IIFL: top Ideas for 2017

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IIFL

Maruti Suzuki Target Rs 6,100
We are bullish on Maruti Suzuki on account of strong volume growth despite demonetisation. Significant waiting period, enhanced capacities along with new product launches will ensure continued volume outperformance. Low dealer inventory will lead to higher wholesales vs. retails sales. At our target price, the stock is trading at 22xFY18E.

City Union Bank Target Rs 156
We believe Citi Union Bank is an outperformer in terms of capitalisation, asset quality and returns (ROA). This is driven by its niche business model (working­capital lending), healthier margins, superior non­interest income and lower cost ratio that resulted in healthier ROA compared to its peers. We are expecting the PAT to grow at 20% CAGR over FY16­18E while ROA and ROE to be at 1.5% and 18%, respectively . The stock is currently trading at 2x PB FY18E.

Navneet Education Target Rs 135
Navneet Education is one of the most profitable education companyies in India. Supported by aboveaverage monsoon, we expect a recovery in sales from the contribution of Maharashtra business. The stationery business is expected to improve due to focus on export business. Considering the high ROE and strong growth going forward, we expect strong earnings growth in FY18. At our target price, the stock is trading at 18xFY18E.

CESC Target Rs 750
We are positive on CESC due to sector beating earnings growth of >25% CAGR till FY19E on the back of commencement of Chandarpur IPP PPA (600MW) and stable Kolkata utility business. Lower fuel costs and efficient energy sourcing from Haldia plant will improve margins. The stock is currently priced at 5.5x FY17E EV EBITDA. Any monetisation of non­core retail business will lead to further triggers for the stock.

ONGC Target Rs 230
We are bullish on ONGC as rampup in production from the redevelopment projects in Mumbai High (North & South) will help in volume pick.Benign crude prices will ensure minimal or zero underrecoveries. We believe that the net realisations will rise in FY18 leading to decent outperfor mance going forward.