Along with ASM, auditor resignation in few companies made market environment nervous which reflected through lack of buying interest among retail and HNI investors
Anand Rathi Shares and Stock Brokers
Hike in repo rate of 25 bps after almost 4 years by the RBI & a neutral stance by MPC members give them the flexibly to move in either direction in future. Despite rate hike, market absorbed the MPC decision and priced in the commentary with neutral stance which is a good relief with a GDP growth aim at 7.40% for FY19.
Relentless capitulation in midcaps and smallcaps index on the back of ASM (additional surveillance measures) circular by SEBI and Exchanges was a big concern and can impact the markets on the downside further if the list of companies is increased.
Along with ASM, auditor resignation in few companies made market environment nervous which reflected through lack of buying interest among retail and HNI investors.
Amidst this challenging environment, we continue to have bias for quality and earnings visibility companies.
Sundram Fasteners | CMP Rs 600 | Target Rs 760
The firm is the largest manufacturer and exporter of high tensile fasteners. It manufactures automotive components such as high tensile fasteners, radiator caps, powder metal parts, pumps and engine components. It caters to OEM in 2 wheelers, 4 wheelers, farm equipment and commercial vehicle segment.
Company is making efforts to improve product mix with focus on high-value products and increased contribution of exports.
As a part of its backward integration strategy, company added a second 10,000 Ton foundry plant to cater high demand for machine castings in China. Company is significantly adding capacity and has incurred Rs 200 – 300 crore Capex in FY18. Management expects to invest Rs. 350 Crore in FY19. Company has High ROE of 25.40%
Apollo Tyres | CMP Rs 273 | Target Rs 340
The continuing strong demand due to the anti-dumping duty and sales of higher-ton CVs is benefiting Apollo Tyres, in our view. Hence, we expect double-digit replacement growth in FY19, too.Strong growth in truck radial tyres. The company plans to increase its Radial capacity in Chennai from 10,000 tyres a day to 12,000 by September 2018. The Hungary plant’s capacity is expected to be
increased by FY19 to 16,000 tyres a day and would be the volume growth catalyst in FY19 and FY20. Operating margin of its European business to improve from 2.6% in FY18 to 4% in FY19.
The company has started foundation work for a new passenger-car-tyre plant in Andhra Pradesh and expects volumes to scale up in FY20. We expect revenue to clock a 19% CAGR over FY18-20 to Rs. 21,100 Cr and expect the margin to expand from the present 11.1% in FY18 to 12.5% in FY20. Accordingly, we expect earnings to come at Rs. 1390 Cr, leading to an EPS of Rs 24.3 in FY20. We maintain a Buy.
IndusInd Bank | CMP 1920 | Target Rs 2248
IndusInd Bank continues to report robust operating performance after having absorbed the high NPA divergence reported this quarter, keeping profitability intact. Low credit costs, steady NIM and high credit growth would keep profitability high through FY19-20. The strategic BHAFIN deal would be synergistic in the medium term. We expect the bank to maintain stable asset quality over FY19- 20, aided by its well-diversified loan mix. We expect slippages from the corporate book to shrink as the bank increases its exposure to higher-rated corporate bodies. Thus, we model a gross-NPA ratio of 0.97% in FY20.We factor in 26% overall credit growth through FY19-20. The corporate book was largely driven by gaining market share from PSBs and working-capital loans to better-rated corporate bodies. With a
pick-up in CV growth expected in FY19, retail advances could be buoyant.Disclaimer: The author is Vice President - Equity Advisory, Anand Rathi Shares and Stock Brokers. The views and investment tips expressed by investment experts/broking houses/rating agencies on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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