Diwali Muhurat is fast approaching. Several stock brokers / brokerage firms are recommending best muhurat Diwali stock picks for 2014. ICICIdirect, one of the leading stock brokers has indicated 7 best Diwali stock picks for 2014. It has recommended 5 stocks for 2013 Diwali stock picks and these are doing well. Angel Broking on the other side has recommended several Diwali stock picks. Edelweiss research firm has recommended 5 stocks for this Diwali. What are the these best Diwali stock picks for 2014 recommended by stock brokerage firms. What is the basis for their recommendations?
Best Diwali Stock picks from ICICI Direct
1) State Bank of India (SBI) (Current Market Price: Rs 2,526 and Target Price: Rs 3,234 – Expected upside – 28%)
State Bank of India is leading public sector bank in India, which has 15% and 18% market share in deposits and advances respectively. SBI is expected to grow CAGR 15% in FY16E. Supported by the strong liability franchise (14000 branches and 44% CASA ratio), its cost of funds (sub 6%) is among the lowest in the industry, which enables the bank to earn such strong NIM of 3.2% (domestic NIM – 3.5%) on such a large base.
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2) Ultratech Cement (Current Market Price: Rs 2,314 and Target Price: Rs 3,180 – Expected upside – 37%)
UltraTech Cement Limited is one of the geographically diversified leader in the Indian cement space with a capacity of 62.0 MT and market share of 17% in the domestic cement industry in India. It has good and better margins compared to its peer companies. In the last 5 years company sales grew at a CAGR of 30% and profit has grown by CAGR 18%. Further, UltraTech is aiming to reach its total capacity of 70 MT by FY16E, which would help it to maintain its leadership.
3) Rallis India Limited (Current Market Price: Rs 212 and Target Price: Rs 302 – Expected upside – 42%)
Rallis India Limited is part of Tata enterprise. Rallis India is a major crop protection (agro chemicals) player domestically with presence across the agricultural value chain, including hybrid seeds, plant growth nutrients and organic manure & soil conditioners. In the last 5 years company sales have grown at a CAGR of 18% and profit has grown by CAGR 11%. Expected that sales and PAT to grow at a CAGR of 16.8% and 21.6%, respectively, in next 3-4 years.
4) Exide Industries Limited (Current Market Price: Rs 164 and Target Price: Rs 220 – Expected upside – 34%)
Exide Industries is the largest battery manufacturer in India and largest supplier of batteries for motorcycles, passenger vehicles, trucks etc. With the estimated registered vehicles in India are nearly doubling to 12.3 Crore during last 10 years (up 83%), 9 Crore batteries are likely to be sold in next 3-4 years (considering three cycle replacement). Exide’s enviable network of 20,000+ retail touch points is the major factor in maintaining the leadership position in the burgeoning replacement segment.
5) SKF India Limited (Current Market Price: Rs 1,099 and Target Price: Rs 1,448 – Expected upside – 32%)
SKF India is the largest bearing manufacturer in India with an overall market share of 28%. Its deep groove ball bearings (forming 35% of its sales and 45% market share), SKF has an equal presence across the industrial (46% of sales) and automotive segment (54% of sales), spread across OEMs (55% of sales) and after market.
6) Maharashtra Seamless Limited (Current Market Price: Rs 306 and Target Price: Rs 430 – Expected upside – 41%)
Maharashtra Seamless (MSL) is a leading manufacturer of seamless and ERW pipes in India. In addition to the large diameter seamless pipe plant, MSL also manufactures higher value-added products, such as drill pipes used in the oil & gas sector.
7) Kansai Nerolac Limited (Current Market Price: Rs 1,845 and Target Price: Rs 2,396 – Expected upside – 30%)
Kansai Nerolac Limited is biggest industrial paint company in India which has a 35 % market share. Substantial growth is in decorative paints where revenue distribution is up to 55% in this segment for FY 2014. This would be one of the best Diwali stock picks for 2014.
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Best Diwali Stock picks from Angel Broking Recommendations
8) Axis Bank Limited (Current Market Price: Rs 379 and Target Price: Rs 501 – Expected upside – 32%)
Axis Bank, the 3rd largest private sector bank in India, has been focusing on retail business in the past few years. It has increased its branch network at a 24% CAGR from 1,035 in FY2010 to 2,421 branches as of Jun-2014 Quarter, which has aided the bank to maintain healthy growth in its low cost deposits (CASA ratio at 42% in 1QFY2015). The contribution of the retail advances to total advances has increased from 20% in FY2010 to 34% in 1QFY2015 (excluding retail, agriculture loans), out of which 88% of retail loans are secured. Focusing on secured retail products has also helped the bank to maintain its relatively better asset quality with a Net NPA ratio of 0.44% as of 1QFY2015, which is one of the lowest in the industry.
