Your Diwali Portfolio
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The festival of light and the time to bring home the Goddess of wealth has arrived yet again–we are indeed talking about Deepavali or as popularly called, Diwali festival. As you read this, you can well draw the fragrance of this winter festival around you and no festival is worth it unless enough money is there to spend. Keeping up with the tradition and legacy of your favourite investment fortnightly, Dalal Street Investment Journal, we bring this report for you helping to map your investments in the equity markets during the months to come. We call it a portfolio worth a crore and hence we have identified seven stocks which may help you to secure enough returns against investments in these marked stocks.
Going by convention, Diwali also brings in the new investment year for Indian traders and business community. However, the previous Samvat 2072 did not turn out to be as profitable for investors considering it had witnessed a rather dull performance. But then the unputdownable spirit of Indian investors could not be overpowered by the small bad things. Finally markets traded near their all-time high in the month of September 2016. And if the markets' tendency is to be considered at this time sans the global factors, by the time we celebrate the same festival one year from now, investors may find themselves wealthier.
BSE Sensex and Nifty bottomed out in February 2016. After union budget presentation for FY17, Indian capital markets started trading with positive energy. BSE Sensex touched 52-week low of 22494 in February 2016. The primary reasons behind this fall included Chinese equity market crash, BREXIT fears, increasing bad loans of banking sector, weak corporate earning seasons till FY16, etc.
However, then onwards, the markets started recovering and experienced fantabulous rally till first week of October barring few incidents globally and locally which tried to dampen the sentiments of the investors.
FIIs buying in equity markets remained incremental and stood at Rs 43680 crore in Samvat 2072 as against Rs 41729 crore in previous Samvat. Investments from DIIs stood at Rs 16911 crore in Samvat 2072. Slightly more investment from FIIs boosted capital markets with a 2.72 per cent gain on the bourses from the levels of Diwali 2015.
Corporate Earnings
In FY16 corporate earnings dropped and it was heavily influenced by factors like headwinds from low commodity (metals and crude oil) prices, significant NPAs, two consecutive years of poor monsoon impacting consumer sector growth and lack of material transmission of rate cuts.
Corporate earnings are expected to grow by about 25 per cent in FY17, after better results in Q1FY17, good monsoon season after two years of drought like situation, monetary easing as well as recovery in commodity prices. Government has implemented recommendations of the 7th Pay Commission and it will definitely provide strong push to consumption of goods and services.
The recovery of metal prices from bottom driving metal sector earnings and transmission of RBI's FY17 rate cuts will benefit corporate earnings. During FY16, banks have declared large portion of bad assets as per RBI's guideline and this would provide a favourable base from the current financial year. Automobile, banking and financial sectors will drive growth as consumption led demand in the coming quarters amid increasing income base, festival season mood. FMCG industry will also contribute ample amount of growth in near term.
Better Monsson in FY17
With good rains during monsoon is expected to boost private consumption especially in rural areas in the country by 8.3 per cent current fiscal year as against 7.4 per cent in FY16. The distribution of monsoon this season has been the best in the last three years. The nominal agricultural GDP to rise by Rs 1.49 trillion this fiscal, compared with Rs 978 billion in FY16. This is despite a spike in farm output putting downward pressure on prices and farm incomes. The rural markets, which contributes 54 per cent of private consumption, is already seeing some green shoots.
The higher government expenditure on agriculture and rural development in Q1FY17 will provide further support to income generation and increasing demand in rural areas.
Global Scenario
There is a lot of turmoil in other financial markets globally as well as uncertain political situations in major countries. Brexit also surprised various financial markets across the globe and speculations are still making rounds over its further impact. UK Prime Minister Theresa May already stated that the process of exit would start from end of March 2017. India is currently the second biggest source of foreign direct investment (FDI) for the UK. Until now, companies could sell their products and services to the rest of Europe under the European free market system. But after Brexit, the UK will not be an attractive destination for Indian FDI.
