Stock picks for this Diwali

Here’s sharemarketschool.com’s value stock picks for this Diwali.

Large cap segment:

Punjab National bank: PNB, the second largest bank in India, has been a consistent performer for the last 6 years. Over the years, it has recorded consistent growth in all aspects – Interest revenues, net profits, book value, earnings per share and it has been consistent in paying dividends. The Government of India (56.1% stake) and LIC (14% stake) are the major shareholders. Mutual funds and insurance companies hold a total of 38% stake in the bank.

The financial ratios show healthy signs in all aspects except that the Non performing assets have been on the rise in the last few years. The shares of PNB can be bought at a price range of Rs 770 and below. The stock has recorded a 52 week low of Rs 659. We expect the stock return 40% in the long term.

Check the financials at : Moneycontrol

Wipro ltd: Recently Wipro has demerged it’s consumer care and lighting business from its core IT and BPO business. The demerger would provide fresh boost to its IT business which contributes more than 84% of its revenues. We cannot say that the company has maintained consistent growth in all parameters for the last 6 years and the financial results are not up to the mark when compared to it’s peers like Infosys. The reason is, in the past, wipro’s financials include low margin segments like consumer care, lighting and engineering. From now on , by going separate ways, the management has created a win-win situation for it’s IT and demerged businesses. Their IT business gets major revenues from US and Europe and hence, any negative developments in these regions wil affect the company adversely. we suggest to buy the share at a price range of Rs 350- 375, for a target return of 35%  in the long term.

Check the financials of Wipro at Moneycontrol.com

BHEL: the stock has not been performing for the last 2 years, since it lost the monopoly it enjoyed till 2009. However,BHEL has been trying to ensure steady flow of orders by entering into agreements with various state electricity boards. BHEL is one of the largest exporters of engineering equipments.  It’s a totally debt free company with debt equity ratio at 0. The company has been a consistent performer in the last 6 years and the future seems to be bright since the government of India is planning  huge expenditure for infra structure development. BHEL , being a navaratna company, would be the biggest beneficiary of this huge spending. At the present market rate of Rs 232, the stock Is trading at an attractive price for investors who are targeting a 45% return in the long term.

Check the financials of BHEL at Moneycontrol.com

Midcap segment:

Biocon: Biocon is India’s largest bio technology company which draws 70% of its revenues from exports of statins and insulin which are drugs used for controlling cholesterol and diabetes. The pharma gaint has been a consistent performer and dividend payer over the last 5 years. The company is almost a debt free one with the latest balance sheet ratios showing a debt to equity ratio of just 0.07 which is excellent. Over the next few years biocon is poised to become one of the largest players in this space although there might be increased competition from US and European companies. Pharma is one of the most consistent sectors in Indian stock market. The stock may be accumulated in a price range of Rs 240-260. The 52 week low of the stock was at Rs 208. We expect the stock to deliver a return of 35% over the long term.

Check the financials of Biocon at Moneycontrol.com

Crompton greaves Ltd: The share has been trading at  it’s 52 week low of Rs 102.40 last month. CG is a company that manufactures switch gears, domestic electrical equipments and transformers. In the last 3 years it has acquired 5 foreign companies and 1 Indian company (Nelco traction electronics ). The main aim of these acquisitions is to become a global player in this field with market access in US and Europe. So, the future looks bright for the company with these acquisitions. The company is poised to make it big in the off shore wind energy farm installations.  Being an electronics manufacturer, the main raw material for the company is copper and aluminium. The rising commodity prices are a major threat to its present cost effectiveness. At the present market price of Rs 113, the share gives a good opportunity for investors with a target return of 40% over the long term.

Check the financials of CG  at Moneycontrol.com

Zydus wellness Ltd : Zydus is a subsidiary of cadila health care and it markets health care products under the brand name of ever youth and sugar free. The company was formerly called carnation nutra analogue foods ltd till 2008. The financials of the company from 2008 shows robust growth in business. The revenues have grown to 254.77 crores in 2012 from a modest 56.33 crores in 2008. Zydus is a zero debt company. The FMCG sector  has more to tap from the Indian markets by entering the rural areas. Even in the urban areas, the consumer spending on FMCG products is on the rise and the company’s ever youth and sugar free are brands that has established customer base in India. It’s sugar free brand has a market share of more than 85%. The main challenge for the company will be to introduce better skin care products. Thre is increased competition from many ‘ayurvedic’ brands which people think is safe compared to other similar products and hence, heavy advertisement campaign is necessary to feed the brand into people’s minds. Buy this fudementally good stock in declines for a target return of 30%.

Check financials of zydus at Moneycontrol.com

Sintex industries: Sintex is a house hold brand in india. The name is synonymous with plastic water storage tanks and custom plastic moulded products. Apart from water storage products, sintex industries also manufacture building products and water treatment solutions. It also has a textile division that contributes almost 105 of its revenues. Approximately 25% of it’s revenues are from exports and it has loans in foreign currency. So adverse exchange rate fluctuations can hit the company negatively. Long bterm investors looking for a 45-50% profits in the long term can buy this stock on declines. The stock has hit a 52 week low of Rs 50.20.

check the financials here

Stocks to be avoided:

We do not see any prospects in the following stocks due to weak fundamentals/ inconsistency in performance. Hence it is advised to stay away from the following stocks:

JP associates, United spirits, Reliance capital, HDIL, KSK energy, Balrampur Chinni, JK cements, Gujarat NRE coke, Ranbaxy, Puravankara projects, DLF, pantaloon, KEI industries, TTML, Godrej industries, HFCL, Granules India,apollo tyres,  Marico, Indusind bank &  Mahindra life space.

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5 Responses to “Stock picks for this Diwali”

Shilloni

November 10, 2012 at 8:43 pm

Why you included Zydus wellness with a market cap of 1790 Cr in midcap and Sintex with a market cap of 1805 Cr in small cap?

J Victor

November 11, 2012 at 3:44 pm

Dear shilloni .
Thanks for noting that. Both are Midcaps. The heading has been corrected.

isabel

November 12, 2012 at 8:12 am

Really nice post, highly beneficial .. Good Job

Krishna

February 5, 2013 at 11:28 pm

Hi Victor,

Really a nice article.
What’s your view on Indian Overseas Bank. How about getting Long into it for a period of 3-5 years.

Regards
Krishna Kishore

J Victor

February 11, 2013 at 8:05 am

Indian overseas bank is now at value zone. the stock has the potential to move up to Rs 140 – 160 in the future.
However, compared to it’s peers we Cannot say that the performance of the bank is excellent.
At the current market price of Rs 75.50, the stock is basically at approximately 40 discount from it’s valuation.
you can consider exposing your funds with a long term perspective.

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