10 stocks Dalal Street is betting on to deliver big gains under NDA 2.0

As the nation awaits its next government, financial markets are keenly following the developments as indicated by the break-neck market rally which lifted the benchmark indices to new peaks in morning trade.

Exit polls over the weekend predicted a clear victory for the NDA in the election that ended on Sunday. And early trends in vote count suggested the results could be in line with those projections.

ETMarkets.com talked to different brokerages to list out 10 stocks that could potentially delivers solid gains under NDA 2.0.


Stock recos from Sharekhan

Larsen & Toubro: L&T being the largest Engineering and Construction company in India is a direct beneficiary of the domestic infrastructure capex cycle. It is expected to perform well, backed by its sound execution track record and healthy order book. Based on the continued strong growth momentum in subsidiaries and improved outlook on standalone basis, the brokerage maintained ‘buy’ rating on the stock. Sharekhan believes L&T can touch Rs 1,655 level in the coming months.

Ashoka Buildcon: This stock can be a unique play on the construction sector both as a developer and EPC player. It received strong order inflows of over Rs 6,700 crore during 9MFY2019 taking its total order book to 3x TTM revenues. Strong order book along with advanced stages of receipt of appointed dates for its HAM projects is expected to result in strong revenue booking over FY2019-FY2021E. The recent private equity investment in its city gas distribution (CGD) business will lower equity requirement in the business. Ashoka is expected to be one of the major beneficiaries of revival of project award activity in road sector post general elections. The brokerage has set a price target of Rs 154 for Ashoka Buildcon.

Ahluwalia Contracts (India): The company has geared up with a robust order intake and is now out of NGT related execution risks for its projects. Further, it has improved its capabilities leading to the bidding for bigger ticket size projects where the competitive intensity is much lower. Government spending on education, affordable housing and health sectors are expected to rise further post the formation of a stable government. Sharekhan believes the company is on a strong growth trajectory over the next two years with earnings slated to rise by 25 per cent CAGR driven by an increase in the operating margins and an improvement in execution (16 per cent CAGR) over the period of FY2019-21E. Sharekhan is positive on Ahluwalia Contracts with a price target of Rs 390.

Stock recos by Kotak Securities

M&M: New launches in the UV segment will drive volume growth in passenger car segment. Kotak Securities valued Mahindra & Mahindra at Rs 1,000 per share, out of which Rs 319 is derived value of subsidiaries.

ICICI Bank: With asset quality concerns abating and growth getting back on track, the brokerage house expects a faster normalisation of return ratios from here. Kotak values the bank at 1.7x adjusted book and around 11 times March 2021E EPS for RoEs that can move back to 15 per cent by FY2020-21. The brokerage expects the stock to hit Rs 460 in the coming months.

SBI: With negligible balance sheet risk, Kotak Securities believes this bank is well-positioned to deliver strong earnings growth for FY2020-21, which could see return on assets moving closer to 1 per cent. The brokerage sees the fair value for the stock at Rs 410, valuing the bank at 1.2x book and 7x March 2021E EPS for RoEs in the range of around 15 per cent in the medium term.

Power Grid: This company has been able to fend off competition on the back of lower cost of capital as well as capex cost. Existing projects under various stages of implementation, assure earnings growth of 14 per cent CAGR up to FY22E. Power Grid trades at attractive valuations (9x Fw PE). Kotak Securities has a target price of Rs 235 on the stock.

Stock recos by Reliance Securities

NCC: Infrastructure was the flavour in the 2014 after the formation of the new government. The sustenance of improving order books seems on the cards if NDA manages to form government again, NCC is one of the largest infrastructure companies in India with strong government orders led order-book. The brokerage said NCC stock is likely to outperform in the medium term.

ACC: The cement bellwether can be great play seeing both pricing and volume growth improvement. ACC has managed operational efficiencies well and it is poised to see consistent improvement in volumes.

Stock Recos by Motilal Oswal Financial Services

Ultratech Cement: The acquisition of Century’s cement asset and Binani has led to Ultratech Cement increasing its capacity market share in the North to 26 per cent (from 19 per cent currently) and take its pan-India capacity market share to 25 per cent (from 20 per cent currently). The company reported strong results in Q4 as well as FY19. Healthy operating performance along with consistent efforts to lower costs augers well for the cement major. This along with industry tailwinds should help UltraTech in improving profitability going forward. Motilal Oswal has a ‘buy’ rating on UltraTech with a price target of Rs 5,190.


(Views and recommendations given in this section are the analysts’ own and do not represent those of ETMarkets.com. Please consult your financial adviser before taking any position in the stock/s mentioned.)