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The year 2019 was no doubt exceptionally a very interesting and strong year for the Indian Stock market. On the other hand, we can say a lot of events shaped the market: General elections, economic slowdown and more. We hope 2020 to be a better year for equity investors. Almost every year, share market investors decide on for proper financial planning before investing their hard-earned money in markets. They generally calculate their profit and loss to prepare a good financial portfolio for the New Year as a resolution. Therefore, they can earn better returns. Like every year, this year too there will be many investors who want to relook their portfolio and invest in some good fundamentally strong stocks. Therefore, allied to new investments we discussed 20 most important fundamental grip stocks with Escorts Securities, Research Head-Aasif Iqbal who recommended some very high-quality stocks where one can invest for one year to get good returns. So, what are you waiting for? Just follow these 20 stocks to make your next year happier.

Top 20 Stocks to buy at CMP:

1. Satia Industries

• Target-Rs 140, Market Cap-Rs 871 cr

• Investment Horizon is for six to nine months

• Risk-Medium

• Investment Horizon is 6- 9 month.

• Risk - Medium

• Decline in usage of Single use plastic will benefit the paper industry

• Satia Industries is moving into paper cutlery segment, which will boost the topline and bottomline

• Revenue has been growing at rate of 19%

• EBITDA Margin increased from 18.9% in FY18 to 22.22% in FY19

• Current EPS(TTM) is Rs 9.6, We expect EPS to be Rs 15 after capacity Expansion

• New plant will be commissioned by the end of Q4-FY21

2. Larsen & Toubro (L&T)

• Target-Rs 1700, Market Cap-Rs 181104 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk - Low

• Expect Investment cycle to turnaround next year

• L&T has shown consistent growth in order book

• We expect Government thrust on Infrastructure Investment to increase

• Order inflow to remain weak but execution expected to remain strong for L&T

• Company has whopping order book of Rs 3.07 lakh crore

• Current EPS is Rs 53 and it is trading at P/E of 24

3. Reliance Industries

• TGT - Rs 2100, Market Cap – Rs 985707 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk - Low

• Fundamentally very strong company

• Strong telecom earning may increase RIL profitability for next 2 years

• Reliance Jio potential tariff increase will lead to higher ARPU

• Refining Margin expected to increase further due to IMO 2020

• Complex Refiners like RIL to be biggest beneficiary of IMO 2020

• IMO is International Maritime Organisation

• Focus to increase the share of complex chemical going forward as global dependence on oil will decrease

• Balance Sheet deleveraging is big positive for the company

• Company has recently to sell 20% in Oil to Chemical unit to Aramco at $75 bn Enterprise Value

• Current EPS is Rs 57 and it is trading at P/E of 27

4. Biocon

• Target - Rs 400, Market Cap - Rs 34698 crore

• Investment Horizon is for one Year

• Buy as SIP

• Risk - Medium

• The management has set an aspirational target of US$1 billion of biologics sales by FY22 via the organic route

• RoCE for the biologics business was at 16% in H1FY20 vis-à-vis 11% in H1FY19

• Trastuzumab launch in the US is scheduled by CY19

• The company’s therapeutic basket includes molecules from diabetes, oncology, immunology, dermatology, ophthalmology, neurology, rheumatology and inflammatory diseases

• Upjohn-Mylan merger to benefit the company’s expansion into China

• The new draft guidelines issued by the USFDA to help facilitate the development of insulin products is expected to give a boost to companies like Biocon

• FY19 EPS was Rs 6.2, we expect FY22E EPS of Rs 15.6 on back of strong growth in Biologics

5. Syngene International Ltd

• TGT - Rs 410, Market Cap - Rs 12294 crore

• Investment Horizon is for one Year

• Buy as SIP

• Risk - Medium

• Company is into CRO business.

• Eight of the top 10 global pharma companies are its client

• The company has recently added some elite clients like Amgen, Zoetis, Herbalife, GSK and multiple year extension of BMS and Baxter contracts

• As of FY19, the company had a client base of 331

• It owns a pool of 4060 scientists

• The management has maintained revenue growth guidance (~20% constant currency) in FY20. The growth will be higher in H2FY20

• The company remains aggressive on the capex front (~US$380 million already spent + another US$170 million earmarked by FY21)

• FY19 EPS was Rs 8.3, we expect FY21E EPS of Rs 10.3

6. Info Edge

• TGT - Rs 3100, Market Cap - Rs 29914 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk - Medium

