Best Share To Buy For Short Term In August 2018

Mahindra & Mahindra (NSE: M&M) (Share Price: Rs.908): Potential Buy

Valuation: Undervalued stock with trailing PE of 15.07x.

Reasons to consider: Continuous volume growth at average growth rate of ~8-10%. Healthy ROE of around 19-20%. Cash rich company.

Drivers: The company's aim is to increase the revenue share of global FES to 50% from ~35% currently by focusing on small farmers, key agriculture markets such as USA, Mexico, Brazil and Turkey , tractors and other relayed products, & strategic alliances. Long-term demand outlook remains healthy on account of normal monsoon and government focus on infrastructure in rural India.

Financial: Revenue increased by Rs 47577 cr in FY18 vs Rs 41895 cr in FY17. EBITDA margin improved to 24.5% in FY18. Net profit stood at Rs 4623 cr in FY18 vs Rs 3890 cr in FY17.

Dixon Technologies Ltd (NSE: DIXON) (Share Price: Rs. 2835): Potential Buy

Valuation: Overvalued with trailing PE of 53x.

Reasons to Consider: Contious growth with CAGR of ~30% in last five years over healthy order book. The company shifting production from Dehradun to Tirupati which has increased its cost and compressed margin but shifting will get complete by July, and this will reduce expenses through better efficiencies. The company maintains ROCE above 25% in last three years.

Drivers: The company has forayed into security systems and manufactures CCTV's and video recorder which sees strong demand. Owing to which it has increased planning to enhance its camera manufacturing capacity to 400,000 units from 100,000 units at present. Companys Lighting products, home appliances and mobile phone segment sees double digit growth led by low electronic penetration and pick up in domestic consumption.

Financial: In FY18, revenue grew by 14.3% to Rs 2858 crores. EBITDA up by 26.1% to Rs 117 crores. PAT up by 28% to Rs 60.9 crores.

Sterlite Technologies (NSE: STRTECH) (Share Price: Rs.303): Potential Buy

Valuation: Overvalued with trailing PE of 36.49x as compared to close peers.

Reasons to consider: The company has announced the signing of agreements for acquisition of a European specialised optical fibre cable manufacturer Metallurgica Bresciana (Metallurgica) in all cash deal for the total consideration of Rs 367 crore which is to be funded by the mix of internal accruals and European debt instruments.

Drivers: The acquisition will provide Sterlite an access to European market, which will eventually help to increase its global market share for optical fibre products and would help to bring in new tier 1 customer. The new OF capacity expansion would bring in additional revenue opportunity of ~Rs 1000 crores at the full capacity by FY20.

Financial: In FY18, operating income grew by 24% to Rs 3206 crores. EBITDA grew by 44.4% to Rs 749 crores. PAT up by 66% to Rs 334.3 crores. EPS stood at Rs 8.4 / share.

Larsen & Tourbro (NSE: LT) (Share Price: Rs.1293): Potential Buy

Valuation: Overvalued with trailing PE of 24.72x as compared to close peers.

Reasons to consider: Diversified business with portfolio of projects, infrastructure development, manufacturing, IT & financial services. Order inflow grew by 7% in FY18. Uninterrupted payment of dividend with dividend payout of 48% in FY18. Improves ROE to 15.9% in FY18.

Drivers: Large diversified order book with book to bill ratio of ~ 3.5x gives revenue visibility for next three years. The company has signed an agreement with Schneider Electric for sale of its Electrical & Automation segment. Sale of E&A segment is capable of generating cash flow of ~Rs 100 bn in FY20.

Financial: In FY18, revenue is up by 9.5% to Rs 1,19,700 crores driven by infra, hydrocarbon and services businesses. EBITDA grew by 22% to Rs 13,600 crores. PAT up by 22% to Rs 7400 crores. EPS stood at Rs 52.62 / per share.

Amara Raja Batteries (NSE: AMARAJABAT) (Share Price: Rs.783): Potential Buy

Valuation: Fairly valued with trailing PE of 28.49x.

Reasons to consider: Revenue grown at five year CAGR of 17.6%. Company posted healthy numbers in FY18. The company have ROCE of 30% and ROE of 20%. Excellent track record and robust capex plan led to preferred supplier to majority of OEM's.

Drivers: Strong automotive growth drives growth of the company. Capacity expansion by major OEM's and favorable macro opportunities creates good platform for the company.

Financial: In FY18, the company recorded sales of Rs 6059 cr vs Rs 5317 cr in FY17. Operating profit stood at Rs 883 cr vs Rs 849 cr in FY17. The company recorded PAT of Rs 471 cr in FY18.

Escorts Ltd (NSE: ESCORTS) (Share Price: Rs.867): Potential Buy

Valuation: Overvalued with trailing PE of 30.98x.

Reasons to consider: The company is one of the prominent players in auto and tractor industry with market share of 10.4% in tractor segment and 55% market share in material handling equipment. The company has 53 dealers and 120 touch points. The company posted healthy numbers in FY18. EBITDA margin improved led by volume growth and cost control initiative.

Drivers: Increasing market share led by new product launch and network expansion augurs well for the company. Operating margin will be intact as company passes rise in raw material price to end customer by 0.8% in April 2018.

Financials: In Q4FY18, revenue grew by 41% YoY to Rs 1436 cr led by volume growth of 57% in tractor business. EBITDA margin expanded by 480 bps YoY. PAT is up by 153% YoY to Rs 113 cr.