Motilal Oswal Securities 2017 top picks/ideas

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Motilal Oswal Securities

Tata Motors Target Rs 610
JLR volumes and revenues expected to grow at CAGR 12.5% and 15%, respectively , over FY 17-19E, driven by new product launches.This coupled with mix improvement and full benefit of forex would drive realisations and revenues. JLR's EBITDA margins expected to improve sharply from Q2FY17 levels of 10.3% to 17% by FY19 driven by realisation of forex benefit, mix improvement, benefits of modular platform and operating leverage.

ICICI Bank Target Rs 337
Strong capitalisation (CET1 of 13%), significant improvement in granularity of the book (52% retail and SME), sharp improvement in liability profile (CASA ratio of 40%) is helping ICICI Bank to build a low risk business without much impact on core earnings.On asset quality , high proportion of incremental disbursement to A and above rated corporate and recognition of actual stress on balance sheet will reduce concerns over asset quality in FY17.

Canfin Homes Target Rs 2,260
Low cost funding from NCDCPpublic deposits is expected to increase to 60% by FY18E from 35% in FY16. This is expected to translate into expansion of spreads from 2.23% in FY16 to 2.9% in FY18E. It has set a target of achieving loan book of Rs 35,000 crore by 2020 which translates to a 33% CAGR in loan book, which is much higher than the 20­22% growth expected for its peers. We estimate Canfin's loan book to compound at 28% CAGR over FY16­18E.

Sterling Tools Target Rs 1,207
The company has started work on the phaseI expansion for a new plant in Gujarat. Total capex for the project will be Rs 50 crore, likely to be commissioned by September 2017.Conducive macro factors like good monsoons, 7th pay commission roll out, passage of GST, increasing localisation by OEMs will propel the company on growth path, going forward. We expect earnings growth of 20% over FY16­ 18E. We value the company at 20 times FY 18E EPS with a target price Rs 1,207.

APL Apollo Tubes Target Rs 1,248
 We expect the domestic ERW pipe market to grow at a CAGR of 9% over FY16­19E to 10 million tonnes by FY19E. The bulk of the growth will come from the construction and infra segments (airports, mall & prefabricated structures) using the structural pipes followed by demand from traditional applications. APL is planning to expand its capacity further to 2 mt by Q1FY18. We value the company at 15 times FY18E EPS of Rs 83.2.