9) Banco Products Limited (Current Market Price: Rs 139 and Target Price: Rs 182 – Expected upside – 31%)
Banco is a manufacturer of radiators and gaskets that have applications in automobiles, oil engines, compressors and locomotives. The company is a leading exporter of aftermarket radiators in Europe, with a growing presence in the America, Middle East and African markets. The bank expected to register a CAGR of 15.0% in revenue over FY2014-16E to 1,536cr with an operating margin of 13.7% in FY2016E. The profit is expected to grow at a CAGR of 20.4% over the same period to `130cr in FY2016E.
10) Bank of India Limited (Current Market Price: Rs 239 and Target Price: Rs 310 – Expected upside – 30%)
PSU Banks such as Bank of India (BOI) are expected to be among the beneficiaries of an improved economic and policy environment. Further with inflation consistently declining and gross domestic savings once again entering into financial savings such as deposits, we expect interest rates to decline going forward. This is expected to improve the operating performance of banks such as BOI on all fronts, including credit growth, asset quality and treasury gains. In the last ten years, BOI has traded at an average P/ABV multiple of 1.1x and in the range of 0.7x to 1.4x. Currently it is trading close to its bottom average trading range in the last 10 years and at an attractive valuation of 0.5x of FY2016E, which is at a 44.4% discount to its peers like Bank of Baroda. We expect the valuation gap to narrow with improving fundamentals.
11) ICICI Bank Limited (Current Market Price: Rs 1,460 and Target Price: Rs 1,894 – Expected upside – 30%)
ICICI Bank, one of the large private sector bank in India with 3,763 branches has delivered a strong performance in the toughest banking environment. Gross NPA has decreased from 5.1% in FY2010 to 2.69% in Q1-FY15. Net NPA stands at 0.87% in Q1-FY2015 as compared to 1.87% in FY2010. The stock is trading at 1.9x to its FY2016 estimates which has potential to increase to 2.5x to its FY2016 estimates.
12) India Cements Limited (Current Market Price: Rs 108 and Target Price: Rs 146 – Expected upside – 35%)
One of the largest south player, India Cements stands at the 5th position in India. India Cements have installed capacity of 15.6 MTPA all over India. Since its presence is majorly in South India, due to political reasons in Telangana, the performance of this company was not good. Due to the Telangana issue being resolved now, this company should be able to improve its sales in the South. At the current market price of Rs 108 the stock is available at trailing EV/tonne of $63, which is at a large discount to its other Midcap peers. Given the improving macroeconomic scenario, stable pricing and expected pickup in demand, we are positive on India Cements and value it at the EV / tonne of $75 on FY2016E installed capacity.
13) Mangalam Cements Limited (Current Market Price: Rs 337 and Target Price: Rs 337 – Expected upside – 38%)
BK Birla group company, Manglam Cements has its plant in Rajasthan. It has installed capacity of 3.25 MTPA. At the current market price of Rs 244, the stock is trading at trailing EV/tonne of $49 (on its 3.25 MTPA installed capacity), which is at a large discount to its Midcap peers. New 1.25 MTPA capacity is expected to contribute significantly to overall production volume, is also expected to be more energy efficient. Thus there would be a further reduction in the cost of cement production for the company. The realizations are also expected to improve due to strong demand recovery in the cement sector.
14) Siyaram Silks Limited (Current Market Price: Rs 712 and Target Price: Rs 952 – Expected upside – 34%)
Siyaram Silks Limited operates into ready made garments which is a high margin business. It owns brands of Siyaram, mistair, MSD, Oxemberg, Zenesis and Moretti etc. We believe that with market leadership in blended fabrics, strong brand building, wide distribution channel, strong presence in tier II and tier III cities and emphasis on the latest designs and affordable pricing points, SSML will be able to post a revenue CAGR of 17.8% over FY2014-16E to Rs 1,810cr with an EBITDA margin of 11.1%. We expect the profit to grow at a CAGR of 32.4% over FY2014-16E to Rs 111cr. On account of the improved brand acceptance and strong profit growth, this is one of the Best Diwali Muhurat Pick for 2014.
15) Punjab National Bank Limited (Current Market Price: Rs 900 and Target Price: Rs 1,109 – Expected upside – 23%)
Punjab National Bank (PNB)'s loan growth in the last 2 years has been conservative at 5.1% and 13.1% in FY2013 and FY2014 respectively. However, with the economic cycle expected to turnaround, growth rate should pick up in FY2016. In the last ten years, PNB has traded at an average P/ABV multiple of 1.3x and in the range of 0.9x to 1.5x. Currently PNB is trading at a valuation of 0.8x FY2016 P/ABV. We expect the P/ABV multiple to expand over the next few years due to higher growth, better asset quality and return metrics.
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Best Diwali Stock picks from Edelweiss Research brokers
16) Larsen and Toubro (CMP 1,453)
17) Bharat Forge (CMP 752)
18) Biocon (CMP 468)
19) Natco Pharma (CMP 1,271)
20) Fincolex Industries (CMP 317)
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Suresh
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look at the diwali stock pick (2014) on christmas eve (2014). Almost 70% of portfolio running in loss.