According to leading brokerages, these four stocks have potential for heavy gains in the foreseeable future
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| KEC International – On Course Towards Recovery In Operating Margin |
| CMP (Rs.) 74 |
| Target Price (Rs.): 124 |
| Potential Gain (%) : 67 |
| Research By: Nirmal Bang Instl Equities |
| Outlook & Valuation:Driven by better margin T&D orders, stabilisation of SAE Towers & cable business and completion of legacy projects in railway & water segments, KEC is poised to register a healthy expansion in its operating margin profile. While the management retained its operating margin guidance of 8.0% for FY16, we have factored in lower margin recovery of 7.2%/8.1% for FY16E/FY17E, respectively. This is expected to result in a 190bps operating margin expansion over FY14-FY17E, leading to a 46% adjusted earnings CAGR versus a 26% CAGR decline reported over FY11-FY14. A healthy rise in return ratios (RoE expected to rise from 5.7% in FY14 to 16.9% in FY17E) and reasonable valuation along with a high scalability potential owing to a strong T&D capex outlay likely over the next three to five years in India led us to retain Buy rating on KEC. We have also retained our target price of Rs124 on the stock based on 12xFY17E earnings (median P/E of past seven years is 13.6x). |
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| PTC India Financial Services Ltd |
| CMP (Rs.): 50.5 |
| Target Price (Rs.): 64 |
| Potential upside (%): 28 |
| Research By: CD Equisearch |
| Outlook & Valuation: The stock currently trades at 1.9x FY15e BV and 1.6xFY16e BV. We are hopeful that the company will achieve the expected growth rates as a result of combination of suitable investment climate, capacity addition (especially in renewable energy), policy support and as falling interest rates push up demand for funds from power sector. Therefore, we recommend a ‘BUY’ with the target price of Rs. 64 based on 2.4x FY15e BV and 2x FY16e BV, within a time horizon of 9-12 months. |
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| Ahluwalia Contracts – Regaining Strength |
| CMP (Rs.): 237 |
| Target Price (Rs.): 283 |
| Potential upside (%): 19 |
| Research By: Karvy Broking |
| Outlook & Valuation: Premium valuation on back of superior financials: At CMP, ACIL trades at attractive valuations of 19.2x/13.4x FY16E/17E EPS and 10.7x/7.8x FY16E/17E EV/EBITDA. We have valued ACIL at 16x FY17E EPS which is close to 15.6x 1-year forward average of last 9 months and slightly above than historical average of 15x during FY08-10 (business was reviving). We initiate coverage on ACIL with a BUY rating and a price target of Rs283. |
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| Somany Ceramics |
| CMP (Rs.) 371 |
| Target Price (Rs.): 437 |
| Potential Gain (%) : 18 |
| Research By: Karvy |
| Outlook & Valuation: Somany is expected to post CAGR growth of 18% for the period FY14-17E on the back of capacity addition and better product mix. EBITDA margins likely to expand by 46 bps to 7.13% in FY17E. RoE is expected to increase to 22.48% by FY17E. At CMP of Rs.371, stock is trading at 17.8x FY17E EPS of 20.81. We value the company at 21x which is the two year average PE multiple of FY17E EPS and recommend a “BUY” rating for target price of Rs. 437, representing an upside of 18% for the holding period of 9 – 12 months. |
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