Buy pharma stocks: Ambit

Speaking to CNBC-TV18 Pramod Gubbi of Ambit said that the pharma sector will be under pressure. He said pharma has been neglected or has underperformed. Given how things are changing from an investor perspective, they are looking at it as value buy, he said, adding that there won’t be any fundamental changes in terms of the outcome of the US elections. There is a need for Indian companies to move up the value chain and several of them are doing, he said.

Much like pharma, the tech sector is also going through a consolidation after having a good 3-4 years until 2014, he said. There is usually a lag in the advances seen in Indian companies, but they do catch up, he maintained.

It is difficult to gauge the extent of the fall in global markets if Donald Trump wins, he said. There are leveraged positions in the market. Having said that we see that as a buying opportunity, he said. “We don’t see any material changes given the American political and democratic system in terms of checks and balances.”

Sell Bayer CropScience: East India Securities

Bayer CropScience (BCS) registered sales of Rs 10.8Bn, a growth of 9.2% YoY and 35.2% QoQ, indicating pick up in growth. We believe post healthy monsoon, market demand is picking up. Overall performance of BCS was encouraging on back of improving monsoon condition, we believe as season picks up, 3Q & 4Q numbers should improve. 

We expect BCS to post CAGR of 16% in Revenue & 17% growth in PAT over FY16 18E. At current valuation of 43x & 37x FY17 & FY18 expected earnings, we believe stock is overvalued, however managements regular buy back & lower trading volume would support higher price. We maintain our Sell rating on stock with Target price of Rs 4,038.

Sell UPL: East India Securities

UPL posted gross revenue growth of 19% in Q2FY17, mainly on account of strong volume growth of 23% during the quarter. There was a price decline of 5% while exchange impacted positively by 1%. Total net revenues grew by 26% during the quarter. Geographically, India/Latin America contributed highest to the growth with 23%/34% respectively. 

Seed business witnessed a revenue growth of 23%. UPL’s Q2FY16 results were marginally below our estimated. UPL is a leading global generic player in the agrochemical Industry (ranks among the Top-5 post patent agrochemical manufacturers in the world). We expect UPL sales to register CAGR of 14.5% over FY2016-18E, while Adj PAT is likely to show a CAGR of 20.2% during same period. 

Over past few quarters, UPL has seen a strong revival in volume growth, with improving gross margin. At current price stock is trading at 25x & 20x its FY17E & FY18E earnings respectively. Due to recent run up in the price, stock trades near to its fair value, hence we rate stock Sell with TP of Rs 688 per share.

Sell Rallis India: East India Securities

Rallis, on standalone basis, posted growth of 17.8% in Net Sales for the quarter, as domestic business picked up on back of strong monsoon and spillover of export order from previous quarter. Domestic business was struggling on account of two back to back droughts and high channel inventory. Other business (majorly seed) posted strong growth of 66% for the quarter. Rallis’s Q2FY17 numbers were in-line with our expectation.

 Even thought Rallis has one of the best distribution network, company seems to be unable to capitalize on it. Given stellar performance by peers, Rallis’s lowering innovation index and declining growth in domestic business indicate urgent need for business restructuring & focus. 

Overall, we estimate Rallis to register a CAGR of 9% in Net Sales and Profit over FY2016-18E, respectively. On the valuation front, the stock is trading at 29x & 26x FY2017 & FY2018 Estimated Earnings. We recommend Sell on stock with a Target Price of Rs 223.

Buy Navin Flourine: Dynamic Levels

In 2QFY17, Havells India Ltd. (Havells) posted net revenue growth of 9% YoY to INR 14.5 bn, mainly boosted by notable growth of 22% YoY in company’s electrical consumer durable (ECD) segment. On the other hand, revenue growth in Switchgears (5% YoY) and Cables & Wires (flat YoY) was muted on account of sluggish housing and industrial demand. 

Lighting & fixtures demonstrated 9% YoY revenue growth, led by 22% growth in lighting (ex-CFL). Havells’ core EBITDA stood at INR 2.1 bn (14.5% EBITDA margin) compared to INR 1.9 bn (14.1% margin) in 2QFY16. Contribution margin improved across all segments. 

PAT stood at INR 1.4 bn, up 21% YoY. Going forward, attractive macro triggers such as expected growth in housing demand, higher discretionary spending related to payouts of Seventh Pay Commission and healthy monsoons auger well with company’s growth prospects. Over FY16-19E, we expect Havells’ revenue to grow at 13% CAGR with 120 bps margin improvement, entailing 19-20% CAGR earnings growth.

Robust return ratios (RoE >20%; RoCE >30%) and debt-free balance sheet enhance fundamental strength. Improved profitability with optimum working capital could result in notable FCFF of INR 4.7 bn by FY19E. Maintain BUY rating with TP of INR 478 (36x Sept-18E EPS).

Buy granules india: Nirmal Bang

Granules India posted subdued sales growth of 3% yoy to Rs 363.6 cr for the quarter, due to capacity constraints in Paracetamol and Metformin however EBITDA margins improved by 100 bps on account of favorable product mix leaning towards formulations (37% of sales vs 29% in Q2FY16). 

The company posted EBITDA margins of 20.4% vs 19.4% in Q2FY16 and vs 19.6% in Q1FY17. The company is undergoing capex program (earmarked Rs 314 cr for FY17 and similar number for FY18) for increasing the capacities in addition to greenfield facility at Virginia. Increased capacities are likely to be operational by FY17 end or early FY18. 

Management has maintained revenue growth guidance of 10-15% for FY17. In last 5 years the company has shown robust growth and grew at CAGR of 24.7% with PAT CAGR of 41.5%. For the next two years we expect the company’s sales to grow by 14% and PAT by 28%, due to higher profitability in Omnichem and higher contribution by formulations business. 

We believe current year is an year of consolidation wherein it is making all possible efforts to prepare a base for future growth momentum. We have assigned a multiple of 18x FY18E earnings and based on that we recommend BUY on the stock for price target of Rs 156.

Hold Hcl Infotech & M&M: Prakash Gaba

Prakash Gaba of prakashgaba.com told CNBC-TV18, "Nifty had seen a low at 8400 zones. If we get rallies, those would be shorting opportunities, unless 8550 is taken on the upside you must assume that any upmove that we may have would be shorting opportunities and the downside is open." 

"I like two stocks - HCL Technologies   looks certainly good and can climb to levels closer to around Rs 820 zones. I would have a stop loss below Rs 775 and trade long. Mahindra & Mahindra (M&M) is also looking good with targets of Rs 1,420-1,450 zones and stop loss below Rs 1,350. It may take some time for that, but that's the target," he added.

Buy stocks of Ashok Leyland: Ashwani Gujral

Ashwani Gujral of ashwanigujral.com told CNBC-TV18, "Nifty and the Bank Nifty continue to remain in a longer term correction. 

Whatever way the event pans out, the big buying opportunity will come as the market moves higher, for the moment I don’t think there is great positional trade on the Nifty or the Bank Nifty, wait for the event outcome and then try to get long." 

"There is great risk reward now on Ashok Leyland   where a medium target of Rs 120 is now visible. Infosys   is getting closer to Rs 950-970 and getting ready for a pullback rally. In fact the entire IT sector out there could see pullback rally with Infosys right up to Rs 1,080-1,100. Also, Axis Bank   which had a sharp correction in any sort of pullback could also have a medium target closer to Rs 600," he said.