Stocks To Buy Now
Normally, after Q3FY17 results, investors have a good idea of the financial performance of the stocks and can decide what stocks are ripe for a buy.
It is always better to buy stocks which have shown a good quarterly performance because if they continue their superior performance, they can become multibaggers.
We have to also keep an eye on what stocks expert investors like Rakesh Jhunjhunwala, Dolly Khanna, Porinju Veliyath, Basant Maheshwari, Vijay Kedia etc are buying because such stocks are usually very good at a fundamental level and are very strong from the point of performance and financial status.
Sometimes, the expert investors also recommend stocks which are good for buy in terms of their valuations and risk reward performance.
PNC Infratech Ltd (Q3 FY17): Weak quarter; outlook remains strong – BUY CMP (Rs) 101, 12-mts Target (Rs) 128, Upside 26.6%
PNC Infratech Ltd (PNC) Q3 FY17 results were a mixed bag with topline below our estimates while operating margins were in-line with our estimates. PNC reported 11% yoy decline in standalone revenue mainly impacted by slower execution due to demonetization and delay in appointed date for certain NHAI projects. However, its operating margin improved to 13% (up 63bps yoy) on account of benign raw material cost. Performance at the net level was supported by higher other income, lower interest expense and tax credit. The current order book stands at Rs.57.5 bn (~2.9x FY16 revenue), which includes order worth Rs.8.8 bn in the state of Rajasthan to be executed on Hybrid Annuity Model. The Company expects order inflows of ~Rs.15 bn during Q4 FY17 and ~35 bn during FY18. However, in line with weaker than expected Q3 FY17 performance, we have revised our estimates lower. We expect FY17 to witness revenue de-growth of ~5% on account of demonetization impact and slow moving orders. However, the company is poised to achieve topline growth of 25% and 15% during FY18E and FY19E respectively on account of robust order book. With strong margin orders, PNC is likely to deliver robust earnings growth. PNC’s standalone EPC business is currently trading at an attractive P/E of 10.5x FY19E EPS. Owing to the strong outlook, we maintain our BUY rating for revised target price of Rs.128 (based on SOTP valuation).
MOIL Ltd (Q3 FY17): Strong on all fronts – BUY
CMP (Rs) 361, 12-mts Target (Rs) 430, Upside 19.3%
MOIL Q4 FY17 results were quite stronger than our expectations. The outperformance was led by higher inventory liquidation during the quarter. Topline jumped 4x yoy led by 2.6x jump in sales volume and 1.6x increase in blended realizations. The company benefited from the rally in global manganese ore prices and lower domestic imports. During the quarter, MOIL ~doubled its prices as international prices rallied from US$4.1/dmtu in September to US$8.2/dmtu. Imports were also impacted as Chinese players purchased majority of the seaborne ore from South Africa. Jump in other expenses curtailed the jump in operating profit to 9x yoy. EBIDTA/ton for the quarter stood at Rs.3,940/ton against Rs.1,124/ton in Q3 FY16 and Rs.78/ton in Q2 FY17. Global prices have corrected since December as supplies have normalized and buying from Chinese players eased out. We have lowered our estimate for FY18 due to the fall in global prices. We roll forward our estimates to FY19 and maintain our Buy recommendation on the stock with a revised target price of Rs430.
Balkrishna Industries Limited – BUY
CMP: Rs 1,161, 1-Year Target: Rs 1,378, Upside: 18.7%
We recommend BUY rating on the stock due to following reasons 1) The company has sufficient capacity to cater to the improved demand environment in its target markets over the next 3-4 years. 2) Since it derives ~86% of revenues from exports, the lower labor cost it enjoys in India gives it a competitive edge over its global competitors. 3) BIL’s major capex cycle is ending to improve cash flows. 4) Improving market share over competitors and favorable demand environment to drive ~11% revenue CAGR over FY16-FY19E. Given the strong growth prospects, we value the stock at 15x on FY19E earnings to arrive at the 12 months TP of Rs 1,378.
KNR Constructions Ltd (Q3 FY17): Robust performance continues – BUY CMP (Rs) 177, 12-mts Target (Rs) 204, Upside 15.3%
KNR Constructions Q3 FY17 topline was above our estimates. The company witnessed revenue growth of 75% yoy during Q3 FY17 on the back of strong execution. Its operating margin continues to remain healthy at ~15% levels. During the quarter, sharp increase in other income was significantly offset by the increase in interest and depreciation expenses leading to 22% yoy growth in adjusted PAT. As on Dec 31, 2016, the order book stood at Rs.42.4 bn (~4.7x FY16 revenues). KNR expects strong order inflows from Karnataka and Maharashtra regions over next few quarters which would further strengthen its position. The company recently signed a share purchase agreement to sell entire equity stake in its two Road BOT assets for an Enterprise value of Rs.8.5 bn to an Essel group company. This is in line with Company’s strategy to focus on EPC projects. With better than expected Q3 FY17 performance and robust order book, we have revised over estimates higher. With one of the strongest order books in the industry, topline is poised for robust growth. With tight cost control, high margin orders and increasing scale of operations, we expect earnings growth to be strong. KNR’s standalone EPC business is currently trading at a P/E of 15.5x FY19E EPS. We rollover our estimates to FY19 and upgrade the stock to BUY with target price of Rs.204 per share.