axis capital picks 11 must-have nifty stocks for fy14 - 26-3-13

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25 MAR, 2013, 04.42PM IST, ECONOMICTIMES.COM

Axis Capital picks 11 must-have Nifty stocks for FY14

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MUMBAI: Indian macroeconomic conditions, though expected to incrementally improve from its trough, looks quite vulnerable, says Axis Capital BSE -4.25 % in a

report.

Continuity in diesel price rises, increase in minimum support food prices, any global shock which slows FII inflows or spikes crude, reform expectations in the

wake of the DMK pull out and opposition from parties supporting from outside, are likely to impact the market.

In a tough year like this, where there are global financial concerns, macro economic issues and domestic political instability, the brokerage has picked 11

must-have stocks from the benchmark Nifty.

These 11 stocks "are chosen for their expected earnings growth being above the Sensex avg EPS growth of 18% p.a., not being expensive relative to their growth

rate, and leadership position which enables them to wring the most from a difficult environment," the report says.

Tata Steel:

The brokerage sees 20 per cent volume growth in Tata Steel's domestic operations over next 2 years led by the recent 3 million tonne brownfield expansion.

Its domestic volume assumptions for FY14 and FY15 are 8.7 mnt and 9 mnt respectively. Domestic operations, a key beneficiary of potential rupee depreciation,

will help domestic steelmakers raise prices, it says.

European operations are seen to remain moderately profitable led by cost-cutting efforts as well as improving operational efficiencies, for eg. refurbishment of its

old blast furnace in UK.

Maruti Suzuki:

The company is best placed to capitalise on demand recovery. Improving GDP growth trajectory and pre-election stimulus are expected to improve money supply,

Axis Capital says.

Wide distribution reach, rising affluence of rural India, and strong brand equity among first time buyers makes MSIL key candidate for market share gains. Rural

sales accounted for 25 per cent of volumes in FY12 vs. less than 10 per cent in FY09.

The brokerage values the company at EV/EBIDTA of 8.5x and 6.5x for FY14E and FY15E respectively.

Reliance Industries:

Axis Capital picks 11 must-have Nifty stocks for FY14 - The Economic Times http://economictimes.indiatimes.com/articleshow/19189565.cms?prtpage=1

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Capacity expansion is likely to drive 20 per cent EBITDA CAGR over FY13-17E. New projects in petchem and refining would contribute ~70 per cent of FY13-17E

EBITDA growth, which is NOT dependent on any regulatory approvals, the report says.

The gas price hike is imminent and could provide fillip to earnings, valuation, it adds.

"Higher gas price is required to support domestic E&P industry as deep-water fields are unviable at US$ 4.2/mnbtu. Our assumption is conservative at US$6/mnbtu (vs. US$ 8/mnbtu by the Street) as government may not hike gas price steeply due to elections in 2014."

Implementation of Rangarajan committee report which would imply US$ 9+/mnbtu gas prices in FY15, recovery in cyclical margins, and positive contribution from

telecom and retail can be key upsides for the stock.

Jaiprakash Associates:

At full throttle by FY15E, the company would have 36 MTPA cement capacity, 5.5 GW power, $1 billion EPC sales, 165 km Yamuna Expressway, and realty sales

of ~Rs 45 billion p.a. As a result, consolidated EBITDA is likely to rise 2x by FY15E, the report says.

The brokerage is of the view that risk reward is favorable at the current market price. It has maintained BUY with SoTP-based target price of Rs 92.

Tata Motors:

JLR is improving product development capabilities to facilitate portfolio expansion. Benefits will be visible over next 2 to 3 years led by premium lightweight

architecture across products in Land Rover and introduction of smaller engine options.

The brokerage values JLR at Rs 266/sh, Standalone at Rs 76/sh, net auto debt at Rs -15/sh, and other subsidiaries at Rs 25/sh. Potential upside from JLR --

progress of Chinese JV with Chery (expected in H1FY15) and launch of small Jaguar (the next big volume driver after Evoque).

It advises investors to buy with target price of Rs 372; implies 24 per cent upside from CMP of Rs 286.


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Sun has more than USD 1 bn of cash plus strong cash flows from operations which makes it easy for the company to pursue inorganic growth if the right

opportunity comes by.

TCS:

The company continues to deliver higher than industry growth and FY14 is likely to be better than FY13. It has shown consistency in signing large deals acrossverticals despite a weak FY13 drives higher visibility, the report says.

Management has indicated a pick-up in discretionary demand in US (56 per cent of revenue). 75-80 per cent of revenue from non-discretionary services provides

downside cushion.

The brokerage expects 16 per cent CAGR in EPS over FY13-15E and target price of Rs 1,736.

Disclaimer: The above report is based on technical views and information given by the analyst. Please consult your financial advisor before taking any position

in the stocks mentioned.

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axis capital picks 11 must-have nifty stocks for fy14 - 26-3-13

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