US presidential election on November 8, is must watch event in global as it will decide the future relationship with countries in the near future term. Meanwhile, from Indian capital markets perspective also it is a major event but that may not affect as a large. Recently, geo-political tension across India and Pakistan dragged markets down upto some extent and created a turmoil like situation which though was quickly overpowered by strong domestic business and economic numbers.
Investors, however, should always try to find out fundamentally strong scrips to give fruitful returns in future term.
Interest rate cut cycle
Reserve Bank of India adopted new system to review monetary policy through the Monetary Policy Committee (MPC). Six-member MPC committee will now make decision on interest rate cut rather than exclusively by the RBI Governor. The decision on policy rate reduction from 6.5 per cent to 6.25 per cent on October 4 was praised by India Inc. The interest rate hit a five-year low and former RBI guv, Raghuram Rajan began a 125 basis point easing cycle. Transmission of interest rate cut to end customers would ease money flow in financial markets. With marginal cost of funds based lending rates (MCLR), it is pertinent to note that the growth estimate of RBI for FY17 is constantly kept at the same level. The focus of RBI has now shifted to growth as inflation in the country is moving inline. One of the positives for the banking sector from the regulatory angle is the relaxation given on the treatment of sustainable debt under S4A.
Attractive Valuations
BSE Sensex is trading at PE multiple of 20x times which is quite similar as compared to the previous financial year. The index has also given dividend yield of 1.43 per cent as of FY17. Being favourable destination of investments among developing nations across the globe, Indian capital market is bound to bounce back owing to flourishing demand.
As per the investors' point of view, it should be taken as an opportunity to invest in long term.
Dhruv Desai- Director & COO , Tradebulls Securities (P) Limited
This Diwali, which are the sectors you think would be buzzing and worth putting on investors' money?
The sectors which are expected to give returns to investors are consumer durables, consumer packaged goods industry, auto, travel and home decor and furnishing. Apart from that, with increase in online shopping, the sector which will gain and have positive impact would be logistic companies.
Do you see lot more happening in the consumer durables and FMCG sectors considering finally we have a good monsoon and also government employees started getting benefits of the 7th Pay Commission recommendations?
The recent 25 basis point rate cut will improve consumer sentiment aided by festive season, good monsoon and 7th Pay Commission. If we look at FMCG and consumer durables, they are languishing at the same level where they were at the beginning of the calendar year but the fruits of good monsoon and 7th Pay Commission will start reaping now. Also let's not forget the implementation of GST Bill which is a big plus for consumer durables.
Following the rate cut announcement from RBI, do you think banking and NBFCs to dazzle and worth putting a wise bet this festive?
The recent rate cut does not seem to dazzle banking and NBFC stocks. Banking has been gripping with Non-Performing Assets (NPA) and the rate cut is not getting passed on to consumers. So the loan growth is not happening as consumers are not getting benefited but the rate cut is helping banks repair some of their losses. Meanwhile the valuations of NBFC are stretched and so the risk reward is not in favour of investing at current point. For long term investment in NBFC, at least correction of 10 to 12 percent is required so the valuation becomes at par.
Considering global uncertainties, do you think this Diwali will still be a good time to go for buying?
It is difficult to time the market. That is why; there is neither never right time to buy and nor right time to sell. For short term, global uncertainties will make market volatile especially upcoming US election in November. The Fed interest rate hike is factored in but it is difficult to predict the outcome of US election and so will make market vulnerable. Those investors who are long term shouldn't be worried but for the short term traders they should exercise caution. Inspite of global uncertainties it is still good time to invest in market but with long term view.
Chirag Modi- Founder and Director, CM Investments
Traditionally investors opt for buying during Diwali days. Looking at global economic and also political situations, what will be the sectors you suggest investors to buy stock this time?
Ans : - In fact at every point of investment , factors like global economic and political situations of any country affect the investment horizon of that country. Diwali is knocking the doors and investors are looking more enthusiastic this time ever. I like to suggest investors to buy stock for FMCG sector, infrastructure sector and retail players. These sectors will also be benefited due to GST which will come in to effect in the next financial year.
