Happy Holi! Top 10 stocks to colour your portfolio which could give up to 40% return

The color red is a synonym for a fall or correction. We have seen nearly 6 percent fall in the benchmark indices and doubled digit cuts in many stocks from small and midcap space.

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Happy Holi! Top 10 stocks to color your portfolio which could give up to 40% return

The festival of color, Holi, is here. The festive signifies the victory of good over evil, the arrival of spring, and the end of winter. But, for investors, it is time to add more variety to their portfolio by adding stocks from different sectors.

The S&P BSE Sensex rose by about 19 percent since last Holi which was celebrated on 13 March 2017, Monday. The recent correction seen in the month of February has slowed the momentum on D-Street, but analysts say that don’t fear the color red on Street.

The color red is a synonym for a fall or correction. We have seen nearly 6 percent fall in the benchmark indices and doubled digit cuts in many stocks from small and midcap space.

Investors should welcome the color ‘red’ because that would give them the opportunity to buy into quality stocks on declines.

We have collated a list of top ten stocks which could create wealth for investors:

Soumen Chatterjee, Guinness Securities

HDFC Bank & IndusInd Bank:

IndusInd Bank: Target Rs1880| Return 12%

HDFC Bank: Target Rs2080| Return 10%

Both HDFC Bank and IndusInd Bank are trading around 29 times of their trailing earnings & Price to Book of over 4.5 times.

Recently, the RBI has revised the NPA Reporting framework for quicker NPA recognition, this will make PSU Banks to provide higher provisions and whatever the recapitalized funds they have received will move in this cause rather than for growth.

In another way round, this will help quality private sector banks to further consolidate their position in the market and move ahead in the competition. (Target HDFC Bank: 2080 / Support: 1800-1850) & (IndusInd Bank Target: 1880 / Support: 1630)

Eicher Motors: BUY| Target Rs31200| Return 14%

The low competitive threat for RE is a big boost for the Eicher. The automaker has reported good Q3 numbers; PAT went up by 24.5% at Rs 520.5 cr (YoY).

The company maintains an industry-leading operating margin of around 31.2 percent and Return on Equity (ROE) of over 32 percent.

The stock is trading at a rich valuation of 37-38 times of its trailing earnings. Such high valuation likely to be sustained going forward as we expect RE sales to hit the landmark of 1 lk units/month by early next year.

NOCIL: BUY| Target Rs250| Return 29%

NOCIL is the largest rubber chemicals manufacturer in India has reported excellent Q3 numbers. The net profit rose 81 percent to Rs 45 crore and revenues rose 27 percent to Rs 249 crore (YoY).

Improved efficiencies with a change in product mix and higher capacity utilization at Dahej facility augurs well for the company. (Target Price: 250 – discounting the stock to trade at 22 times of FY19E EPS 11.36; Low Debt in books at Rs 66 cr versus Net-worth of Rs 760 cr)

NMDC: BUY| Target Rs185| Return 43%

Earnings trajectory looks promising with better realization, despite soft global iron ore prices. The stock is trading at a very attractive valuation of 12.8 times of its trailing earnings.

Strong demand from domestic steel players will remain the key growth driver. Target Price 185 (Stable earnings visibility with ore prices likely to bottom out soon in the medium term).

Saurabh S Jain, MD, SSJ Finance & Securities:

Godrej Agrovet: BUY| Target Rs 650| Return 7%

Godrej Agrovet Ltd is a leading animal feed company in India. The large portion of this market is unorganized and hence presents a huge opportunity.

We expect company revenues to grow by 10 percent CAGR from Rs 4,911 crore currently to Rs6536 crore by FY20E. The company is expected to post a PAT of Rs 450 crore in FY20E. The stock can be bought now with a price target of Rs 650.

Ujjivan: BUY| Target Rs 450| Return 20%

Ujjivan Financial Services Ltd is a microfinance company focused on providing finance to the unbanked rural population. It has emerged stronger after demonetization which caused transient depression in the sector. We recommend buying with a target price of Rs 450 based on 2.5x FY20E ABV.

Escorts: BUY| Target Rs 1,150| Return 29%

Escorts Ltd is a leading manufacturer of tractors and will benefit from rising farm incomes. In FY17 tractor volumes grew by 24 percent and EBITDA margin expanded by 280 bps which led to almost doubling of PAT to Rs 160 crore.

We expect Escorts to continue delivering a robust performance, with 40 percent PAT CAGR over FY17-19E, mainly driven by revenue CAGR of 13 percent and EBITDA margin expansion of 300bp. We recommend buying with a price objective of Rs 1,150 based on PE ratio of 18x FY19E.

TCS: BUY| Target Rs 3,500| Return 15%

TCS is a leading IT company and will benefit from weakening rupee and improving future outlook for IT sector. TCS is cautiously optimistic regarding the outlook for FY19, with its key vertical of BFSI and Hi-Tech expected to make a strong recovery.

We expect TCS to grow its revenues at a CAGR of 9 percent and 10.5 percent in USD & INR terms respectively over FY17-19E. We recommend buying with a Rs 3,500 based on PE of 20x FY19E.

HCL Technologies: BUY| Target Rs 1,200| Return 28%

HCL Technologies is India’s fifth largest IT services company, with over 1,00,000 employees catering to more than 450 clients. The company has witnessed a strong traction for its digital services driven by Mode 2 and Mode 3 services coupled with a large number of IP partnership. Going ahead, we expect the ER&D space to continue to witness a double-digit growth led by a major contribution from Geometric and Butler America. We recommend buying with a price target of Rs 1,200 based on PE of 18x FY19E.

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Disclaimer:-The views and investment tips expressed by investment experts are their own. Ripples Advisory advises users to check with certified experts before taking any investment decisions.

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