Nifty to consolidate amid IIP, WPI data; top 3 stocks to bet on

On a weekly basis, profit booking was seen in the market last week after six consecutive weeks. Along with the Nifty, the Bank Nifty, Midcap and Smallcap indices have also seen strong selling pressure during the first half of the week.

  

Depreciation of the rupee versus the dollar, higher crude prices and worries over a trade war between the United States and China were the main reason for the weekly fall. At the end of last week, the Nifty closed 91.4 points lower against its previous week's close.

This week has only four trading days. We expect the Nifty to consolidate between last week’s high-low levels, with quality stocks rallying. There are many important events this week. Consumer Price Inflation (August) and Index of Industrial Productivity (July) will be declared on September 12. Wholesale Price Inflation (July) will be declared on September 14.

On September 12, Apple will unveil its new iPhones. From an earnings point of view, a bunch of companies are going to announce their results like Reliance Home Finance, Reliance Capital, Power Finance Corporation, Tourism Finance Corporation of India and Rural Electrification Corporation.

Our past recommendations like Dr Reddy’s Laboratories, Ajanta Pharma, L&T Technology Services, Larsen & Toubro Infotech, Suven Life Sciences, Sun Pharmaceutical Industries, ITC, GMR Infrastructure, Mahindra & Mahindra and Adani Green Energy have given fantastic returns in the very short term.

Alkem Laboratories:

Alkem Laboratories produce high-quality branded generics, generic drugs, active pharmaceutical ingredients and neutraceuticals, which market in India and over 50 countries internationally. It has an extensive manufacturing footprint with a total of 16 manufacturing facilities including 14 in India and 2 the United States.

Company is having comprehensive portfolio of over 700 brands covering all the major therapeutic segments. It has reported excellent results for 1QFY19. Its sales and EBITDA grew by 27.19 percent YoY and 86.08 percent YoY, respectively, while PAT increased by 90.26 percent to 136.15 crore. EBITDA margins in Q1FY19 were at 14 percent vs 9 percent in Q4FY18 and 9 percent in Q1FY18.

Last month Company has successfully cleared the USFDA inspection at Baddi plant. At the CMP, the stock trades at a P/E of 38x.

Technically stock is ready for big breakout. Its daily and weekly charts look highly promising. We are recommending a buy for medium term.

Bharat Forge:

Bharat Forge (BFL), the Indian multinational is a technology driven global leader in metal forming having transcontinental presence across ten manufacturing locations, serving several sectors including automotive, power, oil and gas, construction & mining, rail, marine and aerospace.

BFL has posted a quite healthy growth in Q1FY19. Its profit zoomed 33.92 percent to Rs 234.46 crore against Rs 175.08 crore. EBITDA increased 24 percent to Rs 428.8 crore against Rs 345.7 crore while sales increased by 23.2 percent to Rs 1479.66 crore against Rs 1200.08 crore. Its EBITDA margin improves to 29 percent from 28.8 percent.

Company is setting up Aluminum Forging facility at BF PMT in Tennessee, USA at a cost of USD 55 million. This facility in addition to Al forgings in Europe will help company to enhance its presence in the light weighting technology used in passenger vehicles.

Stock is trading at a PE ratio of 39x. The stock looks good on the daily and weekly chart so we are recommending a buy for medium term.

Super Crop Safe:

Super Crop Safe (SUCROSA) is R&D driven agro chemical with focus on niche products. The company has successfully developed and commercialized high margin bio products through its R&D. Such products are Super Gold, triNETRA and Artica which are getting quite strong response from the market.

Company is aiming to launch 3-4 high margin -high demand products from its R&D every year, which will further strengthen its margin. We believe this approach would add vigor to the company's performance in coming 1-3 years.

At CMP, the stock is trading at PE of just 18.15x on its EPS (TTM) of Rs 1.33 per share. The stock is available at a discount compared to industry PE of 40.18x. Company’s EBITDA grew 37.84 percent CAGR in last four years while PAT increased 77.29 percent CAGR in last four years.

For Q1FY19, its PAT soared 41.25 percent to Rs 1.13 crore. Its EBITDA margin for Q1FY19 stands at 11.45 percent as against 7.66 percent in Q1FY18. We believe this stock can become multi-bagger in a long run, so we are recommending a buy for long term investment prospective.

MORE WILL UPDATE SOON!!

Nifty to hold above 11,550 to extend upmove towards 11,620 this week

We See support for the Nifty at 11,500 and 11,450 on the downside.

