Markets have been trading in a range for the last few sessions. Brokerages have upgraded stock targets and the index levels for 2017. They see only a temporary aberration from the recent demonetization move to the overall demand consumption in the economy.
Markets may still be overpriced
Markets at the current levels of 26,400 points on the Sensex may be a little overpriced in terms of p/e multiples. In fact, the Sensex p/e multiple at near 20 times, is much higher than the long-term average of 17 times. Hence, if you are deploying cash now, you would have to do so carefully and that too in small amounts, since markets have rallied a bit. Here are a few stocks that brokerages are recommending to buy for 2017 and beyond.
Brokerage firm Ajcon Global sees many positives in the Cipla stock. It feels the new launches would benefit the company in the years to come.
Leveraging the front-end in the US market, the company plans to launch 10-15 products. It has a target of filing 20-25 ANDAs (Abbreviated New Drug Applications) in the current financial year for drugs going off-patent. Ajcon expects the execution of the InvaGen pipeline and continued approvals in Cipla DTM (direct-to-market) to ramp up the US revenue to about $500 million by FY18, which should help improve base business margin over FY18-19. The firm says that exiting difficult markets and the ongoing additions to the respiratory markets should help the company in the years to come. Ajcom Global also believes that the company had a decent quarterly performance for the quarter ending Sept 30, 2016.
"At CMP, the stock is trading at a P/E of 31x FY16 EPS. We recommend a "BUY" on the stock with a price target of Rs. 700 (assign a discounted multiple of 28x at street estimated FY18 EPS of Rs. 25) an
upside of 22%, over a period of 3 months," the firm has stated in its research report.
Larsen and Toubro
Broking firm Geojit BNP Paribas is bullish on the stock of Larsen and Toubro. Robust order book, improvement in net working capital (NWC) coupled with L&T's efforts to unlock value from investments augur well for L&T. Geojit says that the financial performance for the quarter ending Sept 30, 2016 was stable and the results of the company were largely in line with estimates.
Valuations for L&T
Geojit has maintained its positive stance on the stock as L&T remains a default pick in India infrastructure play.
"We value the stock on SOTP basis with TP of Rs1,589, ascribing Rs 1,268 to the core E&C business and Rs 321 to the subsidiary portfolio. Notably, we upgrade the stock to ‘BUY', from earlier ‘HOLD'," the firm has said in its research report.
Axis Capital is positive on the stock of Balkrishna Industries and has set a price target of Rs 1213 on the stock. The company remains bullish after the recent conference call with the management after which the management guided on a 8-15 per cent volume growth across geographies. The firm has said that the management indicated the Bhuj facility will see benefits of lower freight cost coupled with some operating leverage benefits as capacity ramp-up.
"We increase FY17/18 EBITDA estimates by 9%-13% on strong results, and reiterate BUY with TP of Rs 1,213 (15x FY18E EPS) vs. Rs 1,019 earlier," the firm has said in its research report.
Disclaimer: The contents of the article is sourced from the research report of Brokerages. The article is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates, the brokerage firms 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.