Markets have been hovering in the 26,000 points to 28,000 points for sometime now. Valuations continue to be slightly elevated as earnings have failed to gather any steam. However, there are a few stocks that can continue to gain and yield good returns in the more long term. Here are a few stocks that one can buy, keeping a long term perspective in mind.
Allcargo Logistics is a player in the container cargo and CFS and PE business. There are a number of reasons to be buying the shares of Allcargo Logistics. The company has a good cash surplus and recently announced a buyback of shares. This is likely to reduce the capital and boost the EPS of the company. That is not all. The Kolkata CFS is expected to go on stream in the last quarter of 2017, which is expected to boost the company's profitability even further.
The planned capacity had earlier been announced at 100,000 TEUs. AllCargo has also entered into a contract to manage and operate (M&O) with CWC's (Central Warehousing Corporation) at Mundra in Gujarat. All this is expected to boost the performance of the company going forward.
Valuations and rationale for investment
The company has very valuable land bank, which should benefit it when the dedicated rail freight corridor is complete. The company has a very strong balance sheet and is a likely beneficiary when GST is implemented. The company is way larger than peers, which should benefit it and its ECU Line gives it a big advantage vis a vis competitors. We believe that Allcargo can report an EPS of at least 16 in 2017-16, which makes the stock inexpensive at Rs 176. In fact, the stock is available at just 11 times one year forward p/e.
Equitas Holdings is a micro finance institution, which recently received license to set-up a small finance bank. The company had earlier this year gone public with an issue of shares and the shares were oversubscribed by 17 times. The shares are currently traded at Rs 165, which means those who had invested in the IPO have made decent returns.
Reasons for investing
There are many reasons to be investing in the stock of Equitas Holdings. The first is that the company has very low level of NPAs and has a robust recovery mechanism. The conversion into a small bank will benefit the company immensely. The stock is an excellent bet, if you have a long-term perspective in mind.
This is more of a speculative stock that can yield good returns. The stock was in the news recently as the company had expressed its intention to sell-off the SEZ. There was no information, whether this was speculative in nature, as the company had not sent any such notice to the exchange. There are a few things that could work for the stock. First is that the share price of the company has dipped from levels of Rs 80, to the current levels of Rs 60. The second is that the quarterly performance for the quarter ending Sept 30, 2016, was upbeat. The interest costs at the company dropped sharply.
Rationale for investment
The company owns some of the finest diamond and jewelery brands including Asmi and Nakshatra. The company reported a sharp jump in net profits for the quarter ending Sept 30, 2016 led by a decline in interest costs. We believe the company can report an EPS of Rs 8 for FY 2016-17, which translates into a p/e of just 8 times, one year forward earnings. This makes the stock a good pick at the current levels.
The article is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article. The author and his family do not own any shares in the above mentioned stocks.