 

The Nifty drifted lower on Friday but managed to attract buying interest. Strong momentum was witnessed in the last hour of the session, with the index heading towards 11,600. It has been forming a Hammer candle for the last three sessions, which indicates that the decline is being bought into.

It has started to form higher highs-higher lows after weakness was seen in the first three sessions of last week. A bullish reversal candle on the daily scale suggests a bounceback, while a Bearish Engulfing candle on a weekly scale suggests limited upside, thus the tug of war between the bulls and bears is likely to continue.

The Nifty now has to continue to hold above 11,550 to extend its upmove towards its 61.80 percent retracement of 11,620, then 11,666-11,700 zones. On the downside, supports are seen at 11,500, then 11,450 zones.

The index witnessed sharp selling pressure in the first three sessions, but staged a recovery from the lows in the last two sessions of the week. It has negated the formation of higher top–higher bottom on a weekly scale and till it doesn’t surpass its recent top of 11,760, limited upside could be seen in the market.

On the option front, maximum put open interest (OI) is seen at 11,500 and 11,400 strike. Maximum call OI is seen at 11,800 and 12,000 strikes. We have seen call unwinding at immediate strikes, while put writing is seen at 11,500 and 11,600 strikes. Option band, with its early OI inventory, signifies an immediate trading range between 11,500 and 11,700 zones. India VIX spurted to 10.24 percent at 13.89. The rise in VIX suggests limited upside in the market.

The Bank Nifty has broken out of the 27,750-28,388 band after consolidation for the past 19 sessions. It drifted lower to 27,135 zones. It has been forming multiple Hammer candles near its support zone, but follow-up buying is missing above 27,500. Now, it has to continue to hold above 27,440-27,500 zones to surpass its hurdle of 27,750. On the downside, support is seen at 27,165, then 27,000 zones.

We expect stock-specific positive moves in Reliance Industries, TVS Motor Company, Mahindra & Mahindra, Bajaj Finance, JSW Steel, Tata Steel and RBL Bank to name a few, while see limited upside in select banking stocks.

MORE WILL UPDATE SOON!!

Buy Cyient CMP 805 Target->900--950+ Stop Loss 766 Time Frame:6 Months

  

MORE WILL UPDATE SOON!!

December target for Nifty at 12K, see pharma as a good turnaround play

For the market, the expert sees earnings to set the tone going ahead, the pace of this recovery is likely to be a gradual one.

Our top favourite stocks are:

Even as the Indian currency has been hitting fresh record lows, experts at Reliance Securities feel that rupee could find some resistance around 72 per US dollar. The currency has seen some erosion on the back of high crude prices along with dollar strengthening.

On the higher side, crude should face resistance near USD 80.5 per barrel that was tested in May 2018. Any breakout above USD 82 per barrel levels, the crude oil price would surge to USD 91 per barrel.

For the market, We expect earnings to set the tone going ahead, the pace of this recovery is likely to be a gradual one though. “Our December 2018 target for Nifty is at 12,000".

Technically, the rupee has been weak since the start of the year from the lows of 63.20 against the US dollar to an all-time high of Rs 71.97 against the US dollar. We believe the Indian rupee will find some resistance around the 72-levels against the US dollar.

Brent crude has bounced from its 200-day average near to USD 70 per barrel. On the higher side, it should face resistance near USD 80.5 per barrel that was tested in May 2018. Any breakout above USD 82 per barrel levels, the crude oil price would surge to USD 91 per barrel.

 Outlook on the market for the remainder of 2018 and for rest of FY19

The upside for the market for the rest of 2018 is limited. While the macro risks are rising, current earnings recovery provides the positive traction for the market. We expect the market likely to move up in 2018, but the pace of the up move is more likely to be gradual. Our December 2018 Nifty50 index target is 12,000.

Earnings recovery is the key. Last fiscal ended March 2018 (FY18) saw a very healthy earnings growth for the Nifty 50 index of 17% and expectations for the current fiscal ending March 2019 (FY19) are mostly in the range of above 15%.

Earnings growth is the positive trigger for the market. While the market is keeping a close eye on the crude oil price movement and the Indian rupee, it will closely watch the state elections that are scheduled towards the end of 2018. We see the Indian market to remain volatile.

A significant part of correction for midcaps is already done but the market is still in risk aversion mode as dictated by the diversion in the stock price performance of top 10 names versus the broader market. Rising macro risks and a possible increase in market volatility do not augur well for the small-caps and mid-caps.

