Buy CEAT; target of Rs 1445: Prabhudas Lilladher

Prabhudas Lilladher's research report on CEAT While Ceat reported a YoY decline in its standalone earnings in Q2, the dip was lower than our expectation. The relatively stable input costs and increase in share of more profitable products in its mix would have a positive impact on Ceat’s performance. 

Revenue growth is also expected to be better with higher demand for two‐wheelers and UVs and capacity constraints would be addressed by its ongoing expansion. Higher profitability and increase in cash flow generation would result in an improved balance sheet position from FY18. We maintain a “BUY”, while retaining our estimates and target price.

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.

Buy UltraTech Cement on dips: Anu Jain

Anuj Jain, Director – Equities at IIFL Private Wealth Management told CNBC-TV18, " UltraTech Cement  , given the way it closed on Friday, it gave up most of the steam, it is good to pick up closer to Rs 3000 or Rs 2990. It is poised towards Rs 3300. So, it is a buy on dips. On Friday it gave up, so there is a possibility of a couple of percentages down before it moves up." " India Cements on the other hand has kept the steam on Friday. 

There is some minor resistance closer to Rs 105 and it can actually move upto Rs 112-113. So, there is momentum still in it. The smaller ones will also start, so, JK Lakshmi Cement has stated to show some accumulation," she added.

Buy Gateway Distriparks on dips: Anu Jain

Anuj Jain, Director – Equities at IIFL Private Wealth Management told CNBC-TV18, "There are certain stocks which kind of stood out on the basis of which they were accumulated.  Gateway Distriparks  , despite the way it has moved up, even at the current level of Rs 365, any dips or up to Rs 355 one can look at picking up this stock. For a medium term, the target is as high as about Rs 400-420. In the mid term if one is playing for about 15-20 days, around Rs 375-385 is what one should get which is still about 7-8 percent move which is still left into the counter." "We have seen a big move coming along with banking into infra. 

So, there was a lot of short covering and a move up there. So, there are signals both in Sadbhav Engineering , Blue Star  and in Voltas  but I would like to give Blue Star as a call. In the medium term again like Gateway Distriparks the targets are very high of about Rs 425. So, for somebody who is looking at as an investment call also, we are advising this," she said. "For a safe person who does not want to play any of these, there is probably Glenmark Pharma . Looking for a target of Rs 750 and stoploss of about Rs 705."

Short Hero Motocorp, says Amit Harchekar

Amit Harchekar of A Plus Analytics told CNBC-TV18, " Hero Motocorp  is continuously forming lower-top and lower-bottom formation. Even despite yesterday’s smart pullback in the market, the stock was unable to close with the gains of more than 2 percent and that is the major sign of concern. It has already breached the long-term support line below Rs 3,150 and now the stock is projecting a target close to Rs 2,700 in the near term.

Any pullback towards Rs 3,000 becomes a good selling opportunity, in fact if anyone is initiating short positions at current level one can go short with the stoploss of Rs 3,050 and target can be seen at around Rs 2,750, he added.

Go long in Bharat Electronics, says Amit Harchekar

Amit Harchekar of A Plus Analytics told CNBC-TV18, "On monthly chart Bharat Electronics   has given another breakout above Rs 3,250 andthat transforms into a price target somewhere around Rs 3,650-3,700 on 15-20 days perspective. In the short-term, good buying is seen in the zone of Rs 3,250-3,300. So this becomes good accumulation zone.

From a technically perspective one can go long in this stock at current level with a stoploss of Rs 3,200 and we are expecting this stock to test level of Rs 3,450-3,600 in the next coming days, he added.

Buy Aditya Birla Nuvo, says Kunal Bothra

Kunal Bothra, head of advisory at LKP told CNBC-TV18, "I have avoided the banking stocks particularly because of the kind of short-term resistance we are facing but from the midcap space, Aditya Birla Nuvo   seems to be a good stock. 

