The domestic equity market kicked in the new financial year on a weak note as the key benchmark index S&P Sensex tanked over 500 points, or nearly 2 per cent, to 27,437.94 on April 24 against 27,957.49 on March 31. However, experts are bullish on the equity markets and valuations are not looking overstretched. On April 24, price-to-earnings ratio of the S&P BSE Sensex was at 18.90, marginally higher than its five year average of 18.65.
Motilal Oswal recommends five stocks which you can add in your portfolio in the present market scenario.
- Ultratech Cement: For the latest quarter ended March 2015, the company registered consolidated net profit of Rs 656.90 crore, down 24 per cent, against Rs 861.91 crore in the corresponding quarter a year ago. However, net sales of the company stood at Rs 6,518.18 crore, up 5.37 per cent, against Rs 6,186 crore during the same period.The brokerage house sees around 30 per cent upside in the shares of Ultratech Cement and believes it can touch Rs 3,534 in the next few quarters. "It offers the best play on demand recovery, along with superior profitability and consistent improvement cost management," said the brokerage house. On April 24, it was at Rs 2,707 on the Bombay Stock Exchange (BSE).
- Jyothy Labs: According to the brokerage house, post Henkel India's integration, Jyothy Labs is well placed to capture the attractive opportunity its expanded portfolio offers. It now addresses a far bigger market, with better distribution footprint and capability to invest and scale up brands. Given its increasing brand investments and richer portfolio, Motilal Oswal expects strong potential for its power brands in the next 3-5 years. "We model 17 per cent sales CAGR, 36 per cent operating profit CAGR and 40 per cent net profit CAGR over 2014-15 and 2016-17. The share price of the company can touch Rs 320. Heightened competition in its core categories due to lower input costs is a key risk," said the brokerage house.
On April 24, the share price of Jyothy Labs was at Rs 244.65.
- Indiabulls Housing Finance (IHFL): The net profit and net sales of the company jumped 22 per cent and 40 per cent to Rs 1,745.86 crore and Rs 551.06 crore, respectively, for the quarter ended March 2015 against Rs 1,244.08 crore and Rs 451.51 crore in the corresponding quarter a year ago. Since the beginning of the ongoing financial year, the share price of the company declined 3.2 per cent to Rs 554 on April 24.However, Motilal Oswal Financial Services is upbeat on IHFL. According to a report by the brokerage house, IHFL has transformed from a diversified lender to a focused mortgage player. Mortgage focus has yielded returns, with return on equity and return on asset improving from 3 per cent and 0.8 per cent, respectively, in 2008-09 to 30.8 per cent and 4 per cent in 2014-15. Focus on mortgage and market share gains will drive asset under management growth of around 23 per cent for the next three years. Asset quality trend to remain stable. Improved borrowing profile, better credit rating and liquidity buffer will aid the company maintain healthy spreads and its share price can move towards Rs 753.
- Infosys: Software major Infosys reported a consolidated Q4 profit of Rs. 3,097 crores, down 4.7 per cent, against Rs 3,250 crore in the sequential quarter ended December 2014. Infosys expects 2015-16 revenue to grow 8.4 per cent to 10.4 per cent in rupee terms. After the Q4 result, Motilal Oswal downgraded 2015-16 and 2016-17 revenues by 4 per cent on the back of 3.1 per cent miss in the fourth quarter estimate. "Growth in the first quarter in 2015-16 will be crucial indicator whether it will achieve the guidance. We expect Infosys to grow its revenues at a CAGR of 10.3 per cent over 2014-15 and 2016-17 and Earnings per share is likely to grow at a CAGR of 10.6 per cent during this period. The share price of the company can touch Rs 2,400 in the next few quarters," said a report by Motilal Oswal. On April 24, the share price of Infosys was at Rs 1,996.25.
- Crompton Greaves:It's journey to emerge as a 'global corporation' from India continues to face multiple 'growth pangs'. Phase-1 of its restructuring program, encompassing European operations has been largely completed. In 2015-16, the company is likely to witness fructification of the management's efforts over the last two years."Demerger of the consumer business will unlock shareholder value; asset sale by promoters will address investor apprehensions on pledged shares. One can buy shares of Crompton Greaves for a target price of Rs 268," said a report by the brokerage house. On April 24, the share price of Crompton Greaves was at 164.20.