Stars powering D-St rally on a strong base, can go further

ET Intelligence Group: Every market rally has its own winners and skilled investors recommend to stick to the winners. In the current rally, over 50 stocks in the BSE 200 index have more than doubled from their lows in March but not all will be able to retain the momentum. ETIG lists 12 stocks that seem to hold more steam given their sound business models and demand revival over the past few months.Adani EnterprisesAdani group companies have emerged as the biggest gainers in the recent rally. Every business including renewables, ports, power and gas distribution that the group has ventured into has created value for investors. The flagship company, Adani Enterprises, has recently forayed into airports, aerospace, defence and data centres and the interest in the stock is likely to remain high.Aurobindo PharmaThe company has reported a faster recovery in the injectables segment than expected. The management has guided for a 20-23% annual growth in FY20-23 for the segment. Given this, the current earnings multiple of 16 still looks attractive despite the sharp stock gain over the past few months.Ashok LeylandThe revival in the CV demand and the company’s efforts to expand the market by launching models in the light CV category should help sustain the growth momentum. The cost optimisation programme and debt reduction will also support margin expansion. Balkrishna IndustriesThe tyre manufacturer reported a blowout September quarter by clocking record volume. The management has a firm growth outlook in the second half of the fiscal year. Analysts expect over 20% annual earnings growth between FY20 and FY23. The stock trades at 16 times FY23 earnings.EmamiHigher revenue contribution of nearly 60% from the robust rural market has brought the stock back in focus. Alleviation of promoter level pledging concerns will also re-rate the stock which was the primary reason behind cheap valuation multiples vis-à-vis peers.InfosysThe country’s second largest software exporter revised the revenue and margin guidance upwards for FY21 while reporting a sustained deal flow in the September quarter. The momentum should continue given the spate of new deals and acquisitions over the past few quarters.Jindal Steel & PowerThe company’s September quarter performance was way better than expected. For October, standalone sales were up 10% year-on-year, production was up 13% and product prices have risen by up to 10%. This paves way for a sustained growth of company. 79395967Mahindra & MahindraThe continued buoyancy in the tractor segment is likely to drive earnings growth of the country’s largest tractor maker. M&M increased tractor industry volume growth outlook to low double digits in the current fiscal year. The contribution of the farm equipment segment to the operating profit in the September quarter reached more than two-thirds with 197% RoCE.Motherson SumiThe auto ancillary major has set a revenue target of $36 billion by FY25 compared with $10 billion in the previous fiscal. The automotive segment is expected to contribute 75% of the total targeted revenue. It expects to achieve the target by entering into new geographies and increasing content per vehicle.Muthoot FinanceA 30% year-to-date rise in gold prices will give further legs to gold loan growth. In the first-half of FY21, loan growth was muted due to funding constraints amid the pandemic outbreak. However, with improved liquidity in the system over the past few months, the growth in the second-half is expected to be strong given its leadership in the segment.PI IndustriesThe agro-chemical company which does custom synthesis manufacturing for global majors has reported strong growth. The domestic business too is growing fast with the revival in the rural economy. The Management has guided for 20-25% revenue growth in FY21.Piramal EnterprisesThe company’s contract research and manufacturing pharma division is growing at over 15% annually. Over 90% of the company's net worth is invested in the finance business which attracts lower valuation due to high exposure to real estate business. A gradual recovery in real estate demand augurs well.

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