Best stocks to buy
Here is a list of the best stocks to buy now. These stocks are a good buy because they have good management, good track record of growth and profitability and the valuations are reasonable. Some of the stocks may become multibagger also.
These are detailed research reports of the best stocks that investors can buy now and today.
Buy Essel Propack Ltd.: Focus on Non-Oral care augurs well CMP (Rs) 246
Global leader Essel Propack Ltd (EPL), part of Essel Group, is the first company to introduce laminated tubes in India. The company commands 33% market share in oral care category. This segment has witnessed modest growth of 5.5% over the last five years and has accounted for 58.2% of the total sales in FY16. Non-oral care segment showed good traction in the last five years ended March’ 2016 with revenue CAGR of 13.1%. We expect the non-oral category to continue its contribution to topline growth led by strong global presence and focused penetration into new markets on the back of abundant opportunities and robust client base. The push in this category would come mainly from the FMCG and Pharma sectors. Although all regions are likely to grow at a similar run rate as in the previous year, subdued performance from international subsidiaries continues to be a risk factor. Expectation of continued revenue growth momentum coupled with superior revenue mix, industrial shift in favor of laminated tubes, operational efficiencies and stable raw material prices should enable EPL to post strong earnings growth and robust return rations going forward. The company is currently trading at 19.9x of FY17E earnings.
Buy Manappuram Finance (Q3 FY17): Coming out stronger – CMP (Rs) 93, 12-mts Target (Rs) 125, Upside 34.4%
• Stable consol AUM comes as a big positive surprise
• PPOP margin further improved; lower auctions push NPLs
• Upgrade estimates substantially; Retain BUY and raise 12m target to Rs125
In preparing a list of the best stocks to buy, investors have to ensure that they are only picking stocks with strong fundamentals.
In fact, leading investors like Rakesh Jhunjhunwala, Ramesh Damani, Dolly Khanna, Porinju Veliyath, Basant Maheshwari buy stocks with very strong fundamentals. The portfolios of these investors have many such best stocks to buy.
Buy Skipper (Q3 FY17): Order inflow muted CMP (Rs) 155, 12-mts Target (Rs) 184, Upside 18.7%
Skipper’s results were weaker than expected on account of slower growth in engineering business and polymer business impacted by demonetisation. Engineering business revenue slowed down to 12.5% yoy as order inflow has been weak 9M FY17 and execution was impacted by demonetisation. Both the key segments EBIT margins suffered due to lower than expected growth. Polymer business witnessed significant margin contraction due to lower sales growth, lower capacity utilization and incentives to dealers to push sales. Order book for engineering project segment stood at Rs.20.3bn (-7.8% YTD), which is 1.7x of FY16 engineering sales. Increased opportunities from PGCIL, SEB, TBCB, and renewable projects to support future growth in engineering segment. Company’s Guwahati facility is expected to get commissioned by March’ 2017 end. We have lowered our estimates based on muted order inflow and demonetization pain, leading to a downward revision in target price to Rs184. We maintain our Buy.
Buy City Union Bank (Q3 FY17) CMP (Rs) 158, 12-mts Target (Rs) 166, Upside 5.0%
• Loan book shrinks 2% sequentially; Deposit book rises
• Gross NPA ratio rises on lower recoveries and upgrades
• NIM resilient at 4.2%; expect moderation going forward
• Return ratios to trend in a narrow band
Buy PTC India Ltd: The Power trading powerhouse CMP (Rs) 87
We interacted with the PTC India (PTC) management to understand the industry opportunity in power trading segment as also the company’s plan to capitalize on the same. PTC India is a market leader in power trading with a share of ~30%. The company trading volumes have grown at a CAGR of 12% during FY11-16. It generates margins to the tune of 4 paise per unit for short-term trades and 7 paise per unit for long term trades. The merchant market in India has witnessed a sharp increase in competition and the lower demand has caused a fall in merchant rates. As a result, many merchant players, including PTC India, are now focusing on shifting their existing portfolio towards long term PPAs to ensure stable cash flow and earnings. PTC intends to increase Long term portfolio revenues to 50% during the next couple of years as against the current 40%. This would ensure stable volume growth along with superior margin profile. On the back of strong long term capacity addition, PTC is likely to witness strong growth in volumes during the next few years. The impact of UDAY scheme is also likely to improve demand for power leading to higher trade volumes. The timely commissioning of capacity in subsidiary PTC Energy’s renewable portfolio would provide further fillip to overall performance.
While the outlook for the industry is expected to improve gradually, the ability to increase contribution from long term contracts would be the key. While volumes would likely pick up with improving demand and more PPA capacity coming on-stream, margins are likely to improve with the continuous decline in the share of low margin short term segment. Timely commissioning of the Energy portfolio under PTC energy would be crucial for generating the targeted project IRR. The Company is currently trading at a valuation of 6x FY16 EPS.
Buy Carborundum Universal (Q3 FY17): Mixed bag; Positive outlook – CMP (Rs) 260, 12-mts Target (Rs) 328, Upside 26.2%
Carborundum Universal (CUMI) results were a mixed bag, as the impact of weaker domestic performance was offset by robust growth in its international business. Domestic business was impacted by demonetisation, production being impacted by cyclone, hydro power production impacted by lower rainfall in Kerala and higher costs incurred in ramping up of new capacities. In the international business, lower losses in China and normalization of EMD capacities in Russia led to the revival in earnings. The company has indicated that growth in the domestic market would pick up in abrasives as the company would gain market share from unorganized sector and new capacities stabilize in EMD. International subsidiaries would continue to report an improvement in earnings on the back of enhancement in product mix and cost rationalization in China. We have marginally lowered our FY17 estimates factoring in the impact of lower hydro power generation and lower contribution from domestic ceramics & refractory division. We believe growth would accelerate in FY18 as domestic demand picks up, ramp up of relocated capacities and superior product mix. We maintain our Buy recommendation with a target price of Rs.328.
Buy Gulf Oil Lubricants (Q3 FY17) CMP (Rs) 695, 12-mts Target (Rs) 858, Upside 23.5%
• Volume growth ahead of the industry
• Price hikes and product mix will help improve margins
• Trading at a discount to FMCG valuations
Buy Mahanagar Gas Reco Price (Rs) 748, Previous Target (Rs) 925, New Target (Rs) 1,040
We had recommended a BUY on Mahanagar Gas Ltd with a target of Rs925 in a company report released on December 13, 2016. The target was surpassed in the previous trading session, thus yielding a return of 23.7% within two months. We continue to be positive on the stock as we expect a sustained volume growth led by 1) higher prices of liquid fuels, 2) expansion in new territories by MGL, 3) rapid conversion of private cars and taxi aggregators. Margins are likely to remain strong with gas prices expected to remain soft over the near term. Any increase in gas prices will be easily passed on given the recent increase in petrol and diesel prices. We recommend investors to hold the stock for an extended target of Rs1,040.