hdfc ltd.elitewealth.in/wp-content/themes/dt-the7/research... · hdfc stands structurally strong to...

Elite Wealth Advisors Limited. ……………. Make Your Money Work For You

Monthly Stock Picks – January 2020

Company Recommendation CMP (Rs)

Target (Rs) Upside

(%) Time

Horizon

Reliance Industries Buy 1536 1620 5 1Month

HDFC Buy 2457 2550 4 1Month

Hindustan Unilever Buy 1934 2050 6 1Month

Havells Buy 654 700 7 1Month

Axis Bank Buy 756 800 6 1Month

M & M Buy 541 580 7 1Month

Biocon Buy 296 320 8 1Month

JSW Steel Buy 276 310 12 1Month

L & T Buy 1342 1400 4 1Month

West Coast Paper Mills Buy 224 255 14 1Month

**We will consider the prices as on 3rd

Jan 2020 at 10am

Weightage of Investment (10 Lakh)

Company Amount (Rs) Weightage

(%)

Reliance Industries 100,000 10%

HDFC 100,000 10%

Hindustan Unilever 110,000 11%

Havells 100,000 10%

Axis Bank 90,000 9%

M & M 120,000 12%

Biocon 80,000 8%

JSW Steel 110,000 11%

L & T 120,000 12%

West Coast Paper Mills 70,000 7%

Total 1000,000 100%

Mo

nth

ly S

tock

Pic

ks

– J

an ‘2

0


Reliance Industries Ltd:

CMP NSE/BSE Symbol MCAP (Cr) Sector Equity (Cr) Face Value Book Value Beta-Sensex

1536 RELIANCE/500325 973289.63 Refinery 6339.20 10.00 639.47 0.97

Reliance Industries Limited is engaged in refining, petrochemicals, oil and gas, organized retail, digital services and others. RIL achieved net sales of Rs 152149 crore in Q2FY20, an increase of 4% as compared to Rs 146018 crore in the corresponding period of the previous year. Increase in revenue is primarily on account of robust growth in Retail & Digital Services businesses which grew by 27% and 43%, respectively. This was partially offset by decrease in Refining and Petrochemicals segment revenue with 17.7% fall in Brent crude price. EBITDA of the company increased by 7.1% to Rs 23,169 crore from Rs 21,641 crore in the corresponding period of the previous year. Robust growth in contribution from Retail up 67% Y-o-Y and Digital services up 48% Y-o-Y led to increase in EBITDA. The Company continues to make major strides in its retail and digital services businesses led by focus on growth markets with offerings in the right product segments and compelling value proposition. Jio continues to be the most popular wireless broadband service provider in the country with its subscriber base increasing to 355.2 million as of 30-September-2019. Net subscriber addition for the Company during the past twelve months was 103 million, which is the highest in the industry by a substantial margin. It is noted, RIL achieved fastest growth in retail operations as their stores covering 24.5 million sq. ft of retail space (up 25% YoY) than all major organized retailers put together on account of continuous adding more brands to retail operations to enhance its revenue. RIL is aiming to list its consumer businesses Reliance Jio and retail arm Reliance Retail in next five years also the company is aiming to be net debt free by 2021 by raising funds and selling stake in various business. All of these steps by the company will contribute to the growth of the company.

HDFC Ltd.:


2457 HDFC/500010 426412.81 Finance 345.81 2.00 724.84 1.17

Housing Development Finance Corporation Limited is engaged in financing by way of loans for the purchase or construction of

residential houses, commercial real estate and certain other purposes, in India. The Company's segments include loans, life insurance,

general insurance, asset management and others. HDFC has registered 61% surge in the net profit to Rs 3961.53 crore in the quarter

ended September 2019 (Q1FY2020), driven by dividend income and the profit on sale of investments on part stake sale of GRUH

Finance of Rs 1627.09 crore. The company has maintained stable margins and spread, while improved expense ratio. The overall

revenue growth of the company was boosted by dividend income of Rs 1074 crore in Q2FY2020 compared to Rs 6 crore in Q2FY2019,

as dividend from HDFC Bank (Rs 865 crore) and GRUH Finance (Rs 70 crore) was received in the second quarter of the FY2020 as

against the first quarter in the previous financial year. HDFC stands structurally strong to balance growth with quality. In retail loan

business, HDFC has demonstrated capabilities with 15-16% YoY growth reflective of market share gains. Being market leader in

housing finance (HFC) prime salaried segment, HDFC is well positioned to tap the high growth.


Hindustan Unilever Ltd:


1934 HINDUNILVR / 500696

419573.06 Personal

care 216.48 1.00 37.11 0.67

Hindustan Unilever Limited is engaged in fast-moving consumer goods business comprising home and personal care, foods and

refreshments. The Company's segments are Soaps and Detergents, Personal Products, Beverages, Packaged Foods, and Others. The

Company reported a 21.2 per cent year-on-year growth in net profit to Rs 1,848 crore for the July-September quarter (Q2) of FY20.

Growth was aided by lower corporation tax, which came into effect last month. Company has registered 6% growth in consolidated

sales to Rs 10105 crore for the quarter ended Sep 2019 compared to Rs 9490 crore in the corresponding period of the previous year.

Amidst a challenging market environment, the company has delivered another quarter of resilient performance and sustained margin

improvement. Rural growth that used to be 1.4 times of urban rate is now about 0.5 times of urban growth rate. The deceleration of

rural growth is much faster than urban growth. The focus on consumer value, excellence in execution and market development

continues to serve the company well. The various measures announced by the Government and the Reserve Bank of India to spur

investment and improve liquidity are welcome steps. Moreover the company is confident that the government will take all necessary

steps for higher income transference to rural India. HUL remains well positioned to unlock the structural FMCG India opportunity while

navigating the short-term challenges.

Havells India Ltd. :


654 HAVELLS/ 517354 40940.02

Electric Equipment

62.58 1.00 68.01 1.16

Havells India Ltd (HAVL) is a leading player in electrical consumer goods in India. It is the market leader in light‐duty power distribution

products. Its offerings include electrical products like circuit protection equipment (domestic and industrial switchgears), cables and

wires, and consumer durables like fans, CFLs, and lighting fixtures. Havells Q2FY20 revenue grew by modest 2% YoY, led by consumer

durables segment & Cable which grew by 20% & 7% YoY. Lighting & fixtures and Switch gears de-grew by 2% & 6% YoY. Weak

construction sector demand on account of tighter liquidity situation in the sector and slowdown in industrial segment impacted these

segments. Havells has gained market share in most of its categories even during a challenging environment. Over the outlook the

company expects a better second half in this fiscal. Demand outlook remains benign, though H2 expected to improve on improved

business efficiency.


Axis Bank:


756 AXISBANK / 532215

213525.80 Private Bank 563.95 2.00 354.58 1.32

Axis Bank is the third largest private sector bank in India. The Bank offers the entire spectrum of financial services to customer

segments covering Large and Mid-Corporates, MSME, Agriculture and Retail Businesses. Axis Bank has registered net loss of Rs 112.08

crore in the quarter ended September 2019 (Q2FY2020), driven by a one-time tax impact of Rs 2138 crore due to changes in corporate

tax rate. Excluding this impact the net profit is showing jump of 157% to Rs 2026 crore from Rs 789.61 crore in Q2FY2019. The Net

Interest Income of the bank has accelerated at 17% to Rs 6102 crore with NIM rising to 9 quarters higher of 3.51% in Q2FY2020. The

bank has also posted 11% growth in fee income, led by retail fees rising 16%. The bank has continued to reduce GNPA and NNPA for

the 6th straight quarter to 5.03% and 1.99%, as compared to 5.25% and 2.04% end of June 2019. Bank's Capital Adequacy Ratio (CAR)

has strengthened post capital raise: Common Equity Tier 1 ratio stood at 14.04% compared to 11.68% at the end of Q1FY20. During

the quarter, the bank has opened 190 branches - highest in the last 24 quarters – to take the Bank's overall domestic branch network

to 4284. Branch banking continues to be an integral part of growth strategy. The bank now expects Net Interest Margin for FY20 to be

higher than NIM in FY19 and bank reiterates medium term range of 3.5%-3.8% on NIM. The bank continues to expect its loan growth

to be 5-7% faster than industry

Mahindra & Mahindra:


541 M&M /500520 66670 Automobile 595.8 5 365.37 1.39

Mahindra and Mahindra Limited is engaged in the manufacture of passenger cars, commercial vehicles and tractors. It is India's 3rd

largest passenger vehicle company and the 2nd largest commercial vehicle company. Mahindra & Mahindra Limited (M&M) is the

flagship company of the Mahindra Group. The Mahindra Group has a leadership position in utility vehicles, information technology,

financial services and vacation ownership in India and is the world’s largest tractor company, by volume. The company will also launch

product in electric vehicle named electric KUV in 4QFY20 followed by C100 (last mile connectivity) to be launched in Q2FY21Q3FY21

and S201 electric SUV in Q1FY22-Q2FY22. The overall passenger vehicle is expected to remain weak in FY20 and the management

expects it to decline to 5% in H2FY20 as against 23% in H1FY20. The management has reiterated the decline in tractor industry growth

outlook from 5% to 7-8% for FY20. The UV segment is expected to see a positive growth in H2FY20 while the CV segment is expected

witness de-growth of 25%. M&M’s market share grew in all segments it competes in. In tractors, market share grew 1.5% and 0.6% in

the PV segment. Overall UV segment (at industry level) will post positive growth in H2FY20 due to new launches. In SCV segment

regained >50% market share, which had dipped in the past few quarters. M&M’s market share grew 7.2% to 7.8% in the PV segment.


Biocon:


296 BIOCON /532523 35545 Pharmaceutical & Drugs 300.00 5 365.37 0.60

Biocon is India's largest biopharmaceutical company that develops biotechnology therapies for disease. The Company is focused on

developing, manufacturing and supplying novel and biosimilar pharmaceuticals for diabetes, cancer and autoimmune conditions.

Biocon has four key businesses: biologic and novel molecules, branded formulations, small-molecule API and generic formulations and

research services. The company has also set up additional manufacturing line for trastuzumab and Human insulin for USD0.10 per dose

for middle and lower income countries. In-licensed early stage asset from Evotec—will develop, manufacture and commercialize the

product, Evotec will receive milestones. Revenue growth led by generic formulations – primarily rosuvastatin, simvastatin and

atorvastatin and API growth led by immunosuppressants. The 40% YoY growth was led by pegfilgrastim, adalimumab in EU, and

trastuzumab in Ems. In pegfilgrastim, there is some shift from OnPro to PFS. Coherus already has 40% share in the vial market. Decline

in share has been due to maximization of available capacity and Enhanced capacity could start showing better market share.

JSW Steel Ltd.:


276 JSWSTEEL /500228 64440.5 Steel 241.72 1.0 152.55 1.45

JSW Steel is one of the largest domestic steel producer with an installed capacity of 18 million tonne per annum (mtpa). The Company

is a part of the O.P. Jindal Group, manufactures iron and steel products. The company’s products include hot-rolled steel strips,

sheets/plates, mild steel (MS) cold-rolled coils/sheets, MS galvanised plain/corrugated/colour-coated coils/sheet, steel billet, bars and

rods. Company remains focused on capex projects (Rs. 48,715cr cumulative capex projected over FY18-21E). All development projects

are on track to commission as per the schedule, including 5MTPA capacity expansion at Dolvi, capacity expansion at CRM-1 complex at

Vijaynagar works and modernization-cum-capacity enhancement at downstream facilities of JSW Steel Coated Products. The Indian

Government's vision of increasing Indian steelmaking capacity to 300 MnT by 2031, JSW Steel envisions increasing its domestic

capacity in India to 45 MnT over the same time period. The company expects steel demand to grow 5% in FY20 and should pick-up in

H2FY20 on account of measures announced by Government. In the current challenging scenario, the declining trend seen in coking

coal prices would act as a silver lining. This would aid steel spreads (EBITDA/tonne) to inch higher from Q2FY20 levels. The steel

consuming sectors - construction, infrastructure, real estate, manufacturing, auto and Infrastructure is the focus area for the

government.


Larsen & Toubro Ltd.:


1342 LT /500510 188782 Engineering - Construction 1256.84 2 442.26 1.31

Larsen & Toubro Limited (L&T) is a leading engineering and construction company in India with a nationwide as well as international presence. It has interests in infrastructure, power, metallurgical & material handling, heavy engineering, shipbuilding, electrical & automation, machinery and industrial products and realty. Through its subsidiaries, associate companies and joint ventures, the group is involved in hydrocarbon business, IT services, financial services, and infrastructure development ventures. Total opportunity pipeline of Rs. 5.2 trillion. This includes an Rs. 4.5 trillion infra opportunity, which is spread across verticals. Additionally, hydrocarbon – Rs. 400 billion, MMMH – Rs. 100 billion and heavy engineering & defence – Rs. 100 billion. Net working capital continues to be elevated at 23% due to the stretched payment cycle amid a tough liquidity environment in addition to the vendors support policy. Revenue contribution yet to pick up for a few large projects, including coastal road projects. The rise in finance charges (part of operational expenditure) was due to growth in financial services business (higher borrowings) along with a 25–30bps YoY increase in finance cost. Staff cost increase on the back of Mindtree acquisition and augmentation in the service business (Rs. 12 billion). EBITDA margin improvement reflects the stage of execution and job mix. Two large orders in the current year aided replenishment of the order book. Revenue decline of 54% reflects depleted opening order book. Other income includes dividend from a subsidiary amounting to INR6.75bn in Q2 (versus Rs. 4.2 billion YoY) and Rs. 7 billion in H1 versus Rs. 7.9 billion YoY. Average tax rate of 25–26% going forward at the company level.

.

West Coast Paper Mills Ltd.:


224 WSTCSTPAPR/500444 1479.17 Paper & Paper Product 13.21 2 166.66 1.03

West Coast Paper Mills Ltd (WCPML), incorporated in 1955 is the flagship company of S.K. Bangur group. The company is among India’s top five paper & paper board’s manufacturer in terms of total capacity of 320000 mtpa. WCPML operates in two business segments; Paper/Paperboard (including Duplex Board) at Dandeli and Telecommunication Cables at Mysore. The sale of Paper and Paperboard was 301931 MT during the year against 291512 MT in the last year i.e., higher by 10419 MT. Turnover during the year was Rs. 1851 Crores as against Rs. 1624 Crores (exclusive of excise duty) in the last year, i.e., higher by Rs. 227 Crores. The growth was driven by higher sales quantity and better realization. The EBITDA margin was 26.43% during the year.


Disclosure in pursuance of Section 19 of SEBI (RA) Regulation 2014 Elite Wealth Advisors Limited does/does not do business with companies covered in its research reports. Investors should be aware that the Elite Wealth Advisors Limited may/may not have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only information in making their investment decision and must exercise their own judgment before making any investment decision. For analyst certification and other important disclosures, see the Disclosure Appendix, or go to www.elitewealth.in. Analysts employed by Elite Wealth Advisors Limited are registered/qualified as research analysts with SEBI in India.( SEBI Registration No.: INH100002300) Disclosure Appendix Analyst Certification (For Reports) Israil Khan, Elite Wealth Advisors Limited, [email protected] The analyst(s) certify that all of the views expressed in this report accurately reflect my/our personal views about the subject company or companies and its or their securities. I/We also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Elite Wealth Advisors Limited. As to each individual report referenced herein, the primary research analyst(s) named within the report individually certify, with respect to each security or issuer that the analyst covered in the report, that: (1) all of the views expressed in the report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in the report. For individual analyst certifications, please refer to the disclosure section at the end of the attached individual notes. Research Excerpts This note may include excerpts from previously published research. For access to the full reports, including analyst certification and important disclosures, investment thesis, valuation methodology, and risks to rating and price targets, please visit www.elitewealth.in. Company-Specific Disclosures Important disclosures, including price charts, are available and all Elite Wealth Advisors Limited covered companies by visiting https://www.elitewealth.in, or e-mailing [email protected] with your request. Elite Wealth Advisors Limited may screen companies based on Strategy, Technical, and Quantitative Research. For important disclosures for these companies, please e-mail [email protected]. Options related research: If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the risk disclosure documents, please contact your Broker’s Representative or visit the OCC's website at https://www.elitewealth.in Other Disclosures All research reports made available to clients are simultaneously available on our client websites. Not all research content is redistributed, e-mailed or made available to third-party aggregators. For all research reports available on a particular stock, please contact your respective broker’s sales person. Ownership and material conflicts of interest Disclosure Elite Wealth Advisors Limited policy prohibits its analysts, professionals reporting to analysts from owning securities of any company in the analyst's area of coverage. Analyst compensation: Analysts are salary based permanent employees of Elite Wealth Advisors Limited. Analyst as officer or director: Elite Wealth Advisors Limited policy prohibits its analysts, persons reporting to analysts from serving as an officer, director, advisory board member or employee of any company in the analyst's area of coverage. Country Specific Disclosures India - For private circulation only, not for sale. Legal Entities Disclosures Mr. Ravinder Parkash Seth is the Managing Director of Elite Wealth Advisors Ltd (EWAL, henceforth), having its registered office at Casa Picasso, Golf Course Extension, Near Rajesh Pilot Chowk, Radha Swami, Sector-61, Gurgaon-122001 Haryana, is a SEBI registered Research Analyst and is regulated by Securities and Exchange Board of India. Telephone:011-43035555, Facsimile: 011-22795783 and Website: www.elitewealth.in EWAL Advisory discloses all material information about itself including its business activity, disciplinary history, the terms and conditions on which it offers research report, details of associates and such other information as is necessary to take an investment decision, including the following: 1. Reports a) EWAL Advisory or his associate or his relative has no financial interest in the subject company and the nature of such financial interest; (b) EWAL Advisory or its associates or relatives, have no actual/beneficial ownership of one per cent. or more in the securities of the subject company, at the end of the month immediately preceding the date of publication of the research report or date of the public appearance; (c) EWAL Advisory or its associate or his relative, has no other material conflict of interest at the time of publication of the research report or at the time of public appearance; 2. Compensation (a) EWAL Advisory or its associates have not received any compensation from the subject company in the past twelve months; (b) EWAL Advisory or its associates have not managed or co-managed public offering of securities for the subject company in the past twelve months;

http://www.elitewealth.in/mailto:[email protected]://www.elitewealth.in/https://www.elitewealth.in/mailto:[email protected]:[email protected]://www.elitewealth.in/http://www.elitewealth.in/


(c) EWAL Advisory or its associates have not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) EWAL Advisory or its associates have not received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) EWAL Advisory or its associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. 3 In respect of Public Appearances (a) EWAL Advisory or its associates have not received any compensation from the subject company in the past twelve months; (b) The subject company is not now or never a client during twelve months preceding the date of distribution of the research report and the types of services provided by EWAL Advisory Provided that research analyst or research entity shall not be required to make a disclosure as per sub-clauses (c), (d) and (e) of clause (ii) or sub-clauses (a) and (b) of clause (iii) to the extent such disclosure would reveal material non-public information regarding specific potential future investment banking or merchant banking or brokerage services transactions of the subject company. (4) EWAL Advisory or its proprietor has never served as an officer, director or employee of the subject company; (5) EWAL Advisory has never been engaged in market making activity for the subject company; (6) EWAL Advisory shall provide all other disclosures in research report and public appearance as specified by the Board under any other regulations.

hdfc ltd.elitewealth.in/wp-content/themes/dt-the7/research... · hdfc stands structurally strong to...

Documents