Business Today

While world frets over Brexit, Follow Warren Buffett mantra and take shelter in these 5 stocks

While world is fretting over the possibility of Britain exiting (Brexit) or remaining (Bremain) in the European Union, we bring you five stocks recommended by top brokerages.

Aprajita Sharma June 24, 2016 | Updated 12:06 IST
Ignore jitters over Brexit/Bremain! Invest in these 5 stocks to mint money
Photo: Reuters

As a sea of red swamps the markets across the globe on Brexit, should you follow Warren Buffett's mantra of being 'greedy when others are fearful'?

If experts are to be be believed this is exactly what you should do. Take a contra call! Buy on dips!

"Use this opportunity to buy. It is not a natural calamity or militancy attack to stop businesses and industrial production in Europe. In two weeks, market will start ignoring Brexit and the focus will shift to monsoon performance and corporate earnings," told G Chokkalingam, founder of Equinomics Research and Advisory to Business Today online.

Nilesh Shah, MD, Kotak AMC and S Naren, CIO, ICICI Prudential AMC also told ET Now to don't panic and see Brexit as buying opportunity.

If you indeed decide to play dare in a stormy market, we bring you five stocks recommended by top brokerages that will return up to 56 per cent in the medium to longer term: 

ALSO READ: Beware! Tata Motors, Bharat Forge among stocks taking a knock on Brexit fears

Prabhudas Liladhar

1) State Bank of India (12.66% upside)

Brokerage Prabhudas Liladhar expects the SBI to deliver 11 per cent CAGR growth in NII even as it sees slight margin pressure on transition to MCLR/interest reversals, and said the residual cleansing of the book in FY17E will likely not result in any further damage to asset quality though elevated credit cost will keep earnings growth under check.

"We believe that SBI is best positioned to capitalize on growth opportunities and progressive capital infusion and revaluation of fixed assets will further increase book value," said the brokerage.

Prabhudas reiterated 'Buy' rating on the stock with a target price of Rs 240 based on 1.1x Mar-18E ABV.

2) Britannia Industries (19% upside)

Brokerage Prabhudas Liladhar cut Brittania Industries' FY16-18 EPS estimates by 3.5-5 per cent due to management guidance of tepid demand conditions in H1FY17.

"BRIT is expecting 5-5.5% inflation in input costs; however, selective price increases and cost savings will enable the company mitigate the impact. Strong brands, increasing distribution network in Hindi heartland and rural India and product innovation will enable the company gain from any uptick in consumer demand," said the brokerage.

The brokerage expects steady returns post re-rating of past 3 years and maintained 'buy' rating on the stock with a target price of Rs 3115.

Motilal Oswal Securities

3) Escorts (56% upside)

Brokerage Motilal Oswal expects Escorts' revenue and PAT to register a CAGR of 15 per cent and 60 per cent, respectively, over FY16-18E, along with strong FCF generation and significant expansion in return ratios (RoCE -post tax to improve from 7.4% to 13.1% during the same period).

The brokerage values the stock at 10x (30 per cent discount to M&M) FY18 EPS to arrive at a target price of Rs 283 (56 per cent upside).

4) Indo Count Industries (45.68% upside)

Given its unique asset-light business model, Indo Count enjoys robust and best-in-class capital efficiency. With its focus on high value, high margin products like fashion, institutional linen and utility bedding, Motilal Oswal expects the company to post 19 per cent revenue CAGR and 31 per cent PAT CAGR over FY16-18.

"Focus on brands and increase in the revenue share of higher value products should entail higher realizations and margins," said the brokerage.

The brokerage expects 160 bps margin expansion over FY16-18 to 23 per cent and maintained 'Buy' rating with a target price of Rs 1,380 (12x FY18E EPS).

Centrum Broking

5) Mindtree (19% upside)

"Mindtree is the best positioned midcap which could break into the bigger league (revenues at $715 million as of FY16 and set to scale to $972 million by FY18E)," said Centrum Broking.

The brokerage expects the stock to deliver 18.6 per cent to 14.6 per cent dollar revenue growth for FY17/18E.

"We have been cautious on Mindtree for a while, led by rich valuation coupled with weaker margin trajectory owing to increasing onsite intensity. Stock has seen a P/E de-rating as well as time correction over the past few quarters," added the brokerage. Mindtree trades at 13.1x two-year forward EPS (vs 15.2x traded one year ago).

Centrum turned Buyers on Mindtree with a target price of Rs 751.


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