Second wave sell-off; these 12 stocks can give up to 69% returns

Last year’s COVID-induced sell-off gave bargain-hunting opportunity to investors. Anything you bought last year turned has now into gold. In a way making money last year was much easier. But the current year is much different as the second wave is much more widespread and the country is reporting over 3 lakh new cases per day as compared to one lakh cases during the peak of the first wave in September 2020. Also, the healthcare system has collapsed as the infected people are unable to find a bed, oxygen cylinders, ventilators. Despite such crisis, benchmark equity indices are down just 9% compared to a 50% slump during the first wave. This clearly indicates that money-making this year is going to be difficult; and given the market volatility, one has to adopt a stock specific approach.

With vaccination for all above 18 years starting from May 1, will help limit the fallout from the second Covid wave. Angel Broking believes that sectors that are rural-focused or will benefit from increased digitization and import substitution not only offer long term revenue visibility but are least likely to be impacted due to the second Covid wave. The brokerage firm is upbeat on sectors like IT, Pharma, tractors chemicals and agrochemicals and has cherry-picked 12 stocks that give you similar returns like last year.

PVR | Target price: Rs 1,800 | Potential Upside: 69%
PVR share prices have corrected significantly as most of the theaters are operating at very low-capacity utilization due to the lack of any major releases due to the Covid-19 crisis. PVR will be the biggest beneficiary once things normalize.

GNA Axles | Target price: Rs 550 | Potential Upside: 53%
GNA Axles is expected to be one of the biggest beneficiaries of strong growth outlook for truck sales in US and Europe markets which are witnessing strong recovery in demand. US which accounts for almost 40% of the company’s revenues has been registering strong class 8 truck sales.

IDFC First Bank | Target price: Rs 77 | Potential Upside: 47%
IDFC First Bank’s ability to raise sufficient liquidity at low cost would be the key criteria for banks to navigate the current situation, as asset side inflow would be limited. New management of the bank has managed to build a strong a liability franchise and retail lending portfolio.

Federal Bank | Target price: Rs 110 | Potential Upside: 45%
Federal Bank is one of India’s largest old generation private sector banks. At the end of FY2021, the bank had total assets of Rs. 1.9 lakh cr. with deposits of Rs. 1.56 lakh cr. and a loan book of Rs. 1.2 lakh cr. NPA’s have remained steady for the bank over the past few years with GNPA for Q3FY21 at 3.38 per cent while the NNPA ratio stood at 1.14 per cent. PCR (provision coverage ratio) at the end of Q3FY21 stood at 67 per cent which Angel Broking believes is adequate.

NRB Bearings | Target price: Rs 150 | Potential Upside: 43%
NRB Bearings management has highlighted that exports growth should be in excess of 20% for FY21 driven by demand from existing customers as well as new customers.

Escorts | Target price: Rs 1,573 | Potential Upside: 29%
Escorts will benefit from rural India relatively less impacted due to Covid-19, record food-grain procurement by government agencies as well as better than expected Kharif crop in 2020, The tractor industry will continue to outperform the larger automobile space in FY21.

Ashok Leyland | Target price: Rs 145 | Potential Upside: 29%
Ashok Leyland is ideally placed to capture the growth revival in CV segment and will be the biggest beneficiary of the Government’s voluntary scrappage policy.

Shriram City Union | Target price: Rs 1,800 | Potential Upside: 23%
The company reported a strong 50% sequential growth in disbursement for the quarter which led to a 3.7% qoq growth in AUM to ~ Rs. 28,500 crore. Shriram City Union surprised positively on the asset quality front Gross stage 3 loans decreased by 20bps qoq to 6.5% in Q3FY21. Net stage 3 for the quarter was stable at 3.3% while PCR ratio stood at 52.7%.

Carborundum Universal | Target price: Rs 600 | Potential Upside: 20%
Carborundum Universal is expected to benefit from improving demand scenarios across its end user industries such as auto, auto components, engineering, basic metals, infrastructure, and power.

HCL Tech | Target price: Rs 1,161 | Potential Upside: 17%
HCL Tech is trading at a P/E multiple of 17.0x FY22 EPS estimate which is at a significant discount to the other large-cap IT companies like Infosys and TCS and offers tremendous value at current levels given market leader status in Infrastructure management.

Metropolis Healthcare | Target price: Rs 2,850 | Potential Upside: 17%
Metropolis Healthcare is expected to grow at ~15% CAGR, stable margins profile and moderating competitive intensity.

Galaxy Surfactants | Target price: Rs 2,750 | Potential Upside: 6%
Galaxy Surfactants have been increasing its share of high margin specialty care products in its portfolio which now accounts for ~ 40% of its revenues while the balance is accounted for by the performance surfactant business.

(Disclaimer: The recommendations in this story are by the respective research or brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)