We expect healthy 15-18 percent earnings growth and bullish on large-caps over the midcaps.
We believe recovery track would be backed by better-than-expected corporate earnings FY18 and pro-BJP outcome in Karnataka elections which will shape up the second half performance of the markets.
Domestically we expect healthy recovery in corporate earnings, Pro BJP State elections outcomes followed by Timely, well spread and sufficient monsoon would keep market on optimistic outlook while globally US Trade war saga, Oil prices and raise in FED interest rates scenario can break the markets sentiments on either side. Hence any unpredictable changes in these parameters will trigger market movements going ahead.
Considering the current scenario obviously we prefer to weight (50 percent) on Equity mainly on high quality frontline counters which are fundamentally strong, complying high corporate governance and has health earning visibility. We see many such quality companies have come at very reasonable prices for multiple reason. Accumulating those would be once chance which may not be available in next recovering bull markets.
We believe Mutual fund exposure as a second best to be investing mainly in the sector focused schemes like Pharma / Banks or diversified scheme with 25 percent weight which are best in the downturn scenario.
With respect to bond yields which are currently yielding better as the expected pickup in economic activity and demand for credit will also affect the cost of money in the economy. Therefore we see that the increase in bond yields is unlikely to be reversed significantly in the foreseeable future while the overall economic outlook is positive.
We expect healthy 15-18 percent earnings growth and bullish on large-caps over the midcaps.
Below are the Top five sectors we are optimistic in coming 2-3 years.
1. Capital Goods
2. Autos
3. I.T
4. Financial Services
KEC International | Rating - Accumulate | CMP - Rs 393 | Target - Rs 500 | Return – 27%
KEC International (KEC), the flagship company of the RPG group, is a leading EPC player in T&D Space. KEC has over 7 decades of experience with footprint presence in 63 countries and strong execution capabilities across all the segments. We expect T&D business regains momentum by expanding beyond boundaries and Strong order inflows improving revenue visibility. Energy & Rail– Priorities of the New Government sector in focus: The Govt proposed 100 percent rural electrification by 1st May 2018 which act optimistic for the company’s T&D business and also proposed 3500km of railway lines to be commissioned in FY18 which is good for KEC as it is focusing more on Railway business.
Maruti Suzuki | Rating - Accumulate | CMP - Rs 8,715 | Target - Rs 11,330 | Return – 30%
Maruti has historically built strong brands and that has resulted to maintain the lion's share of small car and support healthy volume growth. New launch like New Swift Brezza, Baleno and IGNIS have performed better than market expectations. Eyes toward electric vehicles: Company plans to introduce EVs as soon as market sets to swift from traditional vehicles to EV segments. It is focusing on hybrid technology, which is a step toward electric mobility. Li-ion battery plant, which is being set-up by JV between Suzuki, Toshiba and Denso, would help to reduce cost of hybrids and EVs. MSIL has plans to expand its Nexa network for the premium segment to 400 outlets by 2020 from 200 currently. We are positive on the space on long term
Bajaj Finance | Rating - Accumulate | CMP - Rs 1,669 | Target - Rs 2,170 | Return – 30%
Bajaj Finance (BFL) has continued to maintain its strong growth momentum with a 35 percent yoy growth in consolidated AUM at INR 779 bn, largley led by consumer and commercial financing. Asset quality during the years was steady. Despite providing in excess of RBI requirements, the company has managed its credit costs well. Segment wise, the company continues to be cautious on SME financing as it continues to witness some pressures in the self-employed mortgages (LAP & SEHL). At currently level asset quality is one the best in the industry along with a comfortable coverage ratio, despite maintaining a growth rate more than 30 percent. We continue to be positive in this space for 2-3 years for healthy returns.
HDFC Life | Rating - Accumulate | CMP - Rs 430 | Target - Rs 560 | Return – 30%
We believe HDFC Life has Unique Positioning in Life Insurance Space with strong parentage and a trusted brand that enhances its appeal to consumers. Consistent revenue growth: Between FY15 and FY17, annualised premium equivalent posted a CAGR of 14.5 percent. The company has a healthy balance sheet with total net worth of Rs44.6bn and solvency ratio of 200.5 percent as of 30 September 2017, above the minimum 150 percent solvency ratio required under the Insurance and Regulatory Development Authority of India or IRDA regulations.
Godrej properties | Rating - Accumulate | CMP - Rs 738 | Target - Rs 950 | Return – 29%
Godrej name is next to quality in this industry. It has different land bank strategy like JV with land owners that reduces its land cost and also ties up with developers as a Development manager which helps it earn 10-11 percent of revenue for branding, marketing and selling of the project. We believe new project pipeline continued to scale up in operation. Godrej have completed the RERA registration of all their projects in Maharashtra, Karnataka, Chennai, Ahmedabad and NCR. Post implementation of RERA, opportunities for new project acquisitions are expected to increase, especially for organised developers. The combination of GST, the Real Estate Regulatory Act, an improving economic environment, lower inflation, and lower interest rates has led to much better affordability and are expected to revive housing demand.
MORE WILL UPDATE SOON!!
0 comments:
Post a Comment