Last week, BSE's Sensex crossed the 45,000 level for the first time, while NSE's Nifty 50 climbed above 13,200 on better-than-expected Q2 GDP data and a dovish monetary policy commentary from RBI. On Monday, the bull run continued as Sensex and Nifty 50 hit a new all-time high of 45,291.56 and 13,280.05, respectively.
In such a euphoric state of the market, the valuation of many stocks appears overstretched and expensive.
If you are looking for cheaper buys, here are 7 stock ideas from brokerages that are priced less than Rs 150 per share.
1. Ashok Leyland (ASHOKLEY)
5 Dec closing price on NSE: Rs 94.80
Emkay Global Financial has raised its target price on the stock to Rs 124 "on the back of an increase in volume and margin assumptions".
"Our overtly constructive view on the CV cycle rests on three fundamental pillars: 1) a deep appreciation of replacement cycles - which always kick in as exogenous catalysts fade; 2) somewhat crude but practical assessment of the system's capacity utilization, and 3) unusually strong gross margins for transporters despite a severe demand shock. At least, these all should aid 24% YoY growth in MHCV volumes in Q4FY21 and a further 85% in FY22," the brokerage said in its report last week.
It further added that Ashok Leyland is the best play on the fast-evolving CV recovery.
"First, ALL's market share in MHCVs (medium and heavy commercial vehicles) will touch its cyclical high of 34% as 25T trucks reclaim their share of the segment. Second, plugging product gaps in 3T plus LCV market offers immense scope for market share gains. Last, management has clearly articulated its capital allocation which caps investments in the ancillary businesses at about Rs2.5bn/year or 18% of FY21-22E OCFs," it said.
Sharekhan also has a "buy" rating on Ashok Leyland Ltd and raised its price target to Rs 131, a 38% upside from last week's price.
"Faster-than-expected economic recovery, especially in infrastructure, road construction and mining to spur demand for new trucks as well as replacement, making us positive on Ashok Leyland Ltd," it said.
"We raise our volume estimates for FY22E/FY23E by 13.9%/12.1%, respectively. Company focusing on boosting CV exports, increasing revenue from replacement and defence segments to reduce dependence on cyclical domestic CV business. Led by raising of volume estimates and margin expansion, we expect ALL's EBITDA estimates to improve by 190%/55% in FY22E/FY23E, respectively. Stock trades at attractive EV/EBITDA multiple of 7.9x FY23E, against long-term average of 11.7x," it added.
2. Sanghi Industries (SANGHIIND)
5 Dec closing price on NSE: Rs 34.10
Anand Rathi said in a research report said, "Weak demand in its operating regions (Gujarat/Maharashtra) due to COVID-19 and the monsoon hindered Sanghi' Q2 performance. Cost optimisation, however, brought some respite. With the Kutch expansion to commence in Q3, it's ramping up amid an uncertain demand environment would be key to watch".
The brokerage has a "buy" rating on Sanghi Industries with a higher target price of Rs 42 from Rs 31 earlier.
3. Ashok Buildcon (ASHOKA)
5 Dec closing price on NSE: Rs 86.65
With a target price of Rs 127, Anand Rathi said that Ashoka Buildcon's "proven execution capabilities and a well-set balance sheet" has "impelled" it to retain its "buy" rating on the stock.
"Notwithstanding the early-rains and continuing COVID-19 impact, Ashoka's Q2 revenue marks its return to growth and suggests of even better times ahead. With execution efficiencies returning to normal, inflows are the other key deliverable and management expects to make more progress in H2 on this front. A well-set balance sheet and some progress on the SBI-Macquarie exit are good auguries," the brokerage said in its research report last week.
4. Indian Hotels Company (INDHOTEL)
5 Dec closing price on NSE: Rs 128
Last week, Sharekhan said in its research report on Indian Hotels Company that "staycation, weekend road trips, and wedding/social gatherings have emerged as immediate growth drivers for the industry and aided IHCL to post sequential improvement in occupancies (stood at 32.3% in Q2FY2021, improved from lows of 20.5% Q1FY2021)."