However, quality mid-caps with strong return ratios, lower leverage and high cash generation will still continue to be preferred even though they might be perceived as expensive.

Global cues now mostly emanate from the US. Trade-related announcements and the statements by the Federal Reserve continue to impact the market. The market will keep close tabs on these developments.

Our outlook on the following sectors are:

FMCG: Positive from operating performance basis but valuation challenges persist at current levels. ITC is a good bet at current levels as it will see softening base and is attractively valued. Apart from rural is a good theme to play.

Metals: Some positives are emerging for the sector with some easing on trade challenges but volatility could persist.

Aviation: Crude moving up and inability to take pricing up sufficiently is a challenge for the sector.

Pharma: One of the best turnaround plays. The US pricing scenario seems to be stabilizing and challenges in plant clearances are past their peak. Earnings growth trajectory should improve going further and dollar appreciation tail winds offer improving visibility for earnings.

Banks & NBFCs: Earnings growth challenges for the banking sector could persist for a couple of more quarters but a bulk of NPA recognition has happened. With improving nominal GDP growth rate, the credit growth should pick up. Preference for private retail banks over PSU banks is likely to continue.

MORE WILL UPDATE SOON!!

RBL Bank, Prabhat Dairy among top 10 stocks that could return 15-60% over 1-year

RBL Bank is likely to see improving return profile over the next couple of years, due to improving advances & loan mix, higher CASA, lower cost ratios and improving asset quality.

  

The market is continuing to correct and consolidate after hitting record highs last week dragged by concerns like weak rupee and higher crude prices, which may impact the country's current account deficit and economic growth.

The Nifty has so farlost more than 200 points and the Sensex around 700 points from their record highs of 11,760.20 and 38,989.65, respectively, hit on August 29.

Experts suggest that the correction was due as the indices had rallied more than 10 percent year-to-date.

Crude oil prices have rallied nearly 23 percent year-to-date to USD 79 a barrel since August 15, while Indian rupee has fallen nearly 12 percent year-to-date against the US dollar.

The ongoing depreciation has room till 73, but the journey till there is less likely to be steep because of the ongoing trade war tensions, and a higher likelihood of only a gradual US rate hike will ensure that we may not have any runaway rally in US dollar or weakness in rupee.

RBL Bank: Buy | Target: Rs 739 | Return: 18%

RBL Bank (one of the fastest growing private banks) is likely to see improving return profile over the next couple of years, due to improving advances & loan mix, higher CASA, lower cost ratios and improving asset quality.

We expect the bank to report industry-leading loan CAGR of around 31.5 percent over FY18-20E. We forecast revenue and PAT CAGR of 27.5 percent and 36.8 percent, respectively, over FY18-20E.

We forecast return on assets (RoA) and return on equity (RoE) will increase by 24 bps and 317 bps to 1.4 percent and 14.6 percent, respectively, over FY18-20E. Considering the multiple levers, we value the stock at 3.6x FY20E P/ABV to arrive at the 12-months target price of Rs 739.

Karur Vysya Bank: Buy | Target: Rs 116 | Return: 24%

Karur Vysya Bank will benefit from its digital banking initiative, asset quality improvement, and advances growth. Further, improving loan mix, higher CASA, lower cost ratios to also support its return profile.

We forecast its RoA & RoE to increase by 48bps and 540bps to 1 percent and 11.5 percent, respectively, over FY18-20E. KVB is currently trading at around 1.5x FY20E P/ABV, which is attractive from a risk-reward point of view.

Reduction in stressed asset formation and improvement in core profitability would drive re-rating of the stock. We forecast its revenue and profit to register 14.1 percent and 50.9 percent CAGR over FY18-20E, respectively.

Considering the multiple levers, we value the bank at 1.8x FY20E P/ABV, to arrive at the 12-month target price of Rs 116.

City Union Bank: Buy | Target: Rs 235 | Return: 20%

City Union Bank will benefit from its increasing loan book led by better traction in MSME and retail loan book segments. Its focus on lower slippages and higher recovery will lead to declining credit cost over the next couple of years.

In addition, focus on high yielding products, higher CASA & CD ratio and lower cost ratios to also support its return profile.

We forecast its RoA & RoE to increase by 7bps and 13bps to 1.64 percent and 15.4 percent respectively over FY18-20E. Considering multiple levers, we assign 2.8x on FY20E P/ABV to arrive at target price of Rs 235.