Looking at the current scenario , after Jio launch and also spectrum auction, do you think telecom stocks are worth investing again? Which are stocks in this particular sector you suggest investor to stay put?
Ans :- During the first half of fiscal 2015, telecom stocks had charted a distinctly upward trend with telecom stocks shooting up to their 52 week high in July 2015, breaching the 1600 point mark . Presently telecom sector is under pressure due to high tariff war which is affecting its margin. In the anticipation of Jio lauch, all listed telecom companies' stocks are under performing since last one year and their prices already get discounted. Market sentiments started weakening and telecom index slumped below 1200 points in January this year- an almost two-year low. During fiscal 2016, Bharti Airtel has already lost 11.5 percent market cap, Idea Cellular a whooping 40% and Reliance Communication over 15%. Looking at the current scenario , I do not like to recommend investors to stay put in telecom companies.
How are the PSU banks look like at this festive time ? Do you think this sector is going to go up from here and why ?
Ans : - Presently public sector banks are available at a cheap valuation in terms of P.E. ratio and price to book valuation in comparison to private sector banks. Mr. Rajan , former Governor of Reserve bank of India had taken massive surgical operation of Non- Performing Assets ( NPA ) of the banks in the year 2015-16 which resulted these banks' bad assets quality getting cleaned up due to high provisions of NPA Assets. Now PSU banks' Assets quality is improving since these banks are focusing intensively on NPA recovery. Net interest margin is also improving. In near future , I expect, Interest rate will also decline. Government of India has been aggressively focusing in improving financial health of PSU banks and providing funds as per provision made in the union budget. In the coming years, more enthusiastic results will be shown by the banks. Government will infuse more funds. Banks have also received approval from SEBI for starting assets management companies. This sector is presently like a rising sun, so investors can opt to buy and accumulate the PSU banks' stocks on every decline.
What are crucial levels of Nifty one should watch out during this October to December Quarter ?
Ans : - The very crucial level of Nifty during this quarter will varies between 8350 to 8450. If it crosses this level, then major resistance should be between 8750 to 8850 with storing support. My view is that if nifty crosses 8850 till March, 2016 , then next target of Nifty will be 9300. I agree with JP Morgan that Nifty will touch 10000 levels, but seems to be happening in the first quarter of next year. This will come true looking to the political stability, decline in interest rate, moderate inflation rate. Recently IMF has set GDP rate of India is 7.6%.Narendra Modi, Prime minister of India, right now focussing on infrastructure development aggressively.The government has proposed slew of measures to boost investment in both industrial sector and service sector through ‘Make in India' programme . Looking at economic growth prospects in terms of improving GDP rate, decline in inflation rate ,accelerating pace of investment in infrastructure sector and introduction of GST from next financial year S&P Moody may upgrade the rating of Indian sovereign which might create confidence among foreign investors.
How do you find small — cap segment to go from this point ? will it be wise to put one's money in this segment as there are lots of happening currently.?
Ans : - All small-cap stocks are not having buying potential . Most of the mid-cap and small- cap stocks have been overvalued and their rates are not justified looking to their P.E. ratio. I do not think any buying opportunity has been left in this segment except some of the mid-cap stocks. One should not put own hard earned money on the penny or tipped stocks. I advise all the investors before making any investment in share, see the management, business structure and plan also and future potential growth of the company in which he is going to invest.
Review of previous Diwali Portfolios—Five Years in Consideration
Equity markets in India during last one year did not bring much wealth for the investors till theunion budget for the fiscal year 2016-17. Things started changing for good since Union Finance Minister, Arun Jaitley rose to table the budget document in Parliament. While sending this report to print, things have started looking up and better than ever. We take this opportunity to carry out a critical analysis of our last five years' Diwali recommendations.
You will be delighted to note that while in last five years Sensex witnessed 11.48 per cent raise our recommended stocks witnessed 27.32 per cent jump during the period under consideration thus dominating the index hike. However if 2015 recommendations are to be considered, three stocks, Tata Motors, HDFC Bank and Nestle India have done extremely well making our reader-investors richer and wealthier. Tata Motors had given a return of 19.01 per cent return while HDFC Bank in spite of all the uncertainties in this sector, paid a return of 18.89 per cent to our reader-investors. Nestle India facing the Maggi debacle, managed to give a return of 4.67 per cent. But then there had been stocks like Dish TV, Kolte Patil and Marksans Pharma could not deliver well due to various reasons. Adani Port and SEZ also failed to live upto the expectations and estimates.
On a year wise perspective, Diwali 2011 portfolio grew by 29.33 per cent while Sensex rose by only 11.12 per cent during the same period. Our recommendations on Diwali 2012 also had beaten index and increased by 20.85 per cent. Diwali 2013 portfolio remained top performer among the portfolios in last five years by clocking a jump of 49.21 per cent. Yet again, Diwali 2014 portfolio also jumped up by 29.22 per cent over the index performance. However, Diwali 2015 portfolio declined by 9.99 per cent against Sensex clocking a raise of 2.63 per cent.
Indiabulls Housing Finance
Bse Code:535789 Face Value: Rs.2
CMP:Rs.846 Market Cap:26759
There are various positive sentiments across housing sector. Real Estate Act, 2016 will lead to a structured, transparent and disciplined manner. The real estate sector in India is at an inflection point with sales in the top six residential markets showing a strong positive uptake. Meanwhile, office space demand in the first half of CY16 increased by 12 per cent on a yearly basis across top six cities in India.
IBHFL has issued Rs 1330 crore of rupee denominated affordable housing masala bonds. The bonds were raised at 8.57 per cent for a tenor of 3 years and 1 month.
On financial front, IBHFL's revenue increased at CAGR of 17.11 per cent during FY12-FY16. The company's EBITDA too rose by CGAR of 17.66 per cent within last five financial years. Its net profit boosted by CAGR of 18.63 per cent as of FY16 within five years.
IBHFL's top line increased by 28.54 per cent to Rs 8290 crore in FY16 as compared to previous fiscal year. The company's EBITDA too rose by 27.57 per cent to Rs 7185 crore in FY16 on yearly basis. Its net profit also boosted by 23.34 per cent to Rs 2345 crore in FY16 as compared to previous financial year. IBHFL's cost to income ratio has declined from 18.7 per cent from FY12 to 14.3 per cent in FY16.
On quarterly front, IBHFL's net sales increased by 29.69 per cent to Rs 2372 crore in Q1FY17 as compared to same period in previous financial year. The company's PBT increased by 26.4 per cent to Rs 875 crore in Q1FY17 on yearly basis. Its net profit also increased by 23.23 per cent to Rs 630 crore in Q1FY17 as compared to same period in previous fiscal year.
On asset quality front, IBHFL's gross NPA was stable at 0.84 per cent and net NPA of 0.36 per cent in Q1FY17. IBHFL's loan assets has risen CAGR of 28 per cent as of Q1FY17. IBHFL's funding mix of 40 per cent from debenture and securities, 47 per cent from bank loans, 11 per cent from sell down and 2 per cent from ECB as of Q1FY17.
On valuation front, IBHFL's share price is trading at PE multiple of 14.94x times against industry PE multiple of 23x times which is quite attractive. The company's PE multiple is lower as compared to peers such as HDFC (21x), LIC Housing Finance (18.09x), Repco Home Finance (34.5x). Its PB multiple of 3.25x times against HDFC's 4.27x and Repco Home Finance 5.53x.
IPCA Labroratories
Bse Code:524494 Face Value:Rs.2
CMP:Rs.620 Market Cap:4226
Ipca Laboratories is a manufacturer and supplier of over 10 active pharmaceutical ingredients (APIs). The company's 3c division focuses on cardiovascular and anti-diabetic markets. Its 3d division is focused on cardio-diabetic market. On financial front, IPCA Laboratories' revenue increased by 11 per cent to Rs 847 crore in Q1FY17 as compared to same period in previous financial year. The company's EBITDA too rose by 60 per cent to Rs 128.51 crore in Q1FY17 on yearly basis. Its EBITDA margin expanded by 466 basis points to 15.26 per cent in Q1FY17 as compared to previous financial year. IPCA Laboratories' net profit boosted by 127 per cent to Rs 47.57 crore in Q1FY17 on yearly basis. The company's net profit margin expanded by 287 basis points to 5.62 per cent in Q1FY17 as compared to same period in previous fiscal year.
On segmental revenue front, IPCA Laboratories earned 75.47 per cent from formulation amounting to Rs 620 crore and remaining 24.53 per cent amounting to Rs 275 crore from APIs in Q1FY17. The company earned 42.02 per cent from domestic formulations, 4.27 per cent from domestic APIs, 33.45 per cent from exports formulations, 20.26 per cent from Exports APIs in Q1FY17.
IPCA Laboratories' top line declined by 8.73 per cent to Rs 2845 crore in FY16 as compared to previous financial year. On geographic revenue front, the company earned 48.33 per cent from India and 51.67 per cent from outside India in FY16. Its net profit decreased by 63.31 per cent to Rs 93.27 crore in FY16 on yearly basis. IPCA Laboratories has debt to equity ratio stood at 0.35x times as of FY16. Time to invest in Ipca.
Manpasand Beverages
Bse Code:539207 Face Value:Rs.10
CMP:Rs.720 Market Cap:1689
The market size of beverage industry in India, which consists of juices, carbonated drinks and bottled water is estimated to be worth about Rs 65000 crore. This market is estimated to grow at CAGR of more than 20 per cent. The Indian packaged juice industry size is approximately Rs 8000 crore and it has been growing at more than 30 per cent per annum in last few years and will maintain that pace in future as well.
Manpasand Beverages (MBL)'s brands are present in 24 states through more than two lakh retailers, over 2000 distributors and 200 plus super stockists. The company has two manufacturing facilities. The company has invested about Rs 160 crore in setting up its new facility in Haryana recently. It has production capacity to go up by 45,000 to 50,000 cases per day. MBL's Mango Sip and Fruits Up brands to be made and distributed in north and north-eastern India from the new plant. The company is also looking at setting up more manufacturing facilities.On financial front, MBL's revenue increased by 54.75 per cent to Rs 557 crore in FY16 as compared to previous financial year. The company's EBITDA boosted by 72.24 per cent to Rs 110 crore in FY16 on yearly basis. Its EBITDA margin expanded by 354 basis points to 21.47 per cent in FY16 as compared to previous fiscal year. MBL's net profit increased by 68.81 per cent to Rs 50.56 crore in FY16 on yearly basis. The company's net profit margin expanded by 76 basis points to 9.08 per cent in FY16 as compared to previous financial year.
MBL's top line has increased by CGAR of 45.38 per cent during FY12-FY16. The company's EBITDA too rose by CAGR of 51.2 per cent as of FY16 within five financial years. Its PAT also boosted by CAGR of 52.68 per cent as of FY16 from last five years.
On quarterly front, MBL's revenue increased by 57.82 per cent to Rs 237 crore in Q1FY17 as compared to same period in previous financial year. The company's EBITDA too rose by 33.48 per cent to Rs 45.26 crore in Q1FY17 on yearly basis. Its net profit boosted by almost two times to Rs 28.65 crore in Q1FY17 as compared to same period in previous financial year. It is a buy from us considering the numbers and facts.
Prime Focus
Bse Code:532748 Face Value:Rs.1
CMP:Rs.71.20 Market Cap:276.64
Prime Focus is a media and entertainment industry services company. The company provides end-to-end creative services; technology products and services; production services and post production services. Its technologies include CLEAR (Hybrid Cloud technology enabled Media ERP Suite), DAX Digital Dailies and ViewD (stereoscopic two-dimensional (2D) to 3D conversion process). Prime Focus has operations in Bangalore, Cape Town, Chandigarh, Delhi, Goa, Hyderabad, Johannesburg, Kolkata, London, Los Angeles, Mumbai, New York, Toronto and Vancouver.
On financial front, revenue of Prime Focus increased by 1.54 per cent to Rs 526 crore in Q1FY17 as compared to same period in previous financial year. The company's EBITDA too rose by 17.68 per cent to Rs 101.4 crore in Q1FY17 on yearly basis. Its EBITDA margin expanded by 435 basis points to 19.65 per cent in Q1FY17 as compared to same period in previous financial year. Prime Focus witnessed a turnaround in profitability as posted net profit of Rs 106 crore in Q1FY17 against net loss of Rs 230 crore in Q1FY16. Prime Focus has been able to cut down leverage level from last couple of quarters and stood at Rs 1270 crore as of June 2016.
On geographical front, Prime Focus earned 35.48 per cent from Canada, 23.63 per cent from United Kingdom, 22.27 per cent from US, 18.34 per cent from India, 0.15 per cent from UAE and remaining 0.14 per cent from other countries in FY16. Prime Focus World has robust order book of over USD 200 million (Rs 1334.9 crore) with movies like Dunkirk, The Mummy, Wonder Woman, Fast 8, Inferno, Geostorm, Fantastic Beasts and Where to Find Them, Justice League: Part 1 amongst others.
Prime Focus Technologies (PFT), the technology subsidiary of Prime Focus has secured the first round of funding from Ambit Pragma, a growth capital private equity (PE) fund. On valuation front, Prime Focus has EV/EBITDA is trading at 9.18x times against peers such as Inox Leisure (14.59x) and PVR (17.12x) which is quite attractive. We recommend our readers to buy this stock.
RBL Bank
Bse Code:540065 Face Value: Rs.10
CMP:Rs.313 Market Cap:11558
Indian banking system is currently in a restructuring mode. The financial and economic conditions in the country are stable and better than other countries in the world. The Indian banking industry is on a path of modernisation with new trends like payment and small finance banks playing an important role.
From RBL Bank's big bang IPO listing, it will utilise funds for tier-i equity capital base and fulfil the incremental capital needs under the Basel-III norms as well as Reserve Bank of India's norms. RBL Bank raised Rs 330 crore from CDC Group through Basel III compliant tier-II capital. On financial front, RBL Bank's deposits and advances both have grown at CAGR of 51 per cent over last four years. It has maintained CASA ratio and NIM growth in the range of 18.6 and 3 per cent in FY16. NII of the bank has risen by 47 per cent to Rs 819 crore in FY16 on yearly basis. Its net profit also boosted by 41 per cent to Rs 293 crore in FY16 as compared to previous fiscal year.RBL Bank's net total income expanded to Rs 3235 crore in FY16 at a CAGR of 43.47 per cent over FY12-16. The bank's PAT also boosted to Rs 293 crore in FY16 at a CAGR of 34.79 per cent over last five years. On asset quality front, RBL Bank has maintained its net NPA of 0.59 per cent in FY16 against 0.27 per cent in FY15.
On valuation front, RBL Bank with TTM EPS of 7.91, looks attractive at PE of 37.67x as compared to Kotak Mahindra Bank (55.05x) and IDFC Bank(57.2x). The bank is also placed well on this parameter with PB multiple of 2.88x as compared to its peers: Yes Bank (3.73x), IndusInd Bank (4.06x) and Kotak Mahindra Bank (5.89x). Low level of NPAs, safer CAGR ratio, consistent growth in total income, proportional balance of deposits and advances, are major growth pointers for the bank.
TVS Motor Company
Bse Code:532343 Face Value:Rs.1
CMP:Rs.389 Market Cap:7575
India's automobile industry accounts for 7.1 per cent of the country's Gross Domestic Product (GDP). The two-wheelers segment with 81 per cent market share is the leader of the automobile market owing to a growing middle class population and also a young population having cash. The central government implemented recommendations of the 7th Pay Commission and then interest rate cut cycle and good monsoon in FY17 acted as major triggers for the striving demand in the automobile sector. Automobile manufacturers welcome the rate cut by RBI in early October and it will lift consumers' sentiments and boost buying in the ongoing festive season.
On quarterly result front, TVS Motor posted revenue of Rs 2853 crore with 12.15 per cent growth in Q1FY17. Company's EBITDA too rose by 15.99 per cent to Rs 200 crore in Q1FY17 on a yearly basis. Its EBITDA margin expanded by 59 basis points to 7.51 per cent in Q1FY17 as compared to same period in previous fiscal year. TVS Motor's net profit increased by 21.15 per cent to Rs 121 crore in Q1FY17 on a yearly basis.On financial front, TVS Motors's top line increased by CAGR of 9.29 per cent from FY12 to FY16. The company's EBITDA too rose by 10.54 per cent CAGR within last five financial years. Its bottom line boosted by CAGR of 22.74 per cent in FY16.
The company's revenue increased by 12.93 per cent to Rs 11377 crore in FY16 as compared to the previous fiscal year. Its EBITDA too rose by 25.18 per cent to Rs 758 crore in FY16 on yearly basis. Its net profit also increased by 12.51 per cent to Rs 369 crore in FY16 as compared to the previous financial year. The company's ROE and ROCE stood at 27.08 per cent and 23.8 per cent in FY16. The company has very low debt to equity ratio of 0.73x times as of FY16. Its capex stood at Rs 4.5 billion in FY16 against the company's management has guided Rs 4 billion in FY17. This Diwali, add TVS in your portfolio.
On segmental revenue front, TVS Motor company earned 98.2 per cent from automotive vehicles segment and 1.8 per cent from automotive components during FY16. On geographical front, the company earned 77.85 per cent from domestic segment and 22.15 per cent from export segment in FY16.
The company has commenced manufacturing products for BMW at its Hosur facility. On valuation front, the share price of TVS Motor Company is trading at PE multiple of 48.55x times against industry PE multiple of 29.34x times. Indeed it is a buy for your Diwali portfolio.
Ultratech Cement
Bse Code:532538 Face Value: Rs.10
CMP:Rs.3978 Market Cap:40396
India is the second largest producer of cement in the world. Government initiatives such as development of 98 smart cities, increasing demand from realty sector are expected to provide a major boost to the sector.
UltraTech Cement is in the business of cement and cement-related products. On financial front, Ultratech Cement's top line increased by CAGR of 5.79 per cent in last five financial years. The company's EBITDA too rose by CAGR of 3.12 per cent from FY12-FY16. However, its net profit declined by CAGR of 0.99 per cent in last five fiscal years.Ultratech Cement's revenue increased by 5.09 per cent to Rs 25281 crore in FY16 as compared to previous financial year. The company's EBITDA too rose by 10.51 per cent to Rs 4891 crore in FY16 on yearly basis. Its EBITDA margin expanded by 37 basis points to 19.99 per cent in FY16 as compared to previous fiscal year. Ultratech Cement's net profit also increased by 8.97 per cent to Rs 2287 crore in FY16 on yearly basis. The company's net profit margin expanded by 32 basis points to 8.96 per cent in FY16 as compared to same period in previous fiscal year.On quarterly front, Ultratech Cement's revenue increased by 3.92 per cent to Rs 6590 crore in Q1FY17 as compared to same period in previous financial year. The company's EBITDA boosted by 22.74 per cent to Rs 1475 crore in Q1FY17 on yearly basis. Its net profit increased by 29.17 per cent to Rs 780 crore in Q1FY17 as compared to same period in previous financial year. Ultratech Cement is a zero debt company. The company's ROCE stood at 15.8 per cent with expansion of 3.5 per cent in Q1FY17 on yearly basis.
On valuation front, share price of Ultratech Cement is trading at PE multiple of 44.72x times which is quite attractive as compared to peers ACC (45.01x), Ambuja Cement (63.09x) and Shree Cement (145.01x). Meanwhile, the company's PE multiple is also attractive as compared to industry PE multiple of 47.46x times. We find it an attractive proposition at this time.