Your questions, our answers: Don’t panic if you are invested in Infra stocks

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Those who had bet on infrastructure companies need not panic. The returns may not have been as expected. Hold on, say our experts, as there’s a growth story hidden there

Which are the stocks you need to hold on to

Q: I have been holding Texmaco Rail at Rs 155, Nila Infra at Rs 17 and Federal Bank at Rs 60 since one year.What should I do? – Ajimon Dmon

A: Hold Texmaco Rail considering opportunities for turnaround n rail business till you get your invested capital back. Hold Federal Bank with a target price of Rs 52 (i.e. 1.1x adjusted book value). Sell Nila Infra on every rise as such a tiny infra company trades at 30 PE and market cap at four times sales.The concern is inventories and receivables, which are 120% of its annual sales.

Q: I am holding 1,000 shares of L&T Finance at Rs 83, 666 of NHPC at Rs 36, 100 shares of NMDC at Rs 285, 125 shares of NTPC at Rs 239 in addition to small quantities of PNB, SBI, ICICI. Please advise whether I should hold? -Nalendra Patro

A: If you are a long-term investor, hold L&T Finance and NTPC – certainly they will give rewards in 2 to 3 years as the infrastructure sector is expected to come back to the growth story in the long term. NHPC is worth holding at current price as it can recover at least 20% from the current price. Add NMDC as its “other income” itself could provide an EPS of Rs 4 and henceprovide decent dividend. Hold all three banking stocks for a 15% rebound. I do not believe that the resource and banking sectors would continue to sink till 2016-end. If that is the case, one has to give up faith in the equity asset class as a whole for this year.

Q: I am holding Sun Pharma, Cipla, Dr Reddy’s, Ujjas Energy, Marksans Pharma and Nectar Life Sciences.What should I do? – Tapas Bhattacharya

A: Hold Sun Pharma, Cipla and Dr Reddy’s Labs as there is scope for some recovery in pharma stocks. Sell Ujaas Energy as it is trading over 35 PE on FY2016 earnings and receivables and inventories together being more than annual sales do not give comfort. Exit Marksans Pharma and Nectar Life Sciences if they recover 10% to 15% from the current levels.

Q: With the government announcing new plans for the power sector, this space seems to be heading towards upward movements. Would this be a time to buy into power stocks? – Sahil Kamdar

A: Power companies will take another 2-3 quarters to show any significant growth in earnings.However, considering the valuation, balance sheet strength and dividend yield, you may consider buying Neyveli Lignite. Power ancillaries like Savita Oil Technology is worth investing for the long term.

Q: I want to buy Axis, SBI, PNB & BOB which are at 52-week low & may grow considerably in the first six months of 2016. Do you think I am on the right track? -Vinod Borkar

A: I suggest consider buying Axis Bank, Syndicate Bank, Karur Vysya Bank based on quality of assets and dividend yields.

Q: I bought Sintex at Rs 105 & DHFL at Rs 221. What are prospects of these companies? – Satyajit Majumdar

A: Considering the price to book value and track record of business growth, you may accumulate DHFL to bring down average cost. But debt position of Sintex doesn’t give me confidence to go aggressive on further acquisition of this stock.

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