Kalpataru Power Transmission: Buy | Target: Rs 451 | Return: 23%

KPT's order book at Rs 13,700 crore and L1 status in Rs 2,340 crore order provides strong revenue visibility (over 2 years) in standalone business.

Traction in international transmission & distribution (Bangladesh, Sri Lanka etc) and railways (Africa & CIS regions) will lead to sales / PAT CAGR of 15.5 percent / 18.5 percent over FY18-20E.

We value standalone EPC business at RS 384 per share; BOOT assets at 1xBV at Rs 14 per share; JMC at Rs 39 per share; SSLL at Rs 2 per share, 30 percent holding company discount on each and Rs 12 per share for real estate business. We recommend Buy with a SOTP based target price of Rs 451 per share.

Prabhat Dairy: Buy | Target: Rs 195 | Return: 25%

Prabhat Dairy is a Maharashtra based private dairy company (milk processing capacity of 1.1 million litres per day, around 70 percent direct sourcing) with a strong B2B presence. It sells fresh cow milk and value added products under its flagship brand Prabhat and Volup (icecream).

Prabhat is targeting to expand its reach to 0.2 million retail outlets by FY20 (0.1 million in FY18) driving strong growth in B2C business from a low base and increase the segment's sales contribution to 50 percent from the current 30 percent, in the next 2-3 years.

We estimate revenue and PAT CAGR of 12 percent and 32 percent respectively over FY18-20E owing to its strong B2B presence, increasing share of B2C business, and margin improvement (led by operating leverage). We recommend Buy with target price of Rs 195.

Eveready Industries: Buy | Target: Rs 22% | Return: 22%

Eveready's revenue mix is shifting from batteries & flashlights (82 percent of revenues in FY14 to 64 percent in FY18; 58 percent in FY20E) towards lighting and appliances (12 percent in FY14 to 31 percent in FY18; 34 percent in FY20E).

Entry into confectionaries will add Rs 70 crore to cumulative topline over FY18-20E.

Implementation of BIS compliance for dry cell batteries starting October 2018 will reduce dumping of cheap Chinese batteries, pushing volumes for domestic companies.

Eveready has around Rs 100 crore worth of land bank which can be monetised to either pay off long term debt (Rs 120 crore) or take care of other contingencies, if any.

We expect company to post consolidated sales and PAT CAGR of 11 percent and 52 percent respectively over FY18-20E (PAT CAGR is optically high due to 43 percent drop in FY18 PAT).

Abbott India: Buy | Target: Rs 9,639 | Return: 15%

Abbott's branded business and 21 product launches led to revenue growth of 13.6 percent YoY in FY18 versus Indian pharma industry growth of 5.2 percent. Abbott expects to introduce 100+ products over next five years which is expected to provide further growth opportunities.

Due to the stable branded business and cash rich balance sheet, company enjoys ROE of 20 percent plus and ROIC of 50 percent plus. We expect revenue / PAT CAGR of 16 percent / 21 percent over FY18-20E. We recommend Buy on Abbott India with target price of Rs 9,639.

Sanofi India: Buy | Target: Rs 7,446 | Return: 14%

Sanofi has brands like Lantus, Combiflam, Amaryl and Allegra which feature amongst the top 100 brands in Indian pharma industry. Sanofi's insulin portfolio has been growing in double digits due to growth in its diabetes brands. We are positive on Sanofi's business due to the increase in lifestyle related diseases in India.

We project Sanofi's revenue / PAT CAGR of 15 percent / 17 percent over CY18-20 due to strong brand equity and favourable industry dynamics. We recommend Buy on Sanofi India with target price of Rs 7,446.

HG Infra Engineering: Buy | Target: Rs 386 | Return: 60%

HG Infra Engineering is an EPC company with focus on highways, roads and bridges in addition to civil works and water supply projects. It has been a sub-contractor for established players like L&T, Tata Projects and IRB Infra. Strong and persistent execution has helped it transform from a sub-contractor to a frontline EPC bidder.

HG has grown to pre-qualify for projects up to Rs 1,120/1,600 crore in EPC/HAM respectively. The transformation is visible, with HG quadrupling its revenues over FY13-18.

With a further pickup in NHAI orders in second half of FY19E, EPC players will only add to their FY18E book/bill of around 3.3x. This should address longevity concerns on their earnings up-cycle. For HG, EPS should rise to Rs 24.7 per share in FY20E.

HG has a firm grip over working capital (and hence, debt) and should deliver high RoEs more than 20 percent. We initiate coverage with a target price of Rs 386 (valuing core EPC operations at 15x FY20E EPS).

