witness a healthy CAGR of 10 percent during FY17-19E driven by Z success and strong product pipeline. PV segmenth as witnessed traction with the success of recent launches including Tiago,Tigor and Nexon. PV standalone sales growth for the H1FY18 was12 percent YoY.

Exide Industries: Rating: Accumulate CMP: Rs. 205 Target: Rs. 234 Return: 14%

The research firm expects revenue and PAT to grow by 11 percent and 13 percent over FY17-19E led by pickup in industrial activities and incremental revenue from electric vehicle/solar segment. Considering the near term headwinds owing to high lead price, it values EIL at 19x on FY19EEPs of standalone business and insurance business at 1.6xFY19EV (Embeddedvalue) valued at Rs 36/share.

JK Lakshmi Cement Ltd: Rating: Buy CMP: Rs. 385 Target: Rs. 540 Return: 40%

According to Geojit, demand is likely to pick up in 2HFY18 post monsoon and it factors 14 percent CAGR in revenue and 310bps improvement in margin over FY17-19E. Margins will be supported by cost reduction initiatives such as commissioning of 7.5MW WHR (FY18), 20MW Thermal Power Plant (FY19) and Conveyor Belt in East plant. Increase in pet co*ke prices and government restriction on cement prices in East likely to impact margins in 1HFY18 but management expects the risks to soften in 2HFY18.

Cyient Ltd: Rating: Buy CMP: Rs. 539 Target: Rs. 621 Return: 15%

The research firm believes that revenue and PAT is likely to grow at 11 percent and 17 percent CAGR respectively over FY17-19E led by double digit growth in ER&D and telecommunication space. At CMP of Rs 539, the stock rades at a P/E of 15x and 13x on FY18E and FY19EEPS.We value the stock at FY19E P/E of 15x and a scribe at target price of Rs621 with a Buy rating.

Aurobindo Pharma Ltd: Rating: Buy CMP: Rs. 745 Target: Rs. 865 Return: 16%

US sales is anticipated to grow at a CAGR of 11.5 percent over FY17-19E driven by recently launched limited competition gRenvelatablets and new launches in Injectable and Oral solids segments . The management expects US injectable sales to grow in the range of 40-50 percent per annum for the next few years. European business to witness improved operating performance due to transfer of product manufacturing to India. ANDA filings for Injectablesstood at a robust figure of 80, of which 51 are already approved. Geojit expects EBITDA margin to expand by 90 bps YoY to 23.9 percent in FY19E while revenue and PAT to grow at a CAGR of 11 percent and 10 percent respectively, over FY17-19E.

Can Fin Homes Ltd: Rating: Buy CMP: Rs. 559 Target: Rs. 612 Return: 10%

Given the strong traction in loan book expansion and sustained healthy asset quality (Gross/Net NPA at 0.2 percent /0 percent as of FY17), the research firm expects the return ratios to improve further in the medium term. It projects Can Fin to deliver 2 percent + RoA over FY17-19E. Going ahead, initiatives by the government like “Housing for all by 2022” and incentive like credit linked subsidy scheme will drive the business growth for all HFCs and CFHL is well placed to exploit this growth opportunity.

Geojit expects NII and PAT to grow at a robust pace of 25 percent and 30 percent CAGR, respectively over FY17-19E led by strong loan growth (25 percent CAGR) along with stable asset quality .

UPL Ltd: Rating: Buy CMP: Rs. 803 Target: Rs. 887 Return: 10%

The research firm expects revenues to grow at 14.4 percent CAGR, while led by backward integration & better product mix, EBITDA margin to hover in the range of 20 percent-21 percent during FY17-19E. It expects EBITDA/PAT to grow at a strong CAGR of 17.4/13.7 percent over FY17-19 led by backward integration & better product mix. Geojit values UPL at P/E of 17x on FY19E with a target price of Rs 887.

Bharat Electronics Ltd: Rating: Buy CMP: Rs. 171 Target: Rs 195: Return: 14%

The research firm is of the view that order pipeline remains strong and it expects order inflow to grow by 15 percent CAGR over FY17-19E. More potential in earnings growth will emerge as per the progress of the recently initiated modernization & indigenisation programme. Given its robust order book & healthy order pipeline, it continues to maintain a strong Buy rating for the stock and values BEL at P/E of 22x on FY19E with a target price of Rs 195.

Aarti Industries Ltd: Rating: Accumulate CMP: Rs.900 Target: Rs. 1,027 Return: 14%

Geojit factors earnings to grow at 22 percent CAGR over FY1719E led by stable growth in speciality chemical business and strong growth from pharma business. Given healthy earnings outlook we value the stock at18x on FY19E, with a target price of Rs1,027 and maintain accumulate rating.