Leading brokerages have issued research reports on five top quality stocks with the potential for heavy gains
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| SKS Microfinance Initiating Coverage – Play on Indian demographics = best earnings compounding financial stock |
| CMP (Rs.) 460 |
| Target Price (Rs.): 580 |
| Potential Gain (%) : 26 |
| Research By: Emkay |
| Outlook & Valuation:Post the AP crisis, SKS Microfinance (SKSMF) has evolved stronger and is poised to gain from structural opportunity in an underpenetrated microfinance industry (MFI). With low political risk and regulatory harness, we expect SKSMF (leader in MFI) to deliver superior AUM CAGR of 40%, maintain asset quality and more than double the EPS over FY15-18E. Additionally, SKSMF is better placed to receive a small bank license. We estimate that sustainable RoEs (over the medium term) under the banking ambit to remain superior in the range of 20-24%, similar to our expectation for NBFCMFI model. Based on our probability weighted residual income model, we value the company at Rs580 per share (implied FY17PBV of 4.7x). |
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| Kridhan Infra Ltd – Strong foundation |
| CMP (Rs.): 95 |
| Target Price (Rs.): 141 |
| Potential upside (%): 47.7 |
| Research By: Emkay |
| Outlook & Valuation: Strong growth and superior capital efficiency ratios – BUY: We expect KIL to clock a 22%, 23% and 30% CAGR in Revenue, EBITDA and Profits respectively during FY14-17E. KIL’s ROE and ROCE are expected to increase from 26%/18% in FY15E to 34%/27% in FY17E. We initiate coverage with a Buy rating and a target price of Rs.141. |
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| MCX – Steady performance |
| CMP (Rs.): 1053 |
| Target Price (Rs.): 1530 |
| Potential upside (%): 45 |
| Research By: HDFC Sec |
| Outlook & Valuation: We maintain our high-conviction positive stance on the company on account of (1) significant business operating leverage, which is apparent in the quarterly results (2) potential for non-linear growth driven by conducive policy framework (fructification of the SEBI-FMC merger). We maintain our estimates and continue to value MCX at 25x FY17E EPS arriving at a target price of Rs 1,530. |
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| Mangalam Cement – Alluring valuations |
| CMP (Rs.) 237 |
| Target Price (Rs.): 330 |
| Potential Gain (%) : 40 |
| Research By: Karvy |
| Outlook & Valuation: With the capacity expanded by over 60% to 3.25 mt in Q1FY15 (from 2 mt), Mangalam Cement (MCL) is well positioned to leverage the benefits of expected improvement in cement demand in North&Central India. Operating margin is expected to improve going ahead led by improvement in realisations and cost benefits. We expect 70% CAGR in EBITDA during FY15-17E on strong volume growth and margin improvement. The stock quotes at an attractive valuation of 4x FY17E EV/EBITDA ($48/ton). We initiate coverage on MCL with BUY and target price of Rs 330. |
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| Repco Home Finance – Growth regains momentum; asset quality on strong turf |
| CMP (Rs.) 621 |
| Target Price (Rs.): 770 |
| Potential Gain (%) : 24 |
| Research By: Edelweiss |
| Outlook & Valuation: Repco Home Finance (RHF) earnings growth (considering pretax as FY15 has deferred tax provisioning hit) optically seems lower at 21% YoY when compared with the 26% run‐rate during 9mFY15. However, this was primarily owing to prudent stance of increasing provisioning coverage to 60% plus and higher employee cost. Operationally, business metrics and asset quality performance continued to impress. Key highlights: 1) after the Q3FY15 blip, disbursements gained traction (up >45% YoY) resulting in 29% loan growth (9% QoQ); 2) GNPLs dropped by >60bps to 1.3% (seasonal in nature); and 3) NIMs maintained the robust 4.5% mark. The potential to grow manifolds in under‐served markets, further drawing support from adequate CAR of 20%, will sustain RHF’s loan CAGR of 25% plus and help it post impressive 27% plus earnings CAGR, 2.4% RoA and 19% RoE over FY15‐17E. Maintain ‘BUY’. |
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