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SMC's Top Picks for 2017

SMC | 30 Dec, 2016  | Follow Author | Add to my Favourites 
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Reliance Industries Ltd.:




The  company  has  achieved  outstanding  performance  during  Q2FY17 with strong  refining  business  performance  and  record  petrochemicals segment  earnings.  Refining  business  sustained  high  profitability  in  a tough environment highlighting, dynamic response  to  market  trends  and robust  operations.  Petrochemicals  segment  gained  significantly  from higher  volumes,  integration  and  supportive  product  margins. Its projects in the hydrocarbon chain are at advanced stages of mechanical completion  and  precommissioning  activities.  These  projects  would further  strengthen its  position as a leading  operator in  the  energy and materials businesses, thus we expect the stock to see a price target of Rs.1255  in  8  to  10  months time  frame  on  a  target  3  year  average  P/E  of 13.18x  and  FY18  (E)  earnings  of  Rs.95.21.

NTPC Ltd.:




The company is  the  most preferred power  company and  rationalization  of movement of coal to  reduce electricity costs, and rationalization of coal grades based on Gross Calorific Value for correct tariff  fixation would give further  lead  to  transformational changes  in  power  sector .  Moreover ,  it  had added 4028 MW of renewable capacity , which highlights the accelerating speed  of  solar  and  wind  capacity  addition  along  with  conventional capacity. Thus we expect the  stock  to  see a price target  of Rs 185 in  8 to  10 months time frame on an expected P/E of 14x and FY18 (E) earnings of Rs.13.22.




Strong  project  execution  capabilities,  history  of  meeting  targets  and visibility  on  investment  plans  for  next  few  years  gives  comfort  on  earning visibility .  Company continues to  take various initiatives for development of Smart  Grid in  India  and  is  constantly enhancing  its  abilities  through  inhouse research and demonstration projects in  this direction. Thus, it  is expected that  the  stock will see a price target  of Rs.226 in  8 to  10 months time  frame  on  a  target  P/E  of  13x  and  FY18  (E)  earnings  of  Rs.17.41.





Government’s greater emphasis on ‘Make in  India’ initiative in  Defence sector  provides  a  great  opportunity  for  the  Company  to  enhance  its indigenisation  efforts and  to  address  the  opportunities in  Indian  Defence sector .   Heal thy  order  book  and  orders  i n  pi pel i ne,   capaci tyenhancements  and  creation  of  new  test  facilities  help  the  company  in achieving  the  targeted  growth  and  also  would  continue  to  drive  the growth in  the  coming  4 to  5 years.  Thus, we  expect  the  stock  to  see  a  price target  of Rs 1696 in  8 to  10 months time  frame on a two year average P/E of  24.04  and  FY18  (E)  earnings  of  Rs.70.53.

P I Industries Limited:




Continued focus on quality of operations, strong order book position and growth  on  the  domestic  front  helped  the  company  to  hold  on  to  the margins  and  has  significantly  improved  its  working  capital  situation. With emphasis on cash, the  company is  now to  a near to  zero debt status. Improved  demand  in  exports,  advancement  of  orders  from  global customers and improved product mix would improve the consumption pattern,  which would  guide  the  financial  strength  of  the  company .  Thus,  it is  expected  that  the  stock  will see  a  price  target  of  Rs.1107 in  8  to  10 months time  frame on a expected P/E of 32x and FY18 (E)  earnings of Rs.34.60.






The company enjoys a global leadership  positions in  textiles as well as Carries  an  unmatched  domestic  portfolio  of  apparel  brands  and  retail formats. Company’s  capability in  manufacturing garments, coupled with its positioning of the most preferred franchisee/distribution partner in India,  it  is  poised  to  benefit  from  an  increase  in  demand for  apparels,  thus it  is  expected that  the  stock  will see  a  price target  of Rs.412 in  8 to  10 months time  frame  on  three  year  average  P/E  of  19.52x  and  FY18  (E) earnings  of  Rs.21.13.






With  the  company's  manufacturing  infrastructure  of  international standard,  strong  products  portfolio  with  high  growth  brands,  strong marketing capability and strong balance sheet present good outlook for the  company's  business. Moreover ,  the  company  continues  to  invest  in products, people and processes to achieve its growth objective, thus we expect the  stock to see a price target of Rs.494 in  8 to 10 month’s  time frame  on  a  target  P/E  of  19x  and  FY18  (E)  earnings  of  Rs.25.98.





The  company  has  been  a  pioneer  in  catering  to  educational publications. Stability in earnings and reducing equity risk premiums would  support  valuation.  The  company  is  entering  newer  states.  In addition  to  its  own  publications,  it  is  also  looking  at  healthy  growth from government orders. Thus, it is expected that the stock will see a price target of Rs.131 in 8 to 10 months time frame on a target P/E of 17x  and  FY18  (E)  earnings  of  Rs.7.71.






The company is the most preferred manufacturer of cables and meets the demand of virtually every major OEM in  the automotive sector .  It would  more  focus  on  cables  in  the  export  market  for  better  positioning. Steady demand from specific  OEMs and the  shoring  up of control-cable growth in  the  auto and non-auto markets, exports and replacements would  guide  the  further  growth to  the  company .  Thus we  expect  the stock  to  see a price target  of Rs 224 in  8 to  10 month’s  time  frame on an expected  P/E  of  21x  and  FY18  (E)  earnings  of  Rs.10.65.






The company is well placed in terms of fuel security , with the entire fuel requirement met by captive lignite mines. Further ,  power generated by the  company has assured  offtake  through power  purchase  agreements (PP As)  signed  under  the  cost-plus  model,  ensuring  fixed  Return  on Equity of Plant Availability Factor (P AF) for lignite and gas-based plants. Moreover ,  expansions  and  development;  favourable  government  pocilies would give favourable boost to  the company .  Thus we expect the stock to see a price target  of Rs 116 in  8 to  10 months time  frame on an target  P/E of  9x  and  FY18  (E)  earnings  of  Rs.12.90.

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About SMC
SMC Research, founded in 1990, is India’s leading share and stock broker, provides a wide range of financial services and investment solutions. A blend of extensive experience, diverse talent and client focus has made us the 4th largest broking house in India(Source: Dun and Bradstreet, 2008). Over the years, SMC has expanded its operations domestically as well as internationally. Existing network includes regional offices at Mumbai, Kolkata, Chennai, Cochin, Ahmedabad, Jaipur, Hyderabad, Bangalore plus a growing network of 2100+ offices spread across 425 cities/towns in India.

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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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