Calendar year 2017 has been a great one for equity investors with the benchmark Sensex and Nifty giving 28% returns. Though the overall returns may not be that great in year 2018, investors would keep getting individual stock opportunities that could yield much higher returns. Markets, according to analysts, will watch out for earnings upgrades for companies following normalisation of economic conditions post GST, demonetisation and RERA related disruptions. Consumption, IT, capital goods and infra are some sectors to watch out for in 2018. Here are 18 stock picks for 2018 from the top six brokerages:
CMP: Rs 349 | Target Price: Rs 410
Nearly 50% of Dabur’s domestic sales comes from rural India – the highest proportion among FMCG companies – making it an ideal play on rural revival. Worries on wholesale channel due to GST implementation and rural sales are receding faster than expected.
CMP: Rs 1,836 Target Price: Rs 2,215
Nilkamal is a market leader with 32% share in the moulded furniture segment. The plastics division has grown consistently at 8.3% CAGR over FY12-17. The company has free cash fl ows with very low leverage with debt to equity ratio of 0.14 in FY 2017.
CMP: Rs 379 Target Price : Rs 458
Motherson Sumi is in a sweet spot to benefi t from evolving disruptive global automotive trends, which would drive its next wave of growth. It has strong organic growth opportunities. We expect return on capital employed to improve to 21.2% in FY 2020.
Bank of Baroda
CMP: Rs 151 Target: Rs 208
Given the management’s focus on cleaning up the balance sheet and laying the foundation for sustainable growth, the gradual improvement in asset quality will lead to better profi tability.
Can Fin HomesBSE -1.40 %
CMP : Rs 473 Target: Rs 612
Given the strong traction in loan book expansion and sustained healthy asset quality, we project Can Fin Housing to deliver 2% plus RoA over FY 2017-19.
CMP: Rs 723 Target: Rs 810
De-risking the utilisation in non-auto segment and ramp up of passenger vehicle sales will support growth. We expect BFL to trade at a premium valuation given its strong earnings outlook. We expect the earning to grow by 40% CAGR over FY17-19.
Asian Granito India
CMP: Rs 576 Target Price : Rs 640
The boost in the company’s profi tability in coming years is likely to lead to re-rating of valuation multiple. We reiterate our ‘BUY’ recommendation based on 25x FY19E earnings.
CMP: Rs 581 Target Price : Rs 624
Pre-engineered steel buildings sector is poised for growth with rising demand. Everest is well positioned to gain in tandem with industry growth.
CMP: Rs 1150 Target Price : Rs 1300
Post installation of 12MW WHRS at Satna, power cost will dip by 4% of total P&F cost. We estimate revenue to post 19% CAGR over FY17-19 estimated primarily led by higher volume and marginal growth in realisation. We have forecast 42%, 55% and 50% EBITDA, EBIT and PAT growth respectively over FY 2017-19.
CMP : Rs 1,201 Target Price : Rs 1,505
At EV/ EBITDA of 8.5 times, Indigo would trade at premium to global profi table peers. We believe Indigo deserves to trade at a premium as the underlying passenger traffi c growth for the industry is signifi cantly higher at CAGR of 9% over the next 20 years vs. Europe (4%), Middle East (6%) and US (2%)
CMP : Rs 1,355 Target Price : Rs 1,550
We see Endurance as the best way to play two-wheelers in India. Our target price of Rs 1,550 values the company at 15 times FY20 EV/EBITDA -a slight premium to its leading auto component peers.
CMP : Rs 579 Target Price : Rs 648
Godrej Agrovet has strong fi nancials with 40% PAT CAGR over past 7 years with minimal working capital requirement. We expect 20% PAT CAGR over FY 2017-21.
CMP: Rs 858 Target Price : Rs 975.
Despite a sharp upsurge in stock price during last six months due to improving fi nancials and healthy outlook, we believe that the stock still trades at attractive valuation considering a massive discount of 50% in FY20 estimated earnings against Bharat Forge.
CMP: Rs 269 Target Price: Rs 305
We expect the company’s market share in radial tyre segment to improve on the back of capacity expansion to meet the rising demand. Further, ATL is expected to benefi t immensely with the recent imposition of Anti Dumping Duty in Chinese TBR. Looking ahead, with the likely pick-up in utilisation from Hungary, we expect ATL’s European operations to witness improvement.
CMP: Rs 729 Target Price : Rs 851
Over the years, the company has laid strong foundation for growth by focusing on creating a strong brand, new product introduction, increasing distribution footprint and higher share of JVs. Kajaria is well-placed to capitalise on the burgeoning opportunity in tiles industry in coming years. Based on expected EPS of Rs 22.4, the stock trades at a reasonable PE multiple of 32.3 FY20 estimated earnings.
South Indian Bank
CMP: Rs 31 Target Price : Rs 38
The bank has adopted a strategy to increase exposure in retail & SME- high yield segments. At current market price, stock is trading at an attractive valuation of 1 times P/ABV of FY20.
CMP: Rs 134 Target Price: Rs 162
NCC Urban is monetising certain land parcels and repaid part of the debt taken from the parent during the current year. This is likely to bring down the consolidated debt of the company and reduce fi nance expenses further.
CMP: Rs 179 Target Price : Rs 199
The radio industry is expected to grow at an excellent rate going forward. It is rapidly becoming a medium of choice of advertisers. Digital Advertising is the fastest growing vertical in the Indian M&E industry and going forward, we expect high growth.