Tata Motors, SpiceJet among 5 stocks to bet on amid bearish market projections

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New Delhi | Updated: March 10, 2016 4:42 PM

In the past one year, the share price of SpiceJet surged 200 per cent to Rs 63.80 on March 9.

BSE Sensex, NSE Nifty, Top stocks to buy, crompton greavesAfter a steep correction over 12 per cent over the first two months of 2016, domestic equity markets bounced back on firm global markets and a budget that has reignited hopes of an interest rate cut (Photo: Reuters)

After a steep correction over 12 per cent over the first two months of 2016, domestic equity markets bounced back on firm global markets and a budget that has reignited hopes of an interest rate cut by the Reserve Bank of India (RBI) in the immediate future. On a month-to-date basis, the BSE Sensex surged nearly 8 per cent till March 9.

According to market experts, the RBI’s action in the forthcoming policy review meet on April 5 and hopes for a good monsoons are domestic factors that would set the tone for the markets in the near future.

However, Credit Suisse have already downgraded Indian shares to “underweight” from “overweight” and said India will experience “modest deterioration” in external position, and valuations are at “unjustifiable” premiums, while earnings revisions are most negative across emerging markets.

Sharekhan in a research note said, “We remain constructive on equities and prefer using the volatility to accumulate the quality stocks.”

Against this backdrop, below are 5 stocks on which market experts are looking bullish in the present market conditions:

Crompton Greaves: Crompton Greaves has accepted an offer from First Reserve International, a US-based private equity fund, to sell its international transmission and distribution (T&D) business. The business to be sold includes T&D business present in the European, North American and Indonesian subsidies. The total consideration for the deal is Euro 115 million, of which euro 85 million will be paid on closure of the deal and remaining euro 30 million over the period of 18 months.

Sharekhan in a research note said, “We believe the deal is a positive surprise for the Street, as the company can manage to get rid of a major part of its problematic international business. we have retained our ‘Hold’ rating on the stock with a revised price target of Rs 165.

Management believes the deal will enable Crompton Greaves to reduce debt and focus on its faster growing Indian business. Religare has ‘Buy’ rating on Crompton Greaves shares with March 2017 target price of Rs 170. The scrip was trading at Rs 151.85 on Wednesday.

SpiceJet: In the past one year, the share price of SpiceJet surged 200 per cent to Rs 63.80 on March 9. For the quarter ended December 2015, the company reported net profit of Rs 238.40 crore, up 186.68 per cent, against net loss of Rs 275.03 crore in the corresponding quarter a year ago.

JM Financial initiated coverage of SpiceJet shares with ‘Buy’ rating, valuing the stock at 6.5x FY18E EV/EBITDAR (7 per cent discount to Indigo) to arrive at a fair value of Rs 80.

According to JM Financial, the medium-term fleet addition for SpiceJet remains limited at 52 aircraft over FY17/18E. However, SpiceJet’s aggressive utilisation levels – FY16E PLF (passenger load factor) at 90 per cent, block hours at 1,51,000 hours backed by tactical pricing continues to augur well for revenue maximisation. The company continues to retain high focus on ancillary revenues – cargo, food, cancellation and others enabling it to grow its ancillary revenues from 10 per cent in FY14 to 12.5 per cent currently. J M Financial expects yields to hold firm as pressure from lower crude prices are offset by strong PAX growth domestically.

Tata Motors: Tata Motors-owned Jaguar Land Rover (JLR) recorded strong volume performance in February 2016. The company’s monthly retail volume grew by 30.7 per cent year-on-year (YoY) to 37,494 units in February 2016. Jaguar’s volume rose 49.6 per cent YoY to 6,738 units, mainly due to incremental volumes of new XE, while Land Rover grew by 27.2 per cent YoY to 30,756 units, supported by new Discovery Sport. In addition to incremental volume from new launches, growth driver in the month were New RR Sport (up 7 per cent YoY) and Defender (up 14 per cent YoY).

Karvy Stock Broking is bullish on Tata Motors. It said, “We expect JLR to continue its positive momentum across majority of markets on the back of success of new launches at regular intervals. We reiterate our ‘Buy’ recommendation on Tata Motors with 30 per cent upside from the current market price. On March 9, Tata Motors shares were trading at Rs 347.75.

Gabriel India: Honda Motors and Scooters India (HMSI), TVS Motor Company and Royal Enfield (Eicher Motors) together constitute around 75 per cent of the two-wheeler revenues for Gabriel India. According to Sharekhan, HMSI has commissioned its scooters plant in Gujarat in the month of February 2016 with an initial capacity of 6 lakh units, which shall be further increased by another 6 lakh units in the near future. Also, in Q4FY2016, Mahindra & Mahindra’s KUV1OO and Maruti’s Vitara Brezza sales are expected to drive revenue growth. However, the recent labour issue at HMSI’s Alwar plant coupled with Jat agitation led to disruption of production which would pull down its financial performance in Q4FY2016. The brokerage house is positive on Gabriel India’s prospects with a target price of Rs 105. Shares of Gabriel India were at Rs 89 on March 9.

PVR: For the quarter ended December 2015, PVR Ltd posted net profit of Rs 29.88 crore, down 5.59 per cent, against Rs 31.55 crore in the same quarter last year. In the past one year, PVR shares advanced 4.01 per cent to Rs 713 till March 9. On the other hand, Sensex slid 14.04 per cent during the same period.

According to Edelweiss, the company is confident of adding 60 screens per year over the next 5 years and recently touched key milestone of 500 screens. Unlike few peers which add smaller properties of 3-4 screens, PVR is aiming for higher number of screens (6-12) per property. It will not only increase screen occupancy, but also boost the number of shows available at different time slots.

The brokerage house in a research note said, “PVR Q4 is historically weak but better this time. Shares of PVR is looking attractive with strong lineup of movies in FY17. We maintain ‘Buy’ rating of PVR with target price of Rs 947.”

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