SMC Global Research has selected UPL and Sadbhav Engineering as fundamental picks. Investment rationale is as follows:
1. UPL
Current market Price (CMP): 859.85
Target Price (TP): 1,027
Upside: 19%
The company has strong fundamentals and robust outlook. Its strong focus on brand building and customer reach is helping the company in increasing its market share in major addressable markets. Good recovery in south cone and Latin America would help the company to maintain robust performance going forward. Management expects that with improved monsoon, there will be an increase in its volumes and this would boost 20% growth of its consolidated revenues and margins would expand by 50-75 basis points (bps). Thus, it is expected that the stock will see a price target of Rs 1027 in 8 to 10 months time frame on a Current P/E of 24.32x and FY18 (E) earnings of Rs 42.21.
2. Sadbhav Engineering
Current market Price (CMP): 304.50
Target Price (TP): 356
Upside: 17%
Structurally advantages such as relatively benign commodity prices, liquidity conditions globally as well as 'Make in India' initiative, a broad-based policy which actions in enhancing human capital, access to inputs and finance, and better connectivity, sets eye at keeping India's growth above its peers. Management expects that the business definitely will have a very strong footing on every quarter because a large number of projects almost are under execution. Thus, it is expected that the stock will see a price target of 356 in 8 to 10 months time frame on an expected P/Bv of 3.5x and FY18 Book Value per share (BVPS) of Rs 101.64.
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