Dalal Street Investments

What CLSA Recommends to BUY in Market Correction ?

January 22, 2016

The Indian Equity Market has corrected about 20% from the High’s of 30,000. The Index is back to Pre-Modi NaMoBullRun Rally. Amidst the fall, Smart Investors are lapping up stocks which can generate Free Cash Flow. Barring the PSU Banks, other stocks still trade well above their all-time lows.

CLSA French Research House one of the biggest movers and shakers of Indian Market likes the following stocks which have corrected significantly and appear attractive.

Adani Ports: The stock has corrected 40% since its Aug-2015 peak and now trades at 15x Mar-17CL earnings. The potential downside to its all-time low multiple is 13% and we have good visibility on 11% earnings growth for FY17CL.

Cairn India: As against the Mar-16CL net cash on books of Rs97/share, the stock trades at Rs110/share, or an EV of US$330m. At US$30/bbl of crude, the company will make US$150m in Ebitda, implying the stock trades atnearly 2x EV/Ebitda.

Coal India: The stock is down 35% from 2015 peak. Even assuming no coal price hike, the stock trades 12.5x Mar-17CL earnings and potential large volume growth is now nearer in FY18. The stock also offers 7% sustainabledividend yield potential.

Maruti: The stock has corrected 16% YTD. It trades at 15x one-year forward PE but offers 30%+ earnings Cagr over FY16-18CL and the risk-reward is attractive.

Dish TV: The stock has corrected by nearly 30% from its Aug 2015 peak. At 8x Mar-17CL EV/Ebitda, it appears attractive, given the Ebitda Cagr of 20%.

ICICI: One-year forward implied multiple for the corporate book is 0.3x PB, in line with public-sector banks in CLSA coverage universe.

Please do your own Research before making any moves.


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