Khadim India: Buy | Target: Rs 976 | Return: 29%

We initiated coverage on Khadim India with a Buy rating and a target price of Rs 976 based on 16x FY20e EV/EBITDA. We believe it is best positioned to benefit from the domestic footwear industry shifting towards branded footwear.

We anticipate it reporting a 19 percent revenue CAGR over FY18-20 driven respectively by its dual strategy of expanding its retail network (a 16 percent revenue CAGR) and its distribution channel (a 25 percent revenue CAGR).

Driven by operating leverage kicking in and lower interest costs we expect Khadim to deliver a 28 percent PAT CAGR over FY18-20. At the CMP, the stock trades at an EV/EBITDA of 13x FY20e, a 35 percent discount to its peers (such as Bata and Relaxo).

MORE WILL UPDATE SOON!!

Don't see huge fall in market as fundamentals are improving; FMCG valuations stretched

We Advise to maintain right balance in portfolio given market valuations and likely interest rate hike.

  

The Nifty 50 has corrected about 300 points from its record high of 11,760 (touched on August 28), driven by sharp depreciation in the rupee following currency war in emerging markets and rising crude oil prices, which both could hit current account deficit of the country.

Yes there could be global pressure on the market, which could lead to mild correction but we don't see big fall as fundamentals are improving and a lot of companies in Nifty50 already benefitted from rupee fall.

We feels the fall in rupee is a bit of catch-up to other emerging market currencies like Argentina peso, Turkish lira, etc. but the market has done very well despite a sharp fall in the currency. The fall in rupee could also be because of likely increase in interest rates, which was on expected lines.

He said if RBI goes for interest rate hike then there could be pressure on high leverage companies like infra, select financials and NBFCs which could see slight weakness.

Autos

In two-wheeler space, Patil said volume growth is fairly good on pick up in rural demand, especially in scooters segment. In fact some of the players which lost market share earlier want to gain it again which impacted their margin, he added.

Volume growth should be fairly good in car segment and there won't be an impact on the margin front, he said.

Commercial vehicle segment surprised positively. Increase in truck loading could see some fall in demand but the segment as a whole should report 10-15 percent growth this year and new emission norms could support growth next year.

FMCG

The Nifty FMCG index, which comprises of companies like HUL, Marico, Britannia, ITC, Dabur etc, fell 4 percent in last one week.

Consumption companies commentary is very good but valuations are stretched, which the market is realising now.

We see some amount of derating in FMCG stocks on assumption of interest rate rising and high valuations but the structural story is still intact. "Correction from here on could show attractive valuations. As earnings are expected to be steady, any fall of around 10-15 percent from here on could be an opportunity for value buying.

Defence

New pricing policy related to the margin on defence orders could drive these stocks down a bit but fundamentally sound companies with strong productivity will perform better, he believes.

Overall in the PSU space, a lot of companies derated recently which seems to be enough opportunity to look at the space again. Good business dynamics provide an opportunity for long-term.

MORE WILL UPDATE SOON!!

Stock recommendation Tata Sponge Iron Ltd.

 Technical Analysis :

The share price of Tata Sponge has bounced back from the lower band of consolidation ( 900) and the stock has undergone a base building process over past eight months.

The stock witnessed a sturdy rally during November 2016 to January 2018 (from  490-1240). Since then, it entered a secondary phase of consolidation ( 900-1240).

Currently, the stock has resolved out of last five weeks consolidation, suggesting acceleration of positive momentum, auguring well for the stock to unfold the next leg of the rally.

Fundamental Analysis :

Healthy domestic steel demand growth has led to a positive impact on realizations of sponge iron players where, Tata Sponge, being a leading domestic sponge iron player, witnessed a healthy uptick in its realizations over the last two to three years.

The company also has access to captive power plants. Power is generated through these captive power plants through waste heat generated during sponge iron manufacturing. This aids in keeping a check on power costs, thereby aiding overall EBITDA margins.

In FY18, optimum capacity utilization levels and healthy realizations have also had a positive impact on the operating margins of the company.



   

MORE WILL UPDATE SOON!!

Stock Ideas

  

Market Strategy

Nifty has remained above 11600 once it moved above these levels in the early part of the week. The index is expected to remain in the range while the stock specific moves are likely to come on surface. The volatility has remained low which signifies that the current trend should continue. Move above 14% in India VIX only would lead to any major profit booking in near term. The recent rollovers in Nifty are seen on rising roll cost of 0.5% which is higher than the last three series average of 0.3%. This means the market may consolidate for sometime before picking up the uptrend again.

