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Looking for quality ideas amid runaway rally? Experts name these 10 stocks

BSE Sensex and Nifty50 have rallied nearly 12 percent each since the week ended June 12. Both the indices have surged more than 48 percent each from their March 23 low

July 21, 2020 / 02:31 PM IST
 
 
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The market seems to be in a strong position right now, thanks to the global liquidity, and a decent start to the June quarter earnings.

BSE Sensex and Nifty50 have rallied nearly 12 percent each since the week ended June 12. Both the indices have surged more than 48 percent each from their March 23 low.

June quarter earnings for some companies have been better than expected as opposed to expectation of a washout quarter due to coronavirus-led lockdown. Progress in launch of a vaccine could be another factor driving the market higher, experts feel.

"We have witnessed a global liquidity driven rally despite COVID-19 numbers shooting up in various geographies especially US, Brazil, India and a few other countries are facing a second wave. Developed markets had liquidity flows due to monetary policies and stimulus packages whereas India seems to be having liquidity flows from retail," Ambareesh Baliga, an Independent Market Expert told Moneycontrol.

Prashanth Tapse, AVP Research at Mehta Equities said apart from liquidity flow, domestic markets remained in the green zone on the back of better-than-expected corporate earnings and news stating early vaccine for COVID-19 helped markets.

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Overall, experts feel given the sharp rally from March lows, a correction is overdue and that can happen anytime, but stock-specific opportunities never end. Investors have to select the right stock at right time.

Here is a list 10 stocks that can be good bets for the medium-to-long term as recommended by various experts:

Expert: Ambareesh Baliga, an Independent Market Expert

NBCC

NBCC is a PSU which into EPC and PMC (Project Management Contract) with an order book of Rs 70,000 crore. Currently they have Rs 13,000 crore is under execution but once labour returns and completely deployed - it should rise to about Rs 33,000 crore. They are preferred contractors for government projects though there is a tendering process.

A big positive was settlement of Amrapali Project where construction has now resumed and getting green clearance for their projects in Delhi which were stuck due to environmental issues. In fact they have been sold Rs 525 crore worth of units in the Delhi project in May 2020 which is a feat in itself. The next trigger would be to take over of JP Infra which will give them 2,000 acres of land for development.

The stock had cracked from levels of over Rs 80 2 years back due to uncertainties regarding various projects which were stuck in the regulatory conundrum but now have got most of the clearances, thus it could be the beginning of a fresh move.

Himatsingka Seide

Himatsingka Seide operates amongst the largest capacities in the world for producing premium upholstery fabrics, drapery fabrics, bed linen products. They inaugurated their greenfield project in terry towels in October 2019 marking their foray into bath linen.

As a turnaround story it became a multibagger during 2015-2018 moving from around Rs 40 to a peak of around Rs 400, with matching performance of EBITDA growth CAGR of 23 percent in 5 years till FY19. However Q4 FY20 proved to be a disaster - with exceptional write offs Rs 58 crore due to Italy Operations restructuring, inventory write down etc. I expect it to be back on track since both their manufacturing facilities were back in production in April & May (though currently the unit at Doddaballapur has been temporarily shut due to lockdown in that area).

The management has confirmed that order books are nearly 75 percent of pre-COVID numbers and production in operating unit is back to near normal. Himatsingka has a strong brand portfolio through owned and licensed brands contributing 75-80 percent of its revenue.

Though North America concentration of 80 percent of the topline is a risk but the management confirms that none of the major customers are at default risk. It could be among the major beneficiaries of customers moving away from China and the Rupee depreciation is favourable. Overall a good long term pick.

Emami

Emami is into natural skin care and healthcare products with brands like Boroplus, Zandu range, KeshKing, Fair & Handsome etc. Last year Emami had suffered lower revenue growth due to a long winter - but this year, a mild winter and long summer should help volume growth though at a slower pace due to COVID-19 pandemic. Their direct reach in the market is up more than 50 percent in last 3 years with nearly 10 lakh outlets.

One of the pain points has been group debt and pledge of promoters shares. With the sale of Emami Cement this issue too is resolved. COVID-19 has brought back in focus health and immunity.

Emami has immunity building products under Zandu brand which should do very well, whereas Rural economy is the least affected and is expected to bounce back well due to normal monsoons which is good for Emami Products. This could be a good immunity stock for the portfolio.

Jyothy Labs

Jyothy Labs is a leading brand in home and personal care segments including fabric care, household insecticides, personal care and dishwashing with strong brands like Ujala, Henko, Maxo, Margo, Exo, Pril, etc. It operates through 26 manufacturing facilities across 22 locations and has more than 5,000 stockists across the country. It has been a consistent performer with sizeable presence in South India.

COVID-19 pandemic has put focus on Hygiene and Cleanliness. Pre-COVID - Fabric care segment witnessed strong 23.3 percent growth in Henko. Personal care segment grew 13.3 percent. Exo & Pril, have a strong footing in south India with around 30 percent market share whereas North India is an opportunity. Ujala market share is 80 percent - a clear leader. Overall, the Hygiene & Cleanliness theme will play out in this pandemic as well as post that which along with a rural consumption growth would make Jyothy Labs an attractive pick.

TVS Motor Company

TVS Motor is an interesting stock as COVID-19 has put the focus on personal transportation thus improving the prospects of 2-wheeler in the Auto sector which is already getting a fillip from the rural economy. Sales improved 3.4 times in June 2020 compared to May 2020 - ahead of competition just behind Hero Motocorp. TVS have been improving margins since last two years due to sustained cost reduction efforts and the management is confident of improving it further in the coming years as well.

In Q4FY20, realisations increased substantially around 13 percent YoY to Rs 55,000 due to higher proportion of BS6 sales as well as focus on exports. Exports to Africa which has been its major market has been dependent on oil prices - And now with oil prices having bounced back well from the lows - Africa exports should look better. Though FY21 could be a period of recovery, we should see major growth in FY22, thus could be sought after stock.

Expert: Prashanth Tapse, AVP Research at Mehta equities

Bharat Electronics

Riding on Make in India and Vocal to local, we believe BEL is well placed to tap the story. The business going prospects forward looks encouraging especially given the government focus for indigenization of defence manufacturing. We expect normalcy to return in the second half of the financial year and BEL is well prepared to execute domestic demands as well as cater to exports as well as overcoming challenges in its way to growth. Hence we are optimistic on BEL which is capable of delivering a much better larger turnover yielding cashflow /returns over two-three years.

Mishra Dhatu Nigam

We like Midhani business model servicing core strategic sectors like defence, space, power and nuclear for nearly three decades and its presence in one of the few metallurgical plants of its kind in the world, designed to manufacture a wide range of special metals and alloys using integrated and highly flexible manufacturing systems. Hence we believe vocal for local tagline Midhani would stand well placed to tap the opportunity.

HDFC Life Insurance Company

We see an opportunity for the insurance industry amid COVID-19 and investors looking for a high quality business with consistent earnings growth, HDFC Life offers the best in class investment opportunity to accumulate at the current levels. We believe people would start realizing the importance of insurance and the backing it provides in the trying times like the current ones. We strongly believe HDFC Life is optimistic on protection growth and as soon as things get normalised in near future people will look for brands and take up policy for life. Hence we believe the stock to deliver steady returns over the medium term.

BPCL

We like BPCL business best in segment operating four refineries with a combined capacity of 38.3 million tonnes per annum, which is 15 percent of India's total refining capacity of 249.4 million tonnes. We believe the key catalyst for BPCL is developments on disinvestment which should keep news flow supportive. The proposed strategic disinvestment of its entire shareholding in BPCL looks to sell it to an overseas oil firm. On valuation parse BPCL is trading at an attractive valuation of 1.8 times P/B (3-year average P/B is above 2 times) and stock is trading at P/E: 8.2 FY21E with good dividend with decent yield.

Tata Consumer Products

We like Tata Consumer Products (formerly Tata Global Beverages) business which is on its way to becoming a diversified FMCG company with the addition of a strong foods portfolio from Tata Chemicals (salt, pulses, spices) to its already strong tea, coffee and water portfolio both in India and internationally. We believe the acquisition of the consumer products portfolio of Tata Chemicals is a transformational strategic plan for Tata Consumer as it provides long-term revenue growing opportunities. We also consider a positive opinion on recent managerial change with Mr Sunil D’souza (ex Unilever, Coca Cola, PepsiCo, Whirlpool) taking over as MD & CEO in April 2020. Tata Consumer Products would be in a unique position to leverage the strong brand, wider product portfolio and distribution reach to serve the growing aspirations of consumers across the country. Hence we hold a positive outlook on the counter.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sunil Shankar Matkar
first published: Jul 21, 2020 02:31 pm

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