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3 Stocks That Have The Potential To Deliver Superior Returns


Markets are just 3-4 per cent away from peak levels hit in the month of Jan 2018. Here are a few stocks that have some steam left and have the potential to deliver returns. Most of these stocks have been recommended from top brokerage houses in the country.


Motherson Sumi

Brokerage firm Motilal Oswal has placed a "buycall" on the stock of Motherson Sumi with a price target of Rs 423. Motherson Sumi is a top player in the auto ancillary business, supplying to leading auto players across the globe.

3 Stocks That Have The Potential To Deliver Superior Returns
Motilal Oswal has noted that the company has the highest-ever order book of EUR17.2 billion as on FY18. PKC -contribution from 3rd Chinese JV with Zhengao (40% stake) supported revenues in this quarter.

"PKC performance to be at par with other wiring harness businesses in 2-3 years, led by rising backward integration. We maintain FY19/20E EPS, as the easing impact of start-up cost (with the start of Hungary and other plants in 1Q/3Q) partially dilutes the impact of lower PKC margins. Stock trades at 26.4x/18.7x FY19E/20E consolidated EPS. Maintain Buy with target price of Rs 423 (25x Mar'20 consolidated EPS), Motilal Oswal has maintained.

JK Lakshmi Cement

J M Financial has recommended a buy rating on the stock of JK Lakshmi Cement. The company is one of the top producers of cement in the country.

J M Financial has noted that the company has 20MW of thermal power plant in Durg is expected to come on stream in 3QFY19, which should give Rs 70 to 80 per tonne of benefit to the company.

The company is currently using 85% petcoke in its Northern operations and 70% in Eastern operations (coal linkage available to the company in the East);

"Average petcoke cost for the company in 4QFY18 was Rs 7,500 per tonne. As on 31Mar'17, net debt stood at Rs 15.5bn in the standalone entity. Maintain buy as JK Lakshmi is currently trading at 9.8/7.5x FY19/20E EV/EBITDA adjusted for UCW. We value the stock at 10x standalone EV/EBITDA and adjusting the UCW stake to arrive at a target price of Rs 510 (Mar'19). We maintain BUY," JM Financial has stated.


Petronet LNG

KR Choksey has a buy rating on the stock of Petronet LNG with a price target of Rs 209 in its latest research report.

"We believe that a gradual ramp up of the domestic gas processed, expansion of the Dahej terminal and improvement in the Kochi terminal volumes post completion of the Kochi Mangalore pipeline will be the key triggers of the company in the coming quarters which help to significantly improve the top-line and profitability. We have revised our estimates to factor in the increasing volumes from the Dahej terminal and increasing ramp-up from the Kochi terminal.

We expect revenues to grow at a CAGR of 17% over FY18-20E and EBITDA to grow at a CAGR of 17.6% over FY18-20E. At a current market price of Rs 213.2 Petronet LNG is trading at an attractive valuation of 11.2x FY19E EPS and 11.0x FY20E EPS. We valued the company by assigning a P/E multiple of 15x on the FY19E EPS of Rs 19 and arrived at a target price of Rs 285 (potential upside - 33.6% ). We maintain BUY rating on the stock," the company has said in its research report.

Story first published: Saturday, May 26, 2018, 6:16 [IST]
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