THE BRIGHTEST SPARKLERS FOR THIS DIWALI
By Premium Research Bureau
Today is an auspicious day, Dhanteras, the first day of the five-day Diwali Festival. And keeping the festivities in mind, the Muhurat Trading on Lakshmi Poojan day, following the tradition of every year, we have identified a set of Navratnas for Diwali. These ratnas can outshine any gold or diamond jewellery, earning you more too!
The nine gems are one from each sector which we think are today poised for much better times ahead. And these are, as per us, the best stocks in their respective sectors. Take a pick, choose the gem which suits you the best or build a long term portfolio with all these navratnas. These stocks will brighten your Diwali now and in the years to come. These stocks are like a weather proof jacket – be it BJP or any Govt in power; these navratnas will see you through the travails of life.
All these stocks are for the long term, at least till next Diwali and remember, it is always patience which pays. These stocks could give you that elusive pot of gold at the end of the rainbow!
We wish all our esteemed readers a very happy, prosperous and peaceful Diwali and yes, happy investing as always.
Century Textiles
This stock seems to have little reason now to go down as a couple of HNIs have exited the stock. The main trigger immediately now is that promoters are holding warrants, of which 50% have been converted 18-16 months ago at Rs.360-356 pe share. The balance 50% is due for conversion, on or before December 18. This will hike promoters stake from 45% to 50.22%. The next big trigger is the most anticipated restructuring of its cement business and there have been rumours about big players interested in buying. With UltraTech setting itself a target of 100 million tonnes pa by 2017, this cement facility of Century will be a ripe buy. Buy into Century, not for its weak financials but for all this news flows, which could take the stock price from the current Rs.525 to Rs.610-625 by next Diwali.
Gujarat Pipavav Port
At a glance, the Q2FY16 numbers of Gujarat Pipavav Ports looks dull. But sift underneath and you see that the company has an impairment reversal charge of Rs.60 crore and this pushed down the net profit by 34% (QoQ). But the good news here is that all the bought forward book losses have been fully set off in this quarter itself. So as we sail into H2, we are sure to see much better financials. This is probably the reason why the stock is seeing renewed delivery buying from HNIs and institutional investors. The stock is currently under accumulation for the long term and one can expect the stock price to move up from the current level of Rs.165 to Rs.190-200 by next Diwali.
Lupin
The performance of the company for Q2FY16 was disappointing on the back of slower growth in revenue due to poor offtake in Japan and US. Its consolidated net profit for the quarter dropped 35% (YoY) at Rs.409 crore. Topline showed a modest 5% growth at Rs.3321 crore mainly on the back of good business in India. But this should be looked at more as a period of consolidation. Once the acquisition of Gavis gets stabilized, from March 2016 we could see a trailblazing performance from the company. Its strong pipeline of pending approvals and expected bounce back in US and Japanese markets from H2FY16, we recommend a strong buy in this stock. Buy at the current price of Rs.1855 and be assured of netting in a cool Rs.2100-2200 by next Diwali.
Sundaram Clayton
A part of the TVS Group of companies, the company had a very good Q2FY16 with 8% (QoQ) rise in consolidated income at Rs.373 crore and net profit almost doubled up from Rs.7 crore to Rs.13.5 crore. The company is a leading producer of aluminium die castings, for auto and non-auto sector and a preferred brand with almost all OEMs. With a healthy promoter stake at 75%, this stock, ruling currently at Rs.1800 has the potential to zoom past Rs.2000 by Diwali 2016..
Kotak Bank
This private sector bank is in a sweet spot, both in terms of profitability as well as asset quality. The fourth-largest private bank in the country in terms of total business, the Bank had a fantastic Q2FY16 with a 31% (QoQ) jump in net profit, mainly on the back of higher operating profit and lower provisioning. In terms of asset quality, this Bank is best placed as the bank had to undertake no corporate debt restructuring, it had no restructured assets under 5:25 scheme and there was not even a transfer to asset reconstruction companies. With most public sector banks bleeding and the top three in the private sector leaving little gains on the table , Kotak Bank is the most logical choice. Buy at the current price of Rs.650 and target a price of around Rs.750 for next Lakshmi Pooja.
Capital First
This is a 10 year old Non-Banking Finance Company (NBFC) lending to MSME (micro small and medium enterprises) and retail segments, which together account for 84% of its loan book, with balance 16% coming from wholesale lending. The company is on a very sound financial footing. Its Q2 net profit growth, driven mainly by higher NII, showed a very healthy 52% (YoY) jump. The stock is one of the cheapest among the consumer-lending NBFCs of its size and scale. Others like Shriram City Union, Cholamandalam Investment, Sundaram Finance, M&M Finance are all ruling at FY16E PBV multiples of 2.20 to 3.5 times. Some are facing cyclical headwinds, while few others are grappling with rising provisions on account of mounting non-performing loans. None match Capital First’s growth rates, asset quality and revenue visibility, in relation to current valuation. Buy into this growth stock at the current price of Rs.370, with a target price of Rs.400-425 by next Muhurat trading.
Ashok Leyland
The second largest commercial vehicle maker posted a super duper set of numbers for Q2FY16. On a very healthy 55% (YoY) rise in net sales at Rs.4879 crore the company recorded a net profit of Rs.287 crore, up by 137%. The best news - its H1FY16 net profit of Rs.446 crore has already surpassed FY16 net profit of Rs.335 crore. The company has worked really hard to cut down its debt which was down 9% at Rs.2359 crore. With Tata Motors sales getting sluggish in India, this company seems poised to grab more market share. The total sales for October’15 is up 17% (YoY) and that heralds a good time for the company in H2. Buy at the current rate of Rs.89 and ride onto next Dhanteras to Rs.105-110.
Emami
Emami had a poor Q2 but that is just a minor blip as the years ahead look very beautiful. The current performance got dented only on account of its recently acquired hair & scalp care business – Kesh King. This buy has increased its debt from Rs.20 crore to Rs.950 crore but once this brand consolidates, the returns are expected to outdo the interest being paid. The power brands continued to maintain leadership in key categories in H1FY16. Cooling Oils grew its volume market share by 860bps at 73.5% and Cool talc grew its volume market share by 20 bps at 6.2%. Balms, Boroplus Antiseptic cream and Fair and Handsome maintained their leadership positions with volume market shares at 56.4%, 77.3% and 62.4% respectively. In the healthcare range, which includes Zandu Pancharishta, it showed a 37% growth in H1 with its sales growing 84%. Kesh King took away 10% of domestic sales growth in Q2 and 6% of H1. The company has roped in Shruti Hassan to promote the brand in South India. In this segment of beauty and healthcare, this desi brand is the best choice and it seems to be poised for a major growth trajectory. At the current price of Rs.1063, buy now to pocket handsome profit by next Diwali, looking at a fair target of Rs.1250-1300.
Asian Paints
The company posted a good 15% (YoY) rise in consolidated net profit at Rs.399 crore for current Q2. The market expectations were higher which is what pulled down the stock price. Lower sales in Nepal and Egypt due to natural calamity and geopolitical reasons respectively, pushed down the topline. But H2 looks much better and reconstruction in Nepal means more demand. Also this Q3 will bring in the effect of festive demand. What also works in favour of the company is the lower price of crude which helps keep its raw material costs lower thus boosting margins. This stock is the best in the paint segment which is set for a good run in the months ahead. Buty into this market leader at current levels of Rs.815 and look for Rs.930-940 by next Diwali.