"Occupancy level improved to 50% in recent times. Several cost-saving measures (including reduction in cost by 51% in H1FY2021) would ease out pressure on profitability in the near term. Further, strong recovery in occupancies FY2022/FY2023 would help OPM to get back on track. We have revised upwards our earnings estimates for FY2022/FY2023 to factor in improving business environment for domestic leisure travel and likely shift of consumers to trusted brands coupled with expansion in operating profit," it added.
"Indian Hotels Company Limited (IHCL) remains one of our best picks in the hospitability space due to its strong room inventory and relative stable balance sheet, which will help to gain share during the recovery phase," it added while maintaining a "buy" rating on the stock with a revised price target of Rs 155.
5. Bharat Electronics
5 Dec closing price on NSE: Rs 115.75
BEL's (Bharat Electronics Limited) management expects double-digit revenue growth with margins to be around 20% for FY2021E and reiterate FY2021 order inflow target of Rs 15,000 crore.
"Order book remains healthy at Rs 52,148 crore (4x its TTM revenue), which provides good revenue visibility. BEL is well-positioned to benefit from rising defence expenditure supported by strong manufacturing base, execution track record, and continued focus on in-house R&D capabilities" said Sharekhan in its research report last week.
"We retain our Buy rating on Bharat Electronics Limited (BEL) with an unchanged price target of Rs 135, considering reasonable valuations and strong execution capabilities," the brokerage added.
6. GAIL (India)
5 Dec closing price on NSE: Rs 119.80
Sharekhan is bullish on the stock after oil regulator Petroleum and Natural Gas Regulatory Board (PNGRB) unified gas pipeline tariff structure to make fuel more affordable for distant users and attract investment to build infrastructure for gas distribution.
The brokerage has a "buy" rating GAIL with a revised price target of Rs 140 "as unified tariff regulation is structurally positive for long-term volume growth."
"GAIL has cash balance of Rs. 1,614 crore, which makes it likely strong candidate to announce share buyback among PSUs. Earnings outlook has also improved as a sharp increase in spot LNG price to $6/mmbtu could help reverse H1FY2021 loss in the gas trading business, while the increase in HDPE prices bodes well for sustained improvement in the profitability of the petchem business," the brokerage said.
"GAIL is likely to be the key beneficiary of government's aim to increase share of gas in India's energy mix to 15% by 2025 (versus only 6% currently) as the same provides sustainable volume growth opportunity for its gas pipeline and trading business," it added.
Geojit also has a "buy" rating on the stock with a price target of Rs 108 based on SOTP (sum-of-the-parts) valuation.
"Considering that the petrochemicals business is back to optimal levels & improvement in natural gas demand, the outlook remains positive," the brokerage said.
7. NMDC Limited (NMDC)
5 Dec closing price on NSE: Rs 106.85
Prabhudas Lilladher said in its research report last week that NMDC underperformed steel stocks by a wide margin over the last three months due to uncertainty regarding payment of premium for its Donimalai mine's lease renewal.
"After two years impasse, Govt of Karnataka renewed Donimalai mines (with capacity of 7mtpa) at a premium of 22.5% of sales price. We expect that similar premium would be paid for its iron ore operations in Chhattisgarh, which constitutes 78% of its overall volumes. Severe shortage in domestic market (due to supply disruptions in Odisha), strong profitability of steel producers and firm outlook on global prices shall help NMDC to mitigate higher costs with stronger product prices," the brokerage said.
"In light of strong price outlook and attractive valuations," Prabhudas Lilladher has upgraded NMDC to "Buy" with a target price of Rs 125 (earlier Rs 98) based on "1) EV/EBITDA of 3.7x FY22e for iron ore operations (factoring 22.5% premium on entire operations) and 2) EV/T of US$475 for 3mtpa steel plant."
The article is purely informational and is not a solicitation to buy, sell in securities mentioned in the article. 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.