What’s in store next week? Top 3 stocks to bet on that can give good returns in short term

Sumit Bilgaiyan

Next week will be quite important as monsoon will start in India and all weather agencies have forecast a normal monsoon this year. From market's point of view this is the biggest event this week.

Stock specific, Biocon will be closely watched as it will approach target action day (TAD) for the application of a biosimilar drug called Pegfilgrastim. Its result will come on June 4.

On the same day Weizmann Forex will consider a buyback and on June 6, RBI will come up with its policy rate results.

ADF Foods board of directors will discuss a buyback on June 5, while Sadbhav Infrastructure's board will consider the allotment of non-convertible debentures amounting to Rs 190 crore only on private placement basis and fund raising by issue of securities on June 6. South Indian Bank's board of directors will discuss fund raising on the same day.

Here is a list of three stocks to bet on for short term:

Firstsource Solutions (FSL)

FSL has posted revenue growth of 1.1 percent on a QoQ basis. EBITDA margins expanded by 170 bps QoQ aided by lower-than-expected employee expenses and lower other expenses. The board has recommended a dividend of Rs 1.5 per share for the first time and indicated at maintaining a payout ratio of around 35-40 percent of PAT, going ahead.

Management expects revenue growth to be at the top end of industry growth rates in constant currency in FY19 despite downward bias in the customer management division, driven by healthy deal pipelines, signing of contracts, and traction in mortgage business in BFSI.

With a healthy dividend payout and becoming net long term debt free company, we believe FSL could witness a massive upside going ahead. We are recommending a Buy.

Bajaj Auto has posted strong earnings driven by good growth in 3-wheeler and export sales. Export markets like Nigeria have seen good improvement. Volumes in Nigeria improved to 33,000 units per month versus 26,000 in 2017.

Commodity prices are quite volatile but we are expecting management will maintain volume growth. Management is focusing on domestic business to strengthen its presence. Realisation has improved by 1.8 percent QoQ Rs 64,790 versus Rs 63,600 per unit due to higher 3-wheeler and export sales.

We are recommending a Buy due to expectations of higher realisation and better volume growth.

L&T Technology Services (LTTS) is the third-largest pure play ER&D (engineering, research & development) services provider globally. Its broad based services portfolio, presence in underpenetrated market segments and deep rooted client footprint, 43 of the top 100 global ER&D spenders, places it well to address the opportunity emerging from the shifts in global ER&D spend.

Global spend on ER&D services ($680 billion in 2016; source: PwC Consulting) compares that on IT services. However, the outsourced component is lower and India has a relatively lower share of the global outsourcing market. This should improve with the growing shift in ER&D spending from products to software and services, and a rising preference for third-party players.

We believe LTTS is well set to tap this opportunity and its financials are quite superior compared to others. It has healthy cash conversion plus superior return ratios, 39 percent return on equity, are other positives. We recommend a Buy.

The author is Founder of Equity99.