• Company owns Naukri.com, 99acres, Jeevansathi, Shiksha

• Info Edge have 26.38% stake in Zomato and 13.5% stake in PolicyBazaar

• Zomato is expected to be profitable by end of 2020

• InfoEdge recently acquired IIM Jobs for Rs 80.8 crore

• The company’s recruitment business (Naukri) grew at a healthy 18.7% YoY

• Info Edge is a debt free company

• We expect company investment in E-Commerce business like Zomato, PolicyBazaar, and 99acres will drive the valuation

7. Affle (India) Limited

• Target - Rs 1800, Market Cap - Rs 3754 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk - Medium

• Company is into Digital Marketing and is the leader in India

• Large internet user base, rising Smartphone sales, improving data connectivity and young demographics augur well for the shift to digital

• Consistent growth in digital marketing spends across key industry verticals including e-commerce, food, travel, transport, entertainment/OTT/gaming, healthcare, BFSI/Fintech, telecom and others will benefit the company

• We expect Rev and EPS to grow at 35% and 40% respectively for next 3-4 years

8. Lal Path Lab

• Target - Rs 2100, Market Cap - Rs 13918 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk - Medium

• The diagnostics industry remains highly fragmented and unorganised, this gives Dr Lal Path Lab and opportunity to increase its reach

• Strong Brand in Diagnostic in Northern India

• Company is Cash Rich and Debt Free

• Opened Central Lab in Kolkata in December 2018 to drive growth in Eastern India

• Focus on Franchisee Model to push growth

• FY19 EPS was Rs 24, we expect FY21E EPS of Rs 35

9. ACC

• Target - Rs 1750, Market Cap - Rs 27774 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk - Low

• Realization remained strong in Q2 despite weak demand.

• We expect Cement demand to increase in next couple of Qty.

• Company is almost debt free.

• It has Cash in Books of Rs 1890 crores

• We expect FY19E EPS of Rs 78 and FY20E EPS of 91

• Stock is trading at P/E of 16x

• Stock is trading at attractive valuation

10. Kansai Nerolac Paints:

• Target - Rs 650, Market Cap - Rs 28185 crore

• Investment Horizon - 1 Year

• Buy as SIP.

• Risk - Medium

• Kansai Nerolac is subsidiary of Kansai Paint, Japan

• Strong growth seen in decorative paints section

• Decorative paint grew at 12% in volume and 8% by value in Q2FY20

• Industrial paint de-grew by 22% due to slow down in Industry

• We expect recovery in Industry next will benefit Industrial Paint Demand

• In Q2FY20 company opened its plant in Punjab

• Company is debt free

11. NIIT Tech

• TGT - Rs 1700, Market Cap - Rs 9131 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk - Medium

• In 2QFY20, NIIT Technologies’ revenues grew by 8.2% QoQ

• Acquisition of WHISHWORKS supported growth

• The company expects to maintain EBITDA margins at 18% because of increased focus on high margin digital business

• In 2QFY20, company has won deals worth USD 176mn, up by 0.6% QoQ

• We expect that the strong order book, constant traction from insurance and travel verticals would drive top-line growth

• We expect FY20E EPS of Rs 74 and FY21E EPS of Rs 89

• Stock is trading at P/E of 16.4x to FY 21E EPS of Rs 89

12. HDFC Life Insurance Company Ltd.:

• Target - Rs 750, Market Cap - Rs 116045 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk - Medium

• HDFC Life Insurance Co. Ltd, a joint venture between HDFC Ltd. and Standard Life Aberdeen

• Company has strong promoter backing

• In Q2FY20, gross premium income rose 10.4% YoY aided by higher first year premiums (up 20.4% YoY)

• Assets under management (AUM) grew 16% YoY to Rs 1.31 lakh cr in H1FY20 (vs. 1.13 lakh cr in H1FY19)

• Insurance market still largely underpenetrated; there is considerable scope for growth

• HDFC Life seems well placed amongst its peers to benefit from the opportunity

13. Bharti Airtel

• Target- Rs 610, Market Cap - Rs 227812 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk - Medium

• Bharti has raised tariff of its popular bundled plans by 20-40% along with a 40% price hike in low-end plans

• We expect sustainable ARPU (Average Revenue per User) improvement going ahead

• Bharti board approves fund raising of $3 billion via debt and Equity to pay AGR dues

• Uncertainties related to Vodafone - Idea operation to benefit Bharti Airtel

14. RITES Ltd

• Target - Rs 370, Market Cap- Rs 6995 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk - Medium

