ET has issued a report pointing out that ICICI Securities has identified top five madcap stocks for investment.
PTC India Ltd: Target price Rs 115
PTC’s business model is most aligned to sharp revival in the power sector demand through – i) signing more PSAs (lock untied capacity of 4GW), ii) growth in trading business volume and improving long-term volume to aid margins.
PTC has provided Rs267 mn in Q3FY15 for diminution in value of the remaining stake in Teesta Urja project, which is likely to reverse – as the regulated business model over 15% RoE should be achievable given that the project is 91% complete and no more surprise is expected.
Dish TV Ltd: Target price Rs 100
Dish TV reported an APRU increase to Rs177 in Q3FY15 compared to Rs163 in Q4FY14 due to the price hikes taken in Aug 2014. The company has increased its mid and economy package prices by 20% and 15% since FY14-end as it bridges the gap with other DTH players, while basic packages price increases were in line with industry averages.
We believe the recent hikes along with differential pricing will help sustain a 6%/7% ARPU increase in FY15/FY16 compared to 4% YoY increase in FY13/FY14.
Further triggers to stock price are favorable regulatory developments with respect to taxation (GST), license fee reduction and industry sops.
MCX Ltd: Target price Rs 1478
We expect FMC merger with SEBI and professional and experienced management at the helm (Kotak Mahindra Bank as investor and appointment of new MD and CEO) to boost the prospects of the commodity exchange, which had seen a dip in volumes post the NSEL fiasco.
Market share of 85% reflects the strength of the business model. Despite lower ADTV in last 2 years, MCX has not seen any market share erosion (85% for FY14), which reflects the inherent strength of its business model Earnings to grow 48% CAGR over FY15-17.
ICICI expects sales, EBITDA and earnings to grow at a CAGR of 33%, 94% and 48% respectively over FY15-17. Currently at 22.8x FY17E EPS, as against its 5-year average of 25.8x 1 year forward earnings.
Dewan Housing Finance Ltd: Target price Rs 544
Dewan Housing Finance (DHFL) primarily provides housing loans to self-employed members of the low and middle income group in tier 2-3 cities and metro peripheries where large HFCs and private banks have a limited presence.
The recent capital raising exercise of $130mn provided the company with the much needed capital to pursue faster asset growth. The increasing proportion of higher yield loan categories in the asset book will support yields.
Investors would and should continue to pay attention to high operating cost metrics, past media controversies and acquisition track record as potential red flags.
Sobha Ltd: Target price Rs 534
Sobha has one of the highest recurring operational cash flow generation among regional Indian developers, led by its execution-oriented model and strong branding among home buyers in its core residential markets.
Despite FY15 being a challenging year for volume offtake and sales, we expect Sobha’s asset turnover in FY16 to improve on the back of new mid-income product launches, and low base in new markets, and its margins to sustain.
Revival in contractual business should continue to add incrementally to the company’s stable cash flow generation.