Brokerage firm IndiaNivesh Securities is bullish on stocks such as Lumax Auto, Reliance Industries (RIL) and Tata Sponge Iron. According to the brokerage house, Lumax Auto Technologies is trading at a price-to-earnings (PE) multiple of 13 times FY17E and 10 times FY18E EPS. Return on equity of Reliance Industries have improved to 11.8 per cent in 2015-16 from 10 per cent in 2014-15 and it will improve further in the next financial year ended March 2018. The brokerage house sees a higher EBITDA margin for Tata Sponge Iron in coming quarters on the back of rise in realisation.
Below are the reasons why IndiaNivesh is positive on Lumax Auto, Reliance Industries (RIL) and Tata Sponge Iron.
Lumax Auto: For the quarter ended June 30, 2016, the company reported 39.13 per cent rise in consolidated net profit at Rs 11.45 crore against Rs 8.23 crore in the same quarter last year. Net sales of the company advanced by 25.79 per cent to Rs 273.17 crore for the quarter under review against Rs 217.17 crore in the same quarter last year.
According to IndiaNivesh Securities, the Q1FY17 results stood above expectation on account of strong growth in value added products like plastic moulded parts, seat frame and gear shifter. The brokerage house in a research note said, “Lumax Auto has diversified into LED lighting businesses, which we believe will be the new growth driver. LED lighting would have much higher realisation than traditional lightings; this will lead to strong growth in top line. We maintain ‘Buy’ on the stock with a revised target price of Rs 504.” The scrip was at Rs 423.95 on Monday.
Reliance Industries: IndiaNivesh is bullish on Reliance Industries shares with a target price of Rs 1,365. The company reported 18.08 per cent rise in net profit at Rs 7113 crore for the quarter ended June 30, 2016. It had posted a net profit of Rs 6024 crore in the same quarter last year. According to the brokerage house, RIL is in the midst of executing its largest ever capex plans in core and non-core businesses. IndiaNivesh expects the earnings growth trigger to play out in RIL in the second half of 2016-17, when its large core projects get commissioned. The core projects are petcoke gasification plant at its refinery, refinery off-gas cracker in petrochemicals, polyester/aromatics capacity expansion. During April-June 2016 quarter, Reliance Industries posted gross refining margin (GRM) at $11.5 per barrel against $10.8 per barrel in Q4FY16 and $10.4 per barrel in Q1FY16. GRM was boosted QoQ due to better risk management and inventory gain of around $2 per barrel. Shares of the company were at Rs 1,046 on September 12.
Tata Sponge Iron: The company has done mechanical upgradation in production line to enhance the productivity. Going ahead IndiaNivesh expects production of around 4,10,000 mt in FY17E against 390,000mt in FY16 . In Q1FY17, Tata Sponge Iron has made an EBITDA growth of 101 per cent YoY, the brokerage house is expecting a higher EBITDA margin in coming quarters on the back of increase in realisation. IndiaNivesh believes shares of the company can touch Rs 930 in coming quarters. On September 14, shares of the company were trading 0.16 per cent down at Rs 589 in the late afternoon trade.