• RITES standalone order book stand at Rs 6,052 crore

• Order book is expected to grow by +17 % in FY20 over FY19

• Order Book provides strong revenue visibility for next 2-3 years

• GoI is expected to invest heavily in the infrastructure sector, mainly for highways, railways, renewable energy and urban transport

• We expect FY20E EPS of Rs 21.6 and FY21E EPS of Rs 25

• Stock is attractively priced as it is trading at P/E 11.2x to FY21E EPS of Rs 25

15. IRCTC

• Target - Rs 1100, Market Cap - Rs 13949 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk - Medium

• IRCTC is the only entity authorized by the Indian Railways to provide services like catering, travel & tourism, online ticket booking, and packaged drinking water

• IRCTC's business is very strong and is near monopoly

• Catering service is the major revenue generator of IRCTC with 55% of sales as of FY19

• ‘Rail Neer’ sales are expected to increase as 10 new plants are in the pipeline

• 1st Private Train run by IRCTC " Tejas" made profit of Rs 70 lakh till Oct

16. RNAM (Reliance Nippon Life Asset Management)

• Target - Rs 450, Market Cap - Rs 20873 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk - Medium

• Nippon bought Reliance Capital Stake becoming 75% holder in the company

• Confidence in Promoter in entity will bring back the lost business

• We may see sustained pick in AUM

• Nippon Global repute with Institution and HNI will bring back business

• We expect FY21E EPS of Rs 10.7; Stock is trading at 32X. Re-rating is expected

17. Apollo Hospitals

• Target - Rs 1800, Market Cap - Rs 20387 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk - Medium

• Q2FY20 standalone revenues grew 17.9% YoY to Rs 2463.6 crore

• Strong growth in New Hospital to aid growth

• Pharmacy contributes 40% of the total business

• Pharmacy has been growing at 22% for last 5 years

• Company is looking to sale stake in Pharmacy and Insurance business

• We expect FY21E EPS of Rs 44; Stock is trading at P/E of 33x

18. UBL

• Target - Rs 1500, Market Cap - Rs 32215 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk – Medium

• During H1, UB grew its volumes by 6% (ahead of the industry)

• In Beer segment it market share of 52%

• New product launch to aid growth

• It had launched Kingfisher Storm last year and has been doing well in the second year

• Company is planning to focus on Kingfisher Ultra and Heineken

• Launch of own craft beer brand is also on the cards

• Focusing on scaling up of non-alcoholic beer brand ‘Kingfisher Radler’ (a key new segment) in the next few years

• We expect FY21E EPS of Rs 35; Stock is trading at P/E of 34x to FY21E EPS of 35

• Attractively price, P/E expansion expected

19. USL

• Target- Rs 730, Market Cap - Rs 43017 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk - Medium

• United spirits Limited (USL) is a subsidiary of Diageo Plc

• Diageo’s global market leadership (17/40% share in spirits/scotch)

• In Q2FY20, USL’s Premium & Above (P&A) segment grew by 3%

• Company expects a higher growth in P&A segment led by recovery in scotch portfolio

• Company’s strong focus on premiumisation coupled with rising disposable income and changing customer lifestyles provides significant opportunity to grow sales and expand margins

• Company is continuously reducing debt and containing expenses is positive in medium to long term

• We expect FY21E EPS of Rs 17; Stock is trading at P/E 34x to FY 21E EPS of 17

• P/E expansion expected

20. Sun Pharma

• TGT - Rs 550, Market Cap - Rs 102811 crore

• Investment Horizon - 1 Year

• Buy as SIP

• Risk – Medium

• Sales for the Q2FY20 grew by 17% y-o-y to Rs 8123 crore. Strong sales growth

• The domestic formulations business reported 35% growth for the quarter on a low base

• Sun Pharma has just tied-up with AstraZeneca to market few of its oncology products in China

• Sun Pharma has out licensed two molecules – Ilumya and Cequa – and eight generic drugs to China

• Medical Systems Holdings (CMS) for marketing in Greater China

• FY21E EPS of Rs 24, Stock is trading at P/E 17.8X to FY21E EPS of 24

• Stock is attractively priced

Last but not the least, Iqbal says, “Though volatility cannot be denied as US presidential election is up next year. Also Indian economic growth remains a concern along with global economy saw more nationalistic flavor than globalisation. Amid all this concern and volatility, these stocks expected to do good for one year”.

(Disclaimer: Above given stocks are recommended by Aasif Iqbal, Research Head-Escorts Securities. Before investing, do take your financial planners advice and then invest)

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