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Stock Analysis, IPO, Mutual Funds, Bonds & More

ONGC, Airtel, ZEE in CLSA’s ‘Pigs that might fly’ list

CLSA also listed 10 piglet stocks — basically smallcap companies — in the note.

, ET Bureau|
Updated: Feb 11, 2019, 09.46 AM IST
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Other prominent stocks included in the list are Standard Chartered, Robot maker Fanuc, Singtel, Baidu and Nintendo.
There is widespread abhorrence towards Pigs for wallowing in mud, but most do not appreciate that they wallow in mud because they have no sweat glands. However, they are the smartest animal on the earth and cleanest in their natural habitat.

Drawing this analogy about the perception of Pigs, Hong Kong-based broker CLSA, in a note titled “Pigs That Might Fly,” lists 22 stocks in Asia region where valuations are at record low levels due to perception concerns, but offers significant upside if valuation reverts to the mean. Of the 22 stocks, six are from the Indian market including ONGC, Coal India, Bharti Airtel, ACC, ICICI Pru and ZEE Entertainment.

The rationale for ONGC appearing attractive is that the government hiked oil subsidy budget allocation by 22 per cent in the interim budget, which suggests realisation of the company could be much higher than implied by current stock prices. ONGC is one of the cheapest exploration and production companies in the world and as the subsidy overhang subsides, it offers sizable earning improvement.

Coal India, one of the largestcoal producing companies in the world, offers a dividend yield of 9 per cent based on FY20 earnings, the third-highest dividend yield in the Asia ex-Japan region. Coal India stock is available at nine times of FY20 earnings with 70 per cent return on equity.

India’s largest telecom company by revenue and market share Bharti Airtel’s focus on deleveraging due to the stake sale in Bharti Infratel, an initial public offering of African IPO could potentially bring down debt by 24 per cent. CLSA has a price target of Rs 410 on Bharti Airtel, which suggests a 34 per cent upside from the current level. ICICI Pru Life is trading at 40 per cent discount to HDFC Life, therefore narrowing of valuation discount could offer upside for the stock.
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Other prominent stocks included in the list are Standard Chartered, Robot maker Fanuc, Singtel, Baidu and Nintendo. CLSA also listed 10 piglet stocks — basically smallcap companies — in the note. However, no Indian company figure in the list.

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