Mid Term Indian Stock Picks - June 2010

Broking house BONANZA PORTFOLIO has suggested these stocks for good return over mid term.

HCL Technologies

• RECOMMENDATION: Buy
• Market Price: Rs 369
• Target Price: Rs 428
• The company reported a good growth in topline in Q3FY10. Order inflows in the coming quarter would further aid the company in reporting higher revenue. We estimate that the company would report a topline of close to Rs 12,600 crore (consolidated) in FY10 with a consolidated EPS of Rs 21.4.

IFCI

• RECOMMENDATION: Buy
• Market Price: Rs 54.3
• Target Price: Rs 65
• IFCI has maintained its growing trend for FY10 with a rise in the prime business of lending. IFCI has further strengthened its position and growth momentum is expected to be sustained. IFCI has good prospects of getting a banking licence. At a CMP of Rs 54.3, the share is trading at forward earnings multiple of 5.43x of FY11E and P/BV of 1.08x for FY11E.

Ashok Leyland

• RECOMMENDATION: Buy
• Market Price: Rs 63
• Target Price: Rs 70
• Ashok Leyland, with recovery in the commercial vehicle (CV) industry during H2 FY10, has posted a good result for FY10. Margins are better than that of its closest peer, Eicher Motors. At a CMP of Rs 63, the stock is trading at 15.9x FY11E and 13.7x FY12E EPS. We recommend a ‘buy’, in view of sales in April-May being better than our estimates.

ICSA India

• RECOMMENDATION: Buy
• Market Price: Rs 129
• Target Price: Rs 165
• The management has stated that the company plans to maintain its margins at 19-22% for FY11, in line with our estimates. The high margin embedded domain, which currently contributes only 35% to the revenue would increase its contribution to the revenue post-FY11. EPS for FY11 is expected to be at 26.37 (diluted). Investors can buy the counter with a target of Rs 165 in medium term.

SKF

• RECOMMENDATION: Buy
• Market Price: Rs 447
• Target Price: Rs 485
• Owing to its large size and the leadership position, the stock has always commanded premium valuation over its peers. Growth potential in auto and engineering sectors creates an upside for the stock. It is currently trading at a forward P/E of 14.3x on CY10E EPS. The stock has potential to reach Rs 485.

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