Four stocks have been recommended as being worthy of a buy after their Q4FY17 results.
The Q4 numbers of Aurobindo Pharma once again highlighted imminent pricing pressure in the US oral solid business. The scenario is unlikely to change in the near future. However, unlike other peers, the management seems relatively undeterred regarding US prospects. Moreover, we expect the percentage of injectables, which are relatively insulated from pricing pressure, in the US portfolio, to grow from 14% in FY17 to 20-25% by FY19. We believe launches continuum, especially in the injectable space, can effectively neutralise channel consolidation and pricing pressure headwinds. Other important segment i.e. Europe is likely to fetch better margins on the back of product transfers to India and a focused approach. We have ascribed a target price of Rs 750, based on 18x FY19E EPS of Rs 41.8.
HZL’s integrated business model ensures steady cash flows, which reiterates our positive stance on the company. Among all major base metals, zinc is the best placed backed by healthy fundamentals. We expect the topline and EBITDA to clock a CAGR of 14% and 16%, respectively, in FY17-19E. The stock is currently trading at an attractive valuation of 5.1x FY19E EV/EBITDA. We value the stock at 7x FY19E EV/EBITDA and arrive at a target price of Rs 300. We have a BUY recommendation on the stock. HZL has a strong balance sheet, healthy cash flow, lower CoP, net cash status and healthy dividend yield, auguring well for the company
We continue to like VST because of its strong product pipe line and robust financials. We believe the company is likely to deliver strong double-digit earnings CAGR over FY17- FY19E, given the upcoming new product launches across various segments. VST remains a strong structural bet on farm mechanisation, as it is moving from being a tiller and tractor company to a total agri-solutions provider over the next few years. We have retained our Buy rating on the stock with a target price of Rs2,341 (20x FY19E EPS)
We continue to like the asset light business model of VGL and we believe that company has reached an inflection point. We expect the company to report 13% sales CAGR over FY17-19E with net profit CAGR of 42%. Due to heavy fixed cost business model, we expect EBITDA margins to increase higher. The stock has run up in recent past and trading at 52W high. At CMP it is trading at a PE of 14.1x on our FY19E earnings. We recommend HOLD on the stock with a target price of Rs 608 (17x FY19E)