These Stocks Remain Analysts’ Favourite Amid Coronavirus-Fuelled Market Turmoil
The 12-month return potential for the 14 stocks, which don’t have any ‘sell’ rating, ranges from 10-110 percent.
Analysts continue to back a select bunch of Indian stocks at a time when equity benchmarks tumbled amid a global selloff triggered by the novel coronavirus outbreak.
The Nifty 50 Index fell 6.36 percent in February, the worst in 17 months, joining the worst global selloff since 2008. Market veterans cautioned the allocation to Indian equities by overseas investors might fall further as investors assess the economic impact of the outbreak. The world economy, too, is expected to slow down as more cases of COVID-19 are reported across the globe.
Still, 14 Indian stocks are the most loved by analysts. The Bloomberg consensus 12-month return potential for the stocks, which do not have any ‘sell’ rating, ranges from 10-110 percent.
Selection Criteria
- More than 20 analyst recommendations.
Sadbhav Engineering
The stock has declined by a third so far in 2020, owing to capital constraints, weak third-quarter performance due to an extended monsoon, delay in forest clearances for the Mumbai-Nagpur expressway and termination of three projects because of land acquisition issues.
Yet, analysts remain bullish on the back of its asset monetisation plans, healthy operating margin performance, and lower valuations. They said the company’s standalone debt would reduce by half after completion of its asset monetisation plans.
Ashoka Buildcon
The infrastructure company received appointed date—a technical term for the day when a contract letter is handed over to a developer to start work—for all its hybrid annuity model projects. That’s expected to drive better execution in the ongoing quarter. An improvement in working capital that led to debt reduction also kept analysts upbeat.
Kalpataru Power
The company’s plan to achieve a near-zero consolidated net debt status, expected reduction in funding the losses and debt of one of its subsidiaries, strong order book of Rs 15,000 crore and lower valuations have kept analysts bullish. JMC Projects (India) Ltd.—subsidiary of Kalpataru Power Transmission Ltd.—is in advance stages of two asset restructuring, which is expected to lower the funding requirements.
GAIL (India)
Analysts remained bullish on the country’s largest gas distributor on account of lower valuations, risk management on U.S. LNG portfolio, strong core gas transmission business outlook and a turnaround in petrochemicals segment that is expected to result in steady earnings growth.
PNC Infratech
Expectations of robust order inflows, monetisation of Ghaziabad-Aligarh project by the end of March and a strong balance sheet have kept analysts bullish. While proceeds from monetisation of one project are expected to aid the company’s future project funding, its net working capital stands at 56 days which, according to HDFC Securities, is the best among peers.
Dalmia Bharat
Increase in cement prices, completion of expansion in Odisha, integration of acquired plants in the coming quarters and lower valuations are expected to aid the company’s performance. The cement maker’s industry-leading volume growth, cost efficiencies and softening of petcoke and diesel prices are expected to further aid its performance.
NTPC
A capacity addition of 5 gigawatts annually and improving coal stocks, which will reduce plant shutdowns, are expected to aid its growth. This, coupled with a strong dividend yield, has kept analysts bullish.
Repco Home Finance
Analysts are bullish on the non-bank financial company on account of limited impact from the liquidity crunch as it focuses on retail lending portfolio and high levels of capital adequacy, healthy balance sheet with strong return on assets and lower valuations.
State Bank Of India
Strong pipeline of recoveries in 2020, healthy retail loan growth, steady asset quality, value unlocking from subsidiaries are expected to aid the country’s largest lender. In the near term, analysts expect recoveries worth Rs 6,800 crore from three accounts. With subsidiary SBI Cards & Payment Services Ltd.’s four-day initial public offering in the process, the lender has plans to list SBI Asset Management Company and SBI General Insurance over the next one to two years.
Federal Bank
Expectations of stable net interest margins, limited exposure to new corporate stress, better asset quality, stable risk ratings and lower valuations have kept analyst bullish on the lender.
Adani Ports
Outperformance in container operations, addition of six new services, a strong recovery in Dhamra port, acquisition of Krishnapatnam port, recent commissioning of Mundra LPG/LNG terminals and improving volume outlook have kept the street bullish on the stock. Also, aggregate group pledge has stagnated over the past five quarters. And prospects of proceeds from stake sales will lead to a decline in overall share pledge, aiding the stock.
KNR Construction
A robust order book and pipeline, a strong balance sheet and expectations of higher margins driven by the irrigation segment have kept analysts bullish. The company’s order book stood at Rs 6,500 crore—nearly three times its annual revenue. Its balance sheet is expected to get better on receipts of monetisation proceeds from the Walayar-Vadakanchery project.
Aditya Birla Fashion
Improving performance of Pantaloons, sustained margin expansion, strong brand portfolio of lifestyle brands and lower losses in the fast fashion business have helped the company. Pantaloons reported a double-digit operating margin for the first time in the quarter ended December. That came on the back of lower inventories and favourable operating leverage.
Apollo Hospitals
A better-than-expected margin in the third quarter, the firm’s plan to operationalise beds in existing hospitals over the next two years, deleveraging and reduction in promoter pledge may lead to further re-rating of the stock. It has gained close to 21 percent so far in 2020—the highest among the 14 stocks considered for this analysis.
The reasons why these stocks are the most loved have been compiled from research reports of Kotak Securities, SBICAP Securities, JMFinancial, CLSA, Citi Research, Motilal Oswal, Elara Securities, Antique Stock Broking, HDFC Securities and others.