Index Outlook

Bank Nifty : The Bank Nifty ended the August F&O series on a muted note where the private banks continued to witness profit booking whereas the fall extended in Yes Bank which slipped nearly 6% on the last day of the week. Short covering trend seen in few PSU banks which has provided cushion to the index.

Derivatives strategies

Buy Shree Cement (SHRCEM) September Future in the range of 18970-19120, Target: 21180, Stop Loss: 17770

Rationale:

The set up for Nifty remains accretive for stock specific recovery as it is expected to consolidate in the range of 11600-11800 at the start of September series. Stocks with stable rollover actions are seeing good price performance, suggesting august series price buoyancy to continue. Cement stocks are seeing good price move and at the start of the series, the long bias in the Shree Cement has seen smooth rollover to September series. As long as this long addition trend continues ,the stock is likely to head higher. Stocks is yet to witness any major delivery based action since the stock started recovering in July series, this suggest strong hands are still intact in the stock. MORE WILL UPDATE SOON!!

Brokerages upgrade these 20 stocks in August; should you buy?

The Sensex and Nifty rallied more than 9 percent each to scale new highs of 38,989.65 and 11,760.20 respectively in current week while the BSE Midcap index jumped over 8 percent and Smallcap climbed over 6 percent in two months.

 

The strong momentum built up in the market in July, due to in line-to-better-than-expected June quarter earnings, continued in August as well. The Sensex and Nifty rallied more than 9 percent each to scale new highs of 38,989.65 and 11,760.20, respectively, in the current week. The BSE Midcap and Smallcap indices jumped over 8 percent and 6 percent in two months, respectively.

Apart from earnings, improved foreign institutional inflow, consistent support from domestic institutional investors and easing global trade tensions lifted market sentiment. Experts believe the momentum is likely to continue for the next few months.

We remain constructive on Indian equities going forward. We essentially derive our confidence from the pick-up in industrial activity and robust consumer demand aided by strong rural growth, which has now begun to reflect in Q1 FY19 earnings.

We see earnings growth of over 15 percent CAGR in FY19 and FY20. If this pans out as expected, we may even see a compression in market P/E multiple, which seems relatively elevated at current levels.

Jubilant Foodworks: Buy | Target: Rs 1,750 | Return: 12%

Global brokerage firm UBS has upgraded the stock rating to Neutral from Sell and also raised target price to Rs 1,750 from Rs 950, implying potential upside of 13 percent.

Revenue and same-store-sales growth momentum can be maintained by the company and Jubilant is unlikely to lose the battle against its competitors in the long run.

We see limited upside till return on invested capital (RoIC) improvements begin to show.

Brokerage: Kotak Securities

Phoenix Mills: Buy | Target: Rs 707 | Return: 16%

Revenue growth going forward is likely to be led by rental renewals and improvement in commercial and hospitality revenues. We maintain estimates and expect revenues to grow at a CAGR of 7.4 percent between FY18-20.

Operating margins improved during the quarter on YoY basis but were impacted by fit outs going on at HSP which led to lower CAM charges. Going forward, we expect operating margins of 48.7/49.5 percent for FY19/20 respectively.

We maintain estimates and expect net profits to grow at a CAGR of 14.5 percent between FY18-20.

We continue to remain positive on the company and maintain price target of Rs 707 based on sum of the parts valuation on FY20 estimates. Owing to adequate upside from current levels, we upgrade the stock to Buy from Accumulate earlier.

ITD Cementation: Buy | Target: Rs 190 | Return: 41%

Strong, 25 percent, Q1 FY19 revenue growth was a sign of the shape of things to come for ITD Cementation. Q2FY19 is even better with even stronger revenue growth, implying execution is gathering pace with each passing quarter.

The quarter could have been better on order additions, but a healthy L1 status and a buoyant opportunity landscape suggest better days ahead.

With its strong order backlog (and good progress in new orders), a buoyant opportunity landscape and a healthy balance sheet, the future looks bright. The fall in the stock price (around 17 percent in three months, around 29 percent in six) renders it attractive. Thus, we upgrade it to a Buy.

We value it at a PE of 16x FY20 to arrive at a target price of Rs 190. Risk would be any slower-than-expected execution.

Swaraj Engines: Buy | Target: Rs 2,498 | Return: 40%

We expect that triggers for tractor growth and expected strong growth in FY19 would throw up prospects for Swaraj Engines to post strong earnings growth. Due to the recent drop in the stock price we upgrade rating to a Buy.