It is trading above its short-term moving averages . Looking at the fresh swing high being made this could be a good opportunity to buy Aditya Birla Nuvo.One could probably look at a target of Rs 60-70 further from the current price. So it could probably take it very close to Rs 1,825-1,850 and a stoploss placed at Rs 1,730," he said.

Hold Axis Bank, says Gaurang Shah

Gaurang Shah, VP at Geojit BNP Paribas Financial Services told CNBC-TV18, "We do have a positive coverage on  Axis Bank  and we have to factor in today’s number that the bank came out with and according to us, the estimates that we had lined up, the numbers were a tad better than what our expectation was. 

Our initial targets stand at about Rs 580, post these numbers there is credible data to say that we could possibly revise it upwards to about Rs 630." "If you are a long-term investor with the rate cuts heading top-down and incremental improvement on the economic front, I think the corporate loan book and retail loan book is likely to grow at a much more faster pace and given the kind of performance in the numbers, I think the coming quarters could only improve the visibility and the growth. So I would say hold on to it. 

As of now we are working with a target of Rs 580 but like I said, factoring today’s number, we would revise it upward but Rs 630 could be the possible target in year’s time," he added.

Stay invested in SBI: Gaurang Shah

Gaurang Shah, VP at Geojit BNP Paribas Financial Services told CNBC-TV18, " State Bank of India  (SBI) is one of the banks that is under our positive coverage in the banking universe from the public sector undertaking (PSU) banking lot. 

With top-down scenario for interest rate cut, the only issue has been with PSU bank is the asset quality and the restructuring/provisioning issues but given the fact that it is the largest public sector banks and with the recent initiatives by the government this bank also would tend to get benefited." "My advise to the investors would be to hold on to it, wait out for the numbers that will be seeing in maybe about a week or fortnight from State Bank of India (SBI). 

From the near-term we are working with a target of about Rs 345 and if numbers are something soothing and asset quality does not disappoint and of course the NIMs improve, definitely we would revise it upwards, so hold as of now," he added.

Buy M&M Financial; target of Rs 395: ICICIdirect

With the upcoming budget and result season, stock specific moves are likely to be seen in the market. M&M Finance, being into commercial vehicle lending, is one of the cheapest stocks available among its peers. Hence, it is likely to witness money flows in the days to come as sentiments improve further. Moreover, M&M Financial has almost recovered towards its November highs while broader index is still almost 200 points lower than those levels. 

It indicates ongoing buying momentum in the stock and it provides a good opportunity to ride further up move towards 400 levels. After making highs near Rs 340, M&M Financial witnessed significant addition of short positions. 

As a result, the stock declined sharply towards Rs 270 in the later part of December series. Since then as the stock recovered, closure of short positions is still continued and it has shed close to 30% open interest since the month of December. We expect the current short covering trend may scale up to Rs 400 levels in the near term.

Short Hindalco Industries; target of Rs 140: Emkay

The stock traded close to its strong resistance levels of 161 last Friday on back of lower delivery volumes. Delivery volume stood at 0.94 million shares (lowest in the current series) as against series average of 2.03 million shares. Lower than average delivery volumes at resistance levels indicate lower probability of any sustained breakout. % delivery volume on last Friday stood at 29.13%, lowest in the current series. 

Despite the up move from a low of 150 levels to a high of 160 levels in the current series, no significant accumulation of open interest has been observed. On the contrary, closure of positions was observed as open interest declined to 26 million shares from a high of 26.94 million shares. Cost of carry too has been on a declining trend. 

Dollar index has been gaining strength. Historical studies indicate the index has a maximum inverse correlation with the metal stocks. With further strength expected to continue to prevail in the dollar index, we believe the stock could see renewed selling pressure. 

Strategy "Accumulate short positions in Hindalco in the range of Rs 160-161 levels for an immediate target of Rs 140 levels. We recommend holding positions with a stop loss placed at Rs 170 levels on a closing basis.

Buy Divis Labs; target of Rs 2050: ICICIdirect

"Divis Lab has remained near Rs 1700 levels since the last couple of months. The traders who tried to go short in the stock are slowly exiting from their positions as the stock is reverting after remaining sideways for sometime. The stock also absorbed the recent losses in Nifty when the index fell from 8630 to 7970. 

During this period Divis Lab fell only from Rs 1680 to Rs 1640. It shows inherent strength in the stock and it is likely to move up as the index has finally shown signs of revival." "The current OI in the stock is one of the lowest seen in the last 3 months. Since the October expiry, the stock has remained subdued after hitting Rs 1875 levels. Initially there was long liquidation as open interest witnessed closure of over 7%. 

Post this closure, there was short addition of over 35% in a span of 2 trading sessions in the price range of Rs 1800-1840. Later the stock fell till Rs 1650-1700 and stuck up in this range since the month of November.

Buy Divis Lab in the range of Rs 1710-1735, target price: Rs 2050, stop loss: Rs 1556", says ICICIdirect.com research report.

Buy Everest Industries; target of Rs 378: ICICIdirect

"The share price of Everest industries looks ripe for next up move after five weeks of consolidation above its 2010 and 2013 peaks (Rs 267) and therefore offers fresh entry opportunity. Technically the robust price structure is clearly exhibited as stock price consolidated in a narrow range wherein it retraced its preceding up leg (242-321) only by 50% while consuming equal time taken for rally (5 weeks). 

Such price/time behaviour signals constant appetite to own the stock at higher levels." "Earlier share price broke past its multi year highs during November 2014 pointing towards major shift in long term price structure thereby lifting the stock price in higher orbit. We expect stock price to head towards 380 being the 123.6% extension of preceding up leg (242-321) as projected from December 2014 lows of Rs 280." "On the volume front it has been double its 50 week average ~ 1.5 lakh shares during rallies which boost longevity of up trend. The rising MACD which is firmly placed in positive territory supports overall bullish momentum in the stock.

Buy Everest Industries in the range of Rs 317.00-323.00 for a target of Rs 378.00 with a stop loss below Rs 295.00 on a closing basis", says ICICIdirect.com research report.

Buy Gujarat Pipavav; target of Rs 221: ICICIdirect

"Gujarat Pipavav Port (GPPL) has entered into an arrangement with NYK Auto Logistics (India) Pvt Ltd (NYK) where NYK has sub-leased land for developing a dedicated common user integrated roll-in roll-out (RO-RO) yard at Pipavav Port. The RO-RO yard has annual designed capacity to handle 250,000 vehicles and is expected to be operational in the first quarter of CY15. This is another effort on part of GPPL to diversify its cargo base, thereby insulating itself from a downturn in any particular segment. Earlier this year, GPPL commenced its new business line of handling liquid cargo (handled nearly 96,695 MT in Q3CY14). 

This is further expected to ramp up as new capacity gets added and the existing stabilises. The container volume for GPPL has shown strong growth of ~25% YoY due to addition of new services over the years and upgradation of existing clients; also, going ahead we anticipate container volume to post CAGR of ~17% over CY13-16E. However, any new line of business is expected to smoothen out the volatility of revenue growth." "With the addition of a couple of new business lines and improved revenue visibility, GPPL is expected to post a revenue CAGR of nearly 20% over CY11-15 whereas EBITDA CAGR is anticipated at ~27% over the same period. As nearly 70% of GPPL’s cost is fixed, the new business is expected to further improve the operating leverage, thereby aiding the EBITDA margin. 

Further, GPPL’s debt free structure and ECB funding for new capex is expected to bring down the interest cost. A diversified cargo portfolio and presence in high growth segments like tank farms and auto export provide confidence on the earnings growth of GPPL.

 Consequently, we revise our estimates upwards and have a BUY recommendation on the stock with a DCF based target price of Rs 221", says ICICIdirect.com research report.