Ten Top-Quality Wealth Creating Stock Ideas For FY 2016-17

Kshitij Anand of ET has spoken to leading experts like Siddharth Oberoi of Prudent Equity, Sachin Shah of Emkay, Vaibhav Agrawal of Angel Broking, Siddharth Sedani of Sharekhan, Ashish Maheshwari of Blue Ocean Strategic Advisors, Ashish Kapur of Invest Shoppe India and collated their stock ideas.

(1) IL&FS Transportation Networks:

With 7 projects expected to commence in next 12 months, Angel Broking expects the debt repayment cycle at a special purpose vehicle (SPV) level to commence, resulting in the overall consolidated D/E levels peaking out at 4.0 times.

With concerns over higher D/E levels allayed up to a certain extent, coupled with attractive valuations of 0.3x FY2017E P/BV, the domestic brokerage firm has a buy rating on the stock with a price target of Rs 93.

(2) Jagran Prakashan:

Jagran Prakashan is expected to register strong growth supported by an increase in advertisement and circulation revenue and on account of radio city acquisition.

Raw material cost has been on the decline thus lowering news print cost. Considering strong sales growth and improvement in margins, Angel Broking expects an adj. net profit CAGR of 20 per cent over FY2015-17 to Rs 325 crore.

The brokerage firm maintains an accumulate rating on the stock with a target price of Rs 189.

(3) Radico Khaitan:

Angel Broking believes that increase in income levels will augur well for the under-penetrated Indian Made Foreign Liquor (IMFL) segment and IMFL brands.

Radico has strong brands in the premium liquor category which have grown at CAGR of 26 per cent over the last seven-year period and are expected to continue the growth momentum.

Additionally, ENA (key raw material) prices are expected to remain stable and potentially decline owing to higher sugar production and lower demand from Indian Oil Marketing companies. The domestic brokerage firm maintains buy recommendation on the stock with a target price of Rs 156.

(4) Blue Star:

Blue Star’s room air conditioner (RAC) business has been outgrowing the RAC industry by 10 per cent points over the past few quarters thus aiding market share growth, which currently stands at 10 per cent.

The company is focussing on increasing the market share to 12.5 per cent in the near future and we believe that the company should be able to do so as it has strong brand equity and higher share (compared to industry) in split ACs, said the brokerage firm.

(5) Siyaram Silk Mills:

Siyaram Silk Mills (SSML) has strong brands which are present across multiple price points. The company has strong reach with a nationwide network of about 1,600 dealers and its brands are sold in 3,00,000 multi-brand outlets in the country.

“Going forward, we expect SSML to report a net sales CAGR of 10 per cent to Rs 1,815cr and adj.net profit CAGR of 11 per cent to Rs 98cr over FY2015-17E on back of market leadership in blended fabrics, strong brand building, wide distribution channel, strong presence in tier II and tier III cities and emphasis on latest designs and affordable pricing points,” said the brokerage firm.

(6) LIC Housing Finance:

LIC Housing Finance caters more to the medium as well as to low housing segment all together. “If we talk about the disbursal rate, individual disbursals or the loan growth what we talk about is 15%, developers growth is 20% on a whole basis,” said Sedani.

“On earning basis what we believe is 20% FY15 to FY18 growth is expected on a CAGR basis. So disbursals are also expected 15-16% going forward in the next two years,” he said.

(7) Ashok Leyland:

In the MHCV segment Ashok Leyland has gained quite a good market share from 28 per cent to 32 per cent and expect the growth momentum to continue in near future as well. The market cap to sales is 1.3 times where analyst believe that there is quite a good potential going forward. For medium to long-term investors Ashok Leyland seems to be quite a good stock to be in.

(8) Rama Steel Tubes:

Rama Steel Tubes is almost 43 years old company with a very professional management. The trigger for the company in the ERW, galvanised pipes and structural steel business is its expanding capacity in the next couple of years from current one lakh tonne to almost 3.5 lakh tonne which will be triple their top line.

“I am expecting that after their new plant which is getting operational at Kapoli, they will save almost 20 per cent on operational costs. This is a good company with 74 per cent promoter equity and very small share capital of 1.5 crore,” said the analyst.

(9) Mandhana Industries:

Mandhana Industries is a major player into textile space and in spite of a pretty bad time that textile industry has seen in the last couple of years this company has done extremely well.

“In FY14, their profit was Rs 59 crore which jumped to almost Rs 83 crore in FY15. This year, I am expecting profit to be Rs 100 crore plus,” said the analyst. One more trigger which is in sight is they are demerging their retail venture — Mandhana Retail Venture — from the existing setup and every shareholder of Mandhana Industries.

“So in the next three months, once this value unlocking takes place, I am expecting Mandhana Retail Ventures will float at not less than Rs 500 crore market cap,” he said.

(10) Cairn India:

From an investment perspective of a two-to-three-year kind of timeframe stocks like Cairn India or even some other explorations, stocks like Selan Exploration are good bets.

“I really think that the bottoming formation of crude prices will start from here and most of these businesses are now available at very cheap valuations,” said the analyst. Nothing major might happen in the very near term but yes, the upstream oil companies in particular like Cairn India and Selan Exploration are something which I would advocate a buy on, he added.