Portfolio check: Top 7 stock picks from LKP

NEW DELHI: Domestic brokerage firm LKP has handpicked seven stocks across sectors and market capitalisations to beat volatility. These stocks have a positive bias towards sugar industry as sugar prices in India have just hit a three-year-high, the LKP report said.

Calendar 2016 began on a very eventful note with the selloff in the Shanghai Index, which lost almost 15 per cent during a week as the slowdown in Dragonland triggered a crash in commodity prices.

Even today, the world is feeling the pangs of this. Amidst all this, we have India as the only silver lining to show growth in a slowing world.

Here are LKP's seven top stock picks across sectors that look attractive for an investment horizon of at least three months:

Ashok Leyland: Buy | Target price Rs 125

Ashok Leyland ^[2] is the best proxy to play the economic recovery and infrastructure theme through the commercial vehicle (CV) cycle. The buoyancy witnessed in both MHCV and LCV makes Leyland an attractive stock pick. The phasing out of old 15-year-old trucks could spur replacement demand for Leyland.

At a time when many stocks from the Auto space have undergone a correction and are unable to break their previous highs, this stock has been steadily rising even after its elongated periods of consolidation. The stock has not gone below its 200-DMA since March 2014.

Balrampur Chini Mills: Buy | Target price Rs 125

Balrampur Chini Mills (BCML) being a large fully integrated sugar complex is a prime beneficiary of the recent buoyancy witnessed in sugar prices as the present shortfall in production both in India and globally has positioned BCML at the forefront in the sugar space.

A strong balance sheet enables the company to hold on to its sugar inventory and take advantage of the uptick in sugar prices underway since the past few weeks.

Dalmia Sugar: Buy | Target price Rs 125

Dalmia Bharat Sugar (DBSL) produces 3.5lac tons of sugar annually across its five manufacturing locations in UP and Maharashtra and now has a total sugar capacity of 30000TCD.

The company is also expanding capacity at its Kolhapur unit acquired in 2012 at an outlay of 150crs to take advantage of the emerging brighter scenario for the sugar sector.

KCP: Buy | Target price Rs 94

KCP is a diversified company which generates majority of its revenues from Cement & Sugar. The 2.5 million ton Cement manufacturing units in Andhra Pradesh ^[3] are in close proximity to Amravati and is a key beneficiary of the increased traction witnessed in Infrastructural activities in the region.

The 8000TCD sugar unit in Vietnam ^[4] is a beneficiary of the shortage in global sugar production seen recently. The recent rally l ed the price to break out of a rectangular channel which it had been trading for the last 2 years approx.

KCP Sugar & Industries: Buy | Target price Rs 35

KCP Sugar is a midcap stock to play the sugar price recovery theme by virtue of its management track record and balance sheet strength. The company robust has witnessed robust realisation off late for its sugar in southern and eastern parts of India which smells of a good April to June quarter.

A firm believer in the fact that sugar is grown on the farm and not at the factory the Chennai-based KCP Sugar despite being smaller in size compared to its bigger peers scores on robust cash generation and recovery at both its sugar facilities in Andhra Pradesh.

KEC International: Buy | Target price Rs 138

KEC International has seen a good correction in its stock price due to change of guard at Power Grid which is going slow on the tendering process for awarding transmissi on contracts. The worries about the slow growth of its international business which account for half its revenues have led to the stock price correction.

"It looks like the concerns are over. We expect KEC to be at the forefront of new order ^[5] wins beginning April from Power Grid as well as on the International side of the business in Power T&D Infrastructure," said the LKP report.

"We believe that improved project execution and better margins aided by lower commodity prices along with visible growth in the business of Railways & Solar EPC projects is a big growth driver as order flows in the fourth quarter of FY15-16 have been quite encouraging for KEC," it said.

Manappuram Finance: Buy | Target price Rs 40

Manappuram Finance ^[6] is witnessing good traction in gold loans and the diversified non-gold loan mix is also growing at 25 per cent. Advantages emerging from the strong retail customer base, rich retail franchise and improving cost matrix should boost earnings momentum translating into higher return on equity (RoE).

"We expect the company to clock RoEs of 15 per cent and the recalibration of the gold loan portfolio and widening of the product base should go a long way in driving the value growth," said the LKP report.

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