Major events such as the general election and the US Fed tapering programme are likely to keep investors tizzy in 2014. Heres a look at some companies that are poised to perform in the new year
The domestic markets may touch new highs in the next year post general elections,attracting offshore funds despite an expected bumpy period for emerging markets as the US Fed shifts the monetary policy. Moreover,the various efforts taken by the government and the RBI to bring down Current Account Deficit,to cushion the free fall of rupee,boost manufacturing and curb rising inflation have indeed sent out positive vibes,are likely to translate into growth numbers in the coming years.
Moreover,the factors such as improvement in economic activity,better policy decision-making by the newly elected stable government post election and an improvement in the investment climate are likely to stimulate bulls in the markets.
It is expected that the general elections promise a quickness in policy making and the election could murmur the reforms engine in many long-pending areas of economic importance. In 2014,the global economy is likely to perform better comparatively. The developing economies will enjoy relatively high growth while the US will continue with real growth,driven by a reduction in fiscal austerity,a resurgent housing market.
Adani Ports and SEZ
In the last few years,the company has reported steady growth in its revenue and profits. Going forward,the company is likely to maintain the growth momentum on the back of huge capex undertaken by the company. We expect to see a price target of Rs 219 in one year on one year average P/E of 20.98x and FY15 (E) earnings of Rs 10.45.
In the last few years,the company has delivered strong financial performance. The company is focused on exploration across the asset portfolio both in India and core areas internationally and has also started the seismic survey in its South Africa block,which is in line with companys exploration led growth strategy focused on replacement and growth of reserves leading to long term sustainable value creation. We expect the stock to see a price target of Rs 421 in one year time frame on a target P/E of 7x and FY15 (E) earnings of Rs.60.21.
With a unique combination of businesses,the company is well poised to capitalise on future global growth opportunities. Going forward,the company is expected to register a healthy sales growth,supported by strong order backlog. On the estimated September FY15E EPS of Rs 8.09 and target P/Ex of 25x,we expect the stock to see a price target of Rs 202 in one year time frame.
For full year ended September 2013,the companys tractor volume grew by about 9.5 per cent to 66,230 with about 10.5 per cent of market share. Escorts will continue to remain focused on execution in the months ahead. Consistently strong results over the past few quarters is an outcome of introducing high power and specialised tractors,which are improving volumes and strengthening margins. On the estimated September FY15E EPS of Rs 17.68 and two year average P/Ex of 10.13x,the stock could see a price target of Rs 179 in one year time frame.
The companys business is driven by strong and sustained growth of the FMCG sector. Its R&D capability,global customer network,large scale and manufacturing expertise,may help in seizing the opportunity that is being continuously thrown up across the globe. The stock could see a price target of Rs 68 in one year time frame,based on estimated FY15E EPS of 9.04 on one year average P/Ex of 7.55.
The company has so far invested Rs 120 crore in the agriculture business,which includes Rs. 70 crore invested in Engineering,Procurement and Construction (EPC) Industries,the microirrigation company it acquired in 2011. It plans to also invest around Rs. 200 crore in the agriculture business in the next two years. Overall,by fiscal 2016,Mahindra has a target to achieve revenues of Rs. 1,000 crore in the agriculture business.
PNBs September quarter ended performance is just an aberration as sluggish economy and high interest rates due to depreciating rupee and inflation have taken a toll on the profitability of bank. But in the next half year,it is expected to be healthier with stable rupee and improving economic conditions in the country. On the estimated book value of Rs 1072.48 for FY15E and one year average P/BV of 0.74x,the stock is expected to see a price target of 798 in one year time frame.
Sesa Sterlite is one of the worlds largest diversified natural resource companies. Gross debt at Sesa Sterlite was Rs 84,063 crore as at 30 September 2013. On a consolidated basis,the debt equity ratio is at 0.8. The company has consolidated cash,cash equivalents and liquid investments of Rs 48,140 crore.
The company is planning to improve its development through expansion into further locations and increasing its presence in new therapeutical area as well as launch of new products to fill gaps in its current portfolio. We,thus,expect the stock to see a price target of Rs 655 in one year time frame,based on estimated FY15E EPS of 36.38 on target P/Ex of 18.
During the quarter ended September 2013,the company has posted its strongest growth in seven quarters. The strategy of focusing on the top 125 accounts is delivering the results. There is a broad based growth across the customers. The growth momentum is likely to continue on the back of improved deal win rates and couple of large multi-year deal won by the company. We expect the stock to see a price target of Rs 705 in one year time frame on a target P/E of 20x and FY15 (E) earnings of Rs 35.27.
To conclude,despite steady improvement,one cannot ignore that US unemployment remains high,Europes debt crisis is far from over,and Chinas economy continues to slow. So at this juncture,diversification is a strong advice for market participants for this year. One should position oneself with respect to volatility of the markets.
(The author is Chief Strategist and Head of Research,SMC Global Financial)