List of top-10 stocks to buy after Q3FY17 results
Daljeet Kohli follows the salutary practice of conducting a review of his favourite stocks after each quarterly result. He explains how the stock has fared and whether it is now a buy, hold or sell.
In his latest report, Daljeet has recommended a buy of the following ten stocks:
|Stock||CMP (Rs)||YoY Gain (%)|
|Ashiana Housing Ltd||173||41|
|Bharat Electronics Ltd||1507||30|
|Jubilant Life Science||708||134|
|KEC International Ltd||166||61|
|Mahindra & Mahindra||1308||6|
|Orient Refractories Ltd||138||84|
Let’s do a quick review of a few of the popular stocks:
Ashiana Housing – Favourite of eminent stock pickers
Ashiana Housing Ltd needs no introduction to us given that it is backed by a pantheon of elite investors such as Prof. Sanjay Bakshi, Ashish Kacholia, Brahmal Vasudevan etc.
Daljeet’s last recommendation of Ashiana Housing was on the eve of Budget 2017 when the stock was languishing at Rs. 143.
The thrust on affordable housing in the Budget has sparked new life into the stock. It is now standing tall at Rs. 175.
On a YoY basis, the stock has posted hefty gains of 40%.
Daljeet has projected a target price of Rs. 220 for Ashiana Housing.
As usual, the logic is simple and compelling:
“We expect AHL to report 10% revenue CAGR over FY16‐19E on the back of improving deliveries in its key projects, while PAT is likely to witness 10.9% CAGR during FY16‐19E with PAT margins expanding by 360bps over the same period. At CMP Rs 183, AHL is trading at FY17E and FY18E, EV/EBIDTA multiples of 14.4x and 10.8x respectively. We had a BUY rating on the stock with a target price of Rs 183 which has already been achieved. We remain bullish on the company from longer term perspective and maintain our BUY rating on the stock with a revised target price of Rs 220 (arrived on the basis of NAV based SOTP valuation).”
Bharat Electronics Ltd – A “safe” stock
Vijay Kedia rightly described Bharat Electronics as a “safe” stock implying that it will not only protect the capital and keep it safe and sound but also deliver superb compounding gains year after year.
As usual, Vijay Kedia is correct in his analysis as is shown by the 30% gain already notched up by the stock in the past one year.
Daljeet has foreseen a target price of Rs. 1916 for Bharat Electronics on the following logic:
“At CMP of Rs 1,526, BEL stock is trading at FY2018/19E, P/E of 21.7x/18.3x, respectively. Considering the huge awarding pipeline (inc. ~$2 bn Akash Missiles project), where BEL stands good chance to win, current OB/LTM sales ratio of 4.3x, recent Elbit offset win, we expect BEL to top‐line/ bottom‐line CAGR of 13.8%/14.2% during FY2017‐19E. This coupled with strong BS, RoE expansion (from 15.5% in FY2016 to 19.0% in FY2019), we assign 1‐year forward P/E multiple of 23.0x to our FY2019E EPS estimate of Rs 83.3/share. Accordingly,we arrive at price target of Rs 1,916. Given the upside we recommend BUY on the stock.”
Force Motors Ltd – the “next Eicher Motors + MRF“?
Porinju Veliyath deserves credit for spotting the potential of Force Motors Ltd and recommending a buy as far back as in October 2014.
Since then, the stock has put up a spirited performance and delivered gains of 202%.
Daljeet himself issued an initiating coverage report in October 2015 in which he called Force Motors “the next Eicher Motors and MRF” and “multibagger in the making”.
We ought to have acted on the advice because the stock has posted a gain of 71% since then.
Daljeet has again urged a buy with a target price of Rs. 4,698 on the following rationale:
“Considering the growth in the luxury car segment, we see strong revenue growth from auto component business that will help in overall margin expansion. Strong demand for Force Traveller from multiple industries augur well for the company in the coming months. The company is a net debt free company, sitting on cash and cash equivalents of around Rs. 3.5 bn (Rs. 265/share) as on 30th Sep 2016. We have introduced FY19 estimates. At CMP of Rs. 4101, Force Motors is trading at 19.6x FY19e earnings; we maintain BUY with a target price of Rs. 4698 (based on 22x FY19e earnings).”
JB Chemicals and Pharmaceuticals – sharp re-rating expected
JB Chem was first recommended by Daljeet Kohli in October 2013 when it was languishing at Rs. 94.
The stock has notched up handsome gains of 282% since then and ensured that Daljeet stays loyal to it.
The stock has also won the confidence of eminent stock pickers like Ashish Dhawan, Akhil Dhawan, Ashish Kacholia etc.
Daljeet has foreseen an ambitious target price of Rs. 440 which appears easily achievable if the woes surrounding the Pharma sector are cleared.
The fundamentals of the stock are so clear that Daljeet has not had to labour hard for his recommendation:
“At CMP of Rs 333, JBCP is trading at 15.4x/13.1x & 11.3x of FY17E/FY18E/FY19E EPS respectively. We maintain BUY rating with target price of Rs 440 (15xFY19e EPS).”
The stock has also charmed G. Chokkalingam and he has recommended an “aggressive buy“.
Jubilant Life Science – growth driver with re-rating trigger
Jubilant Life Science qualifies as one of Porinju Veliyath’s masterful stock picks. He recommended the stock in June/ August 2016 on the ground that it was at an “inflection point”.
It appears that the stock was awaiting that nod of encouragement because thereafter, in just about six/eight months, it has surged like a rocket and posted hefty gains of 116%.
@porinju ….jubilant life…..next Biocon..in making….like your ideas sir.
— jinu john (@jinujohn1981) June 17, 2016
However, few are aware that Daljeet was even earlier than Porinju in recognizing the potential of Jubilant Life Sciences as a multibagger stock. He recommended the stock in December 2015 when it was languishing at the throwaway price of Rs. 250 and promised a target price of Rs. 492.
Today, though the stock is at Rs. 708, Daljeet has not lost any of his bullishness. Instead, he has increased the price target to Rs. 922 and assured that the lucky shareholders will be able to feast on more gains.
The logic for the recommendation is as follows:
“Life science ingredient segment (50% of total sales) – better margins in this segment to drive profitability of this segment
– JOL is witnessing trend reversal in this business from de‐growth & falling realization in last few years to increase in demand as well as prices. JOL has taken price hike of around 15% from January 2017 in some of the products in this segment. This price hike is outcome of better market conditions & not the increase in input prices. We expect JOL to sustain sales and profitability in this segment
– JOL has net debt of Rs37.4bn at the end of Q3FY17. This is Rs 550 mn lower than net debt at end of Q2FY17. JOL has taken many measures to reduce the cost of debt by refinancing means. Blended cost of debt has come down by 120 bps from Q3FY17 onwards to 6.3%. The management has been focusing on reduction of debt through internal accruals. We believe consistent debt reduction may become a re-rating trigger for the stock.”
Other stock recommendations
The other stocks recommended by Daljeet Kohli are also of impeccable credentials. They are all classic buy and hold stocks which will notch up hefty gains and become magnificent multibaggers by sheer passage of time!