Top 5 Stocks to Invest in for 2020

Akshay Seth
Dec 30, 2019
3 min read

5 Stocks that may deliver upto 70% returns in 2020

1. Larsen & Toubro (Current Price: 1300 Rs, target price: 1800 Rs, Potential Upside potential: 38%)

L&T doesn’t need any introduction, this multinational conglomerate comprises 93 subsidiaries, 8 associates, 34 joint-venture and 33 joint operations companies.The company has been maintaining a healthy dividend payout of 26.80%, Pledged percentage: 0.00 % and Interest Coverage is 2.45. Despite client-specific hiccups, the healthy deal pipeline and continuous large deal win ensure growth acceleration from Q3, after the improved Q2. LTI guided to double-digit growth in FY20. Overall, the better-than-estimated quarter and the brighter outlook for H2 gives the confidence of growth ahead. The stock trades at 17.5x FY21e PE, and the target is based on a target PE of 20x FY20e EPS of Rs 93.

2. Aurobindo Pharma Ltd (Current Price: 465 Rs, target price: 800 Rs, Potential Upside potential: 72%)

A fully integrated pharma company, Aurobindo Pharma features among the top 2 companies in India in terms of consolidated revenues. Aurobindo exports to over 150 countries across the globe with more than 90% of its revenues derived from international operations. Promoter holding: 51.87 %, Interest Coverage Ratio: 19.81, Debt to equity: 0.37, Free cash flow 5years: 2,738 Cr. and Company has also a good return on equity (ROE) track record: 3 Years ROE 22.63%.

JPMorgan on Aurobindo Pharma Maintained ‘Overweight’ with a price target of Rs 875.

3. ITC Ltd (Current Price: 238 Rs, target price: 365 Rs, Potential Upside potential: 53%)

ITC is one of India’s foremost private sector companies with a market capitalisation of US $ 50 billion and Gross Sales Value of US $ 10 billion. ITC has a diversified presence in FMCG, Hotels, Packaging, Paperboards & Specialty Papers and Agri-Business. Very strong fundamentals ( ROCE: 34.2%, ROE: 22.69 %, Interest Coverage Ratio: 461.22, Debt to equity: 0.00, Current ratio: 3.24, Free cash flow 5years: 41,380 Cr.). ITC has underperformed the BSE FMCG index trading cheapest among peers as fear of GST hike worries Street.

CLSA on ITC Maintained ‘Buy’ with a price target of Rs 365.

4. Mahindra & Mahindra Ltd (Current Price: 537 Rs, target price: 750 Rs, Potential Upside potential: 40%)

M&M is one of the largest vehicle manufacturers by production in India and the largest manufacturer of tractors in the world. It is a part of the Mahindra Group, an Indian conglomerate. It was ranked 17th on a list of top companies in India by Fortune India 500 in 2018. The company also expects it will have a cost advantage in the diesel segment under the BS-VI regime, which will be an advantage. It does not see a major shift in the diesel preference in the 2L engine category after BS-VI. The firm plans BS-VI upgrades starting Q4FY20 and three new launches starting Q1FY21F, and most of its models will see significant upgrades along with BS-VI transition.

Nomura has given a ‘Buy’ rating for M&M with target price of Rs 704.

5. Vedanta Ltd. (Current Price: 154 Rs, target price: 220 Rs, Potential Upside potential: 42%)

Vedanta Ltd. is a natural resource company, which engages in the exploration, extraction, and processing of minerals, oil, and gas properties. It operates through the following segments: Copper, Aluminum, Iron Ore, Power, and Oil and Gas. The Copper segment focuses in custom smelting and also include a copper smelter, a refinery, a phosphoric acid plant, a sulphuric acid plant, a copper rod plant, and three captive power plants. Stock is trading at 0.85 times its book value Stock is providing a good dividend yield of 12.43%. The company has been maintaining a healthy dividend payout of 86.18%.

Compounded Sales Growth of last 10 years: 33.13% Compounded Profit Growth of last 10 years: 13.35%