Top 4 Stocks To Buy After Election Result: IIFL Research Report
Top 4 Stocks To Buy After Election Result: IIFL Research Report | |
Company: | Model Portfolio |
Brokerage: | IIFL |
Date of report: | May 23, 2019 |
Type of Report: | Model Portfolio |
Recommendation: | Buy |
Upside Potential: | 100% |
Summary: | Modi 2.0 & Challenges |
Full Report: | Click here to download the file in pdf format |
Tags: | IIFL, Model Portfolio |
BJP led NDA is all set to form the government once again at the centre after winning over 341 Loksabha seats out of 542 (as on May 23, 2019, 6:00PM; as per media reports) on the back of the decisive mandate given by the people of India. Given that Modi Government is fiscally more disciplined vs. UPA government, hence its coming back to power will positively drive the sentiment of the investor fraternity. Notably, during the first 5-year term of Modi Government, inflation had remained in a comfortable zone. Further, the quantum of work and reforms that have been initiated by the Modi Government to generate economic growth in its first 5-year term will see the light of implementation/completion in the second term to deliver on growth. However, there are few key challenges which the government will have to address like liquidity woes, lower GDP growth, consumption slowdown, fiscal deficit and unemployment. Stock recommendations Given the clear mandate to Modi Government, we are positive on sectors such as infrastructure, capital goods, select NBFCs and private banks, hence we recommend buying in the following stocks: AU Small Finance Bank (AU SFB): AU SFB remains a play on industry leading loan growth, successful build up in liability franchise (banking license), lowering cost/income ratio and contained credit cost. We estimate AUM and EPS CAGR of ~35% and ~44% respectively over FY19-21E. This translates to FY21E RoA of 1.6% and RoE of ~17% KEC International (KEC): KEC’s strong order backlog, decent outlook for railways & civil segment coupled with healthy international T&D order pipeline are key positives for revenue growth. Valuations are attractive at 9x FY21E P/E, with 21% EPS CAGR over FY19-21E. L&T: L&T is a play on improving capex cycle and strong earnings growth of 30% CAGR over FY19-21E, led by a strong order book of `2.9 lakh cr (2.7x TTM sales). Cholamandalam Investment & Finance (CIFC): We are positive on CIFC given its growth potential in Vehicle Finance and Home Equity portfolio despite liquidity challenges. Improved asset quality via underwriting and strong parentage makes its competitive vis-à-vis peers. Valuations are attractive at 2.4x FY21E P/BV, with 20% EPS CAGR over FY19-21E. |
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