Against the backdrop of the 11 percent, CAGR in volumes over FY18-20 to 1,14,106, units, we expect revenue to grow 10 percent to Rs 930 crore and lead to an 11 percent CAGR in EBITDA. With the company’s lean cost structure and strong balance sheet, we value the stock at 30x FY20e EPS of `83.3 and arrive at a target price of Rs 2,498.

Risk would be constrained volume growth in M&M tractors would cut into volume and earnings growth.

Everest Industries: Buy | Target: Rs 671 | Return: 20%

The sound performance of its BP division and its de-leveraging led Everest to report its highest-ever quarterly PAT. Its Steel Building division’s roller-coaster performance, though, will continue to be a matter of concern.

We believe that Everest will benefit from rising demand because of its widest range of roofing products, its continuous focus on launching variants with value-added features and its greater operating efficiency. We upgrade rating to a Buy, with a target price of Rs 671.

Risks would be rise in input costs, currency fluctuations.

Oracle Financial Services: Accumulate | Target: Rs 4,650 | Return: 12%

Despite the decline in new license revenue, OFSS has seen healthy deal signings in the new license sales in Q1FY19; bookings have grown 40 percent YoY to USD 28 million as on Q1FY19 led by the new OBP deal win. The management indicated of one more large OBP deal in the pipeline and expects license revenue to cross $ 100 million for full year FY19 (over 13 percent YoY growth in bookings) we have estimated license revenue growth of 14 percent YoY in FY19.

We upgrade earnings estimates by 9 percent for FY20/FY21. We upgrade OFSS to an Accumulate (Reduce earlier) rating and rollover to a Sep’19 target price of Rs 4,650 (Rs 4,250 earlier) based on 21.5x one-year forward PER.

Sun Pharma: Buy | Target: Rs 690 | Return: 11%

Q1 numbers were upbeat on the earnings front while momentum in speciality pipeline ramp-up also looks promising. Going ahead, the management expects near term margins to get impacted due to frontloading of cost of specialty launches. This optical move is the culmination of the management’s long going endeavour for a drift from generics to specialty in the backdrop of US headwinds. This, we believe, is the key differentiator vis-à-vis peers.

The management has reiterated double digit growth guidance for FY19 with slew of specialty launches in the US besides Halol decongestion. We upgrade the stock to Buy as we believe the management is hitting the right chord with sustained planning and investments in the specialty portfolio. Target price is Rs 690 based on 26x FY20E EPS of Rs 25.1 and Rs 38 NPV for Tildrakizumab.

Godrej Properties: Buy | Target: Rs 899 | Return: 29%

We have upgraded the stock to Buy from Add and maintained target price at Rs 899 per shares after Q1 earnings.

Bandra-Kurla Complex commercial project contributed majority of revenue in Q1FY19 and sales volumes were driven by new launches.

Earnings were muted on implementation of IndAS 115 accounting standard.

Equitas Holdings: Buy | Target: Rs 190 | Return: 23%

We have upgraded the stock to Buy from Add with increased target price at Rs 190 from Rs 180 per share.

Earnings upgrades are driven by asset growth. We have changed FY18-20 loan growth CAGR from 25.1 percent to 35.8 percent and upgraded earnings estimates by 3-12 percent for FY19-20.

APL Apollo Tubes: Buy | Target: Rs 2,120 | Return: 25%

APL Apollo reported strong set of numbers during Q1 FY19 driven by robust pickup in volumes. The company registered 45 percent topline growth in Q1 FY19 backed by around 14 percent YoY growth in overall volume and around 28 percent YoY increase in realisation across product portfolio.

Going forward, volume growth is likely to remain strong driven by higher underlying product demand and benefits arising from ramp-up of new capacities that would cater to new end-use segments. The rise in share of high margin products would translate into robust earnings growth. We upgrade rating to Buy with the target price of Rs 2,120.

NTPC: Buy | Target: Rs 187 | Return: 11%

NTPC reported Q1 FY19 performance largely inline with estimates with the standalone topline growing around 14 percent YoY. The growth was primarily aided by 8 percent growth in power generation and sharp jump in tariff (improved from an average of Rs 3.23 in FY18 to Rs 3.36 in Q1 FY19).

Going forward, the management has guided for the limited impact of coal shortages in the rest of FY19. NTPC’s total group capacity at the end of Q1 FY19 has reached to around 54GW and the company is targeting to add 5GW capacity each in FY19E and FY20E. With these additions, the overall capacity is poised to reach around 64GW by FY20E.

Going forward, new capacities coming on-stream and PLF improvement would be the key drivers of revenues and earnings for the Company. With recent correction in stock price, we upgrade rating to Buy with target price of Rs 187.

Oberoi Realty: Buy | Target: Rs 598 | Return: 30%

After a muted Q4FY18, ORL had an impressive start to FY19 clocking in 0.3 million sqft in pre-sales and Rs 620 crore in sales value. Revenue came in at Rs 890 crore in Q1FY19 (lower by Rs 1,130 crore due to IND AS 115). Since ORL's contracts don't have a termination clause, ORL can continue to follow percentage completion method for revenue recognition.

ORL will continue to assess internal thresholds for booking margins. While the Borivali project has met margin recognition in Q1FY19, for Mulund the entire pending margins will be recognised only later in FY19E. ORL’s recent QIP proceed of Rs 1,200 crore will be used as growth capital towards fresh land purchases (not too eager to indulge in JDAs).

With recent price correction we upgrade ORL to Buy from Neutral with Rs 598 per share target price.

ACC: Buy | Target: Rs 1,900 | Return: 17%

We have upgraded the stock to Buy from Neutral and raised target price to Rs 1,900 from Rs 1,890 earlier.

After correction, valuations are no longer demanding. Cycle uptrend has begun and earnings recovery is on track.

Volume upside in ACC is limited, but it may surprise on realisations/costs.

Ambuja Cements: Buy | Target: Rs 295 | Return: 25%

We have upgraded the stock to Buy from Neutral earlier but slashed target price to Rs 295 from Rs 300 as post-correction valuations are attractive.

As demand growth continues, earnings outlook looks better. New capacity improved its volume outlook. We see synergy benefits to improve after master supply agreement.

DHFL: Buy | Target: Rs 775 | Return: 16%

Return on equity (ROE) improvement should drive re-rating for DHFL. We expect ROEs to improve to 15-16 percent despite dilution built in FY19F.

We have upgraded DHFL to Buy with target price of Rs 775 per share.

Indiabulls Housing: Buy | Target: Rs 1,750 | Return: 35%

We have upgraded the stock to Buy from Neutral and raised target price to Rs 1,750 from Rs 1,500 per share earlier. We also raised profit estimates by 3-7 percent.

We factored in lower provisioning & better growth under IndAS. We expect RoE of 27-29 percent on increased net worth.

BPCL: Buy | Target: Rs 509 | Return: 42%

We upgrade BPCL to Buy from Reduce, as we believe the oil marketing companies (OMCs) would be able to pass on impact of higher crude prices on retail diesel/gasoline sales indicated from recent recovery in margins despite elevated crude prices presently at around $75 per barrel. We revised target price to Rs 509 from Rs 496, as we expect higher retail margins from Rs 2 per litre to Rs 2.2 per litre.

We increased FY19E EPS by 15 percent and FY20E EPS by 20 percent on higher retail margins.

Eicher Motors: Buy | Target: Rs 32,249 | Return: 12%

Company's Q1 results are in-line with Royal Enfield's Margin at 32.3 percent & VECV's at 9.2 percent. Royal Enfield continued to post same-store-sales growth of 10 percent.

Competition is still couple of years away. Even after volume growth moderated, company is still a 25 percent earnings CAGR story.

We have upgraded the stock to Buy with a target price at Rs 32,249 per share.

M&M: Buy | Target: Rs 1,042 | Return: 6%

We have upgraded the stock to Buy from Hold and raised target price to Rs 1,042 from Rs 950 per share as Q1 earnings beat estimates by 5 percent driven by a strong margin.

Company is relatively most impacted among OEMs going into BS VI emission norms. Tractors are expected to hit a downcycle possibly in FY21.

Till FY20, company can continue the strong ride. We have raised FY19/20 earnings estimates to 13/15 percent.

Colgate Palmolive: Outperform | Target: 1,320 | Return: 15%

We have upgraded the stock to Outperform from Neutral with increased target price at Rs 1,320 from Rs 1,150 per share earlier.

Market share loss is likely to stem as Patanjali's impact reduced. We expect company's market share to stop dropping in the next two quarters.

Margin will be lower in FY19 but will recover in FY20. We have increased FY20/21 earnings estimate by 1-4 percent.

MORE WILL UPDATE SOON!!