Sumit Bilgaiyan Equity99
We have seen new highs on Nifty and Sensex as we have predicted last week. Large caps are seeing a gush of money from ETFs and DIIs flows are getting in some of the finest stocks in the universe.
We believe it’s time that midcaps and small caps will also see some relief rally. So far we have seen good results across the sectors which clearly show that our country is on a solid growth trajectory.
Small caps and midcaps are still down 24 percent and 15 percent from their highs, respectively, which will be narrowed down in the next week. There many important events this week which will drive the market. RBI and FOMC will start there two days credit policy meeting on July 31. This will be closely watched as dollar and index have increased a lot.
TCNS Clothing Co will list on July 30 and on same day Japan’s monetary policy meeting will also kick start. On August 1, RBI and FOMC will declare their respective decisions.
On the same date, auto companies will come out with their monthly sale numbers in July month. There are a bunch of companies who will announce their results like HDFC, Axis Bank, Tech Mahindra, Tata Motors, UPL, Vedanta, Power Grid, Indiabulls Housing Finance, ONGC, and Titan. Our last week picks ITC & M&M Financial had shown almost 12 percent gain in just one week.
USFDA cleared Ajanta Pharma’s Dahej facility which was built with a capex of Rs 500 crore. While, the first block of its Guwahati facility which is dedicated for derma products started production during FY18, while the second phase’s expansion is underway and may see stabilisation by October 2018, company expects a contribution will start coming in FY20.
Apart from ramping up facilities and increasing capex company has also plans to acquire brands in India and abroad to supplement growth. In India, most of its core brands have stabilised and are showing growth.
Management also aims to strengthen its domestic presence. Apart from spending over Rs 800 crore in the last three years, it further plans to do capex of Rs 500 crore over a couple of years. Most of this capex will be spent on Guwahati facility’s second phase. We believe Ajanta Pharma is in a sweet spot and this valuation justify for the company. We have a buy rating on Ajanta Pharma.
Shankara Building Products is one of the leading organized retailers of home improvement and building products in India. Shankara caters to a large customer base across various end-user segments in urban and semi-urban markets through its multi-channel sales approach, processing facilities, supply chain and logistics capabilities.
Its retail operations are strategically suited to benefit from growth in housing demand, a large market for home improvement, and increasing customer involvement in home solution decisions which have created a need for organized specialty home improvement and building product stores.
Shankara also carries reputed third party brands such as Johnson, Sintex, Uttam Galva, Uttam Value, Futura, APL Apollo, Astral Pipes and Alstone and its own brands such as CenturyRoof, Ganga and Loha at its retail stores. Thus its revenue comprises of retail as well as enterprise sