The market rewards consistency, quality of management and earnings growth. SBI Life Insurance and Shree Cements which rose 17 percent and 19 percent in 2019, so far, entered the $10 billion club (market cap over Rs 69,000 crore).
As of June 11, 2019, as many as 42 stocks have a market capitalisation of over Rs 69,000 crore or $10 billion (Re/USD value 69). These include Godrej Consumer, Britannia Industries, Avenue Supermarts, Sun Pharma, IndusInd Bank, Titan Company, NTPC, Asia Paints, Coal India, Maruti Suzuki, ICICI Bank, Kotak, SBI among others.
Meanwhile, Tata Consultancy Services and Reliance Industries are the only two stocks in the elite $100 billion club (Mcap over Rs 6,90,000 crore).
Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
Shree Cements and SBI Life entered the $10 billion club in 2019, while JSW Steel and Vedanta which were quoting a market capitalisation of over Rs 69000 crore on December 31, 2018, failed to sustain momentum and are out of the club.
While JSW Steel fell 11 percent, Vedanta saw a decline of 15 percent so far this year, which reduced the market capitalisation of both companies below Rs 69,000 crore, as of June 11.
Most brokerage firms remain positive on Shree Cement and SBI Life Insurance and investors who hold these stocks should stay put.
Nomura maintained its Neutral rating on Shree Cements with a target price of Rs 21,500. Volume growth remains healthy for the cement major and, at the same time, the costs are also easing which is a healthy sign.
The rally has been driven by expectations of cement price hikes. “We believe cement is in an upcycle, but we think cement price increase may remain slow, especially after the government’s recent criticism of rising cement prices,” said the note.
“Despite a 5 percent decline since this criticism, valuations at 6.4x FY21F core EBITDA and 33x FY21 P/E are expensive. Overall, we expect 11 percent YoY volume growth for Shree in FY20-21F,” said the note.
As for SBI Life Insurance, Kotak Securities retained its buy rating with a target price of Rs 800. SBI Life reported 14 percent growth in APE in 4QFY19, which was in line with 9MFY19 growth rate, though lower than 17 percent reported in 3QFY19.
Kotak Securities expects SBI Life to deliver 18 percent medium-term operating RoEV with 19 percent VNB (Value of new business) and 19 percent EVOP (Embedded value operating profit) CAGR during FY2019-22E.
The brokerage firm continues to build in high-teens growth and a moderate improvement in VNB margins to drive 18 percent operating RoEV. The brokerage firm also raised the fair value of SBI Life Insurance to Rs 800 from Rs 790 earlier.
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