Markets have gone higher a great deal and one has to really find value stocks that can add to the portfolio. Here are select stocks that can be great long term value picks in India. These picks are largely from some of the top broking houses in the country.
ICICI Direct is bullish on the stock of Mangalam Cement and has suggested a buy rating on the stock with a target price of Rs 340.
The brokerage sees higher budgetary allocation towards infrastructure, roads and affordable housing to boost cement demand over the coming years. Revival in cement demand coupled with capacity expansion of 0.75 MT (i.e. 23% of capacity) is expected to result in 15.1% CAGR in revenues over FY16-18E.
"In addition, freight cost rationalisation, VAT incentives in Rajasthan and fuel cost savings are expected to boost margins. We expect the EBITDA margin to improve from 4.1% in FY16 to 15.1% in FY18E. At the CMP of Rs 293, the stock is trading at an attractive valuation of 6.0x FY18E EV/EBITDA and an EV/tonne of US$42. Hence we maintain BUY with a revised target price of Rs 340/share (i.e. at 7.0x FY17E EV/EBITDA and EV/tonne of US$48)," the firm has stated in its research report.
Centrum has suggested a buy rating on the stock of Lupin Laboratories. The pharma major's Goa facility has been cleared by the US FDA and Centrum believes the company's robust growth across key markets coupled with Lupin+Gavis' strong pipeline of 344 ANDAs will drive future growth.
"Key positive risk to our assumptions would be strong growth in the US market and key negative risk would be slower growth in the domestic market. We maintain our Buy rating on Lupin Ltd with a target of Rs 1,880 (earlier Rs 1,810), based on 23x March'19 EPS of Rs 81.9," the firm has said.
Renowned brokerage firm Edelweiss has placed a buy call on Deepak Fertlizers. With commissioning of new complex fertiliser plant, higher chemical margins and gas issues getting addressed the firm sees a good growth for the company. "With growth coming back and return ratios back on uptrend, we raise our target multiple to 9x FY19E (from 6x) and arrive at target price of of Rs 308 (Rs 190 earlier). Maintain ‘BUY', " the brokerage firm has said in its research report.
Edelweiss has maintained a buy rating on the stock of Tata Power.
"We maintain our estimates and reiterate ‘BUY' with TP of Rs 85. However, FY17E gross debt: equity at 2.4x remains a challenge. For us, the key trigger remains the Supreme Court's ratification of the CERC compensatory tariff recommendations. Even otherwise, looking at coal index, tariff escalations for Mundra project next year could recoup 50% of the losses," the firm has said in its research report. The firm sees deleveraging as the key in the future.
"At current market price, the stock is trading at 1.2x FY18E and FY19E P/BV. We maintain buy, with a target price of Rs 85," the firm has said in its report.
Rama Steel Tubes
Khambatta Securities has recommended buying the stock of Rama Steel Tubes in its recent research report. The firm sees a good potential from operating efficiencies and good demand.
"At the CMP, the stock trades at a P/E multiple of 18.4x/15.3x/13.0x FY17/FY18/FY19 EPS. With focus on expansion to high demand market, operating efficiencies and value added products, we expect the Company to deliver better results in the future. We continue to recommend BUY on the stock with our price target of Rs 165 (16.3x on FY19E EPS), an upside potential of 25 per cent," the firm has stated.
State Bank of India
K R Choksey is bullish on the stock of State Bank of India and has a buy rating on the stock with a target price of Rs 324. K R Choksey believes the bank had a stable quarter.
"While the credit costs are expected to stay on the higher side ahead, the resilient balance sheet backed up with further capital strengthening and healthy core operating metrics continues to reinforce our confidence. We maintain BUY rating for the stock," the firm has said.
Union Bank of India
K R Choksey has maintained an accumulate on the stock of Union Bank. "While the asset quality concerns still in place, we maintain accumulate recommendation given that the bank is yet not out of woods and may continue to witness earnings pressures. We upgrade our target price to Rs 166 valuing the bank at 1x P/ABV FY18E. Currently, the stock trades at mere 0.9x P/ABV FY18E," the firm has said.
The article is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates, the author and the brokerage firms 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.