The earnings downgrade cycle for India Inc is not over yet, but some companies have managed to buck the trend. After bleak September quarter results, analysts have upgraded earnings expectations of these companies, which could help their stocks stay relatively resilient even in the face of a sharp selloff. ET has identified 10 such stocks, based on Bloomberg consensus estimates, currently trading below their five-year average PE and which have the potential to give a return of between 10% and 40% in the next year.
BPCLBSE -1.35 % was the only oil marketing company to post profits in the September quarter despite a huge inventory and forex losses. The stock is trading at 10.39 times its FY2017 estimated earnings, nearly 35% discount to its five-year average. “BPCL should deliver 19% CAGR over FY2015-18,” said Bhaskar Chakraborty, an analyst at IIFL.
The stock is trading at a 7% discount to its five-year average. “Healthy earnings and cash flows will further help CEAT undertake upcoming capex without putting stress on balance sheet on the back of capacity ramp up and recovery in domestic demand,” said Ambrish Mishra, analyst of JM Financial.
The stock has risen 74% so far this year but it trades at a discount to other midcap and large-cap cement stocks. “…Dalmia Bharat’s trading multiples are least demanding among companies of similar size” said Murtuza Arsiwalla, analyst, Kotak Securities.
Dishman, considered a potential turnaround candidate, has seen earnings upgrades of almost 5% in the last three months. “We like Dishman’s shift in focus towards better asset utilisation, improving operational efficiency and reduction in leverage,” said SapnaJhawar, analyst at Reliance Securities.
Currently, the stock is trading at 17 times 2016-17 estimated earnings which is almost 20% discount to its peers. Reliance Securities said the company has indicated that the second half of the fiscal (October-March) is expected to be better than the first half (April-September).
Analysts said JK Tyre is poised for a strong growth with the revival in domestic auto sales and improving radialisation levels in truck and bus tyres. Investors with a two-year perspective can buy the stock, said analysts. The stock currently trades at around four times its 2016-17 estimated earnings.
NAVA BHARAT VENTURES
The stock is trading at a price to earnings ratio at 4.6 times 2016-17 estimated consolidated earnings as against the five-year average of 6.5 times. “We expect Nava Bharat’s earnings to increase by 23% over FY2015-17E,” said Shirish Rane, analyst at IDFC Securities.
IDFC recently said the company’s strategy to internationalise its emerging businesses will be positive and improve margins going forward.
“The commercial success of the second generation of bio-ethanol plants would be a game changer,” said Vikram Suryavanshi analyst, Phillip Capital.
Torrent is one of the most scalable mid-cap pharma models. “We upgrade our revenue estimates on account of better gross margins and lower R&D and staff cost,” said Rahul Sharma analyst at Karvy.
The management’s focus on restructuring the matured portfolio seems to be working for the company, said ICICI Securities. The management expects things to improve with a better product mix, it said. The stock is trading at 16 times it 2016-17 earnings estimate.—-The Economic Times