SHARES to Buy in 2017 Recommend by IIFL

SHARES to Buy in 2017 Recommend by IIFL

After the demonetisation chaos, the government is expected to be proactive in terms of policy actions ­ both in and outside the Budget. The Indian economy is expected to be back on the recovery path from the second half of 2017 as the liquidity crunch wanes and the pent-up demand comes back to the fore.

Most market participants say Indian equities will perform well in 2017, and the Nifty, which gave negative returns in the past two consecutive years, has the potential to scale new lifetime highs.


Maruti Suzuki Target Rs, 6,100

IIFL are bullish on Maruti Suzuki on account of strong volume growth despite demonetisation.Significant waiting period, enhanced capacities along with new product launches will ensure continued volume outperformance.

Low dealer inventory will lead to higher wholesales vs. retails sales.At our target price, the stock is trading at 22xFY18E.

ONGC Target Rs. 230

IIFL are bullish on ONGC as rampup in production from the redevelopment projects in Mumbai High (North & South) will help in volume pick. 

Benign crude prices will ensure minimal or zero underrecoveries. We believe that the net realisations will rise in FY18 leading to decent outperformance going forward.

CESC Target Rs. 750

IIFL are positive on CESC due to sector beating earnings growth of >25% CAGR till FY19E on the back of commencement of Chandarpur IPP PPA (600MW) and stable Kolkata utility business. 

Lower fuel costs and efficient energy sourcing from Haldia plant will improve margins. 

The stock is currently priced at 5.5x FY17E EV EBITDA. Any monetisation of non-core retail business will lead to further triggers for the stock.

City Union Bank Target Rs. 156

IIFL believe Citi Union Bank is an outperformer in terms of capitalisation, asset quality and returns (ROA). 

This is driven by its niche business model (working-capital lending), healthier margins, superior non-interest income and lower cost ratio that resulted in healthier ROA compared to its peers. 

IIFL are expecting the PAT to grow at 20% CAGR over FY16-18E while ROA and ROE to be at 1.5% and 18%, respectively . The stock is currently trading at 2x PB FY18E.

Navneet Publications Target Rs. 135

Navneet Publication is one of the most profitable education companyies in India. Supported by aboveaverage monsoon, IIFL expect a rec ove r y i n s a l e s f r o m t h e contribution of Maharashtra business. 

The stationery business is expected to improve due to focus on export business.

Considering the high ROE and strong growth going forward, we expect strong earnings growth in FY18. At our target price, the stock is trading at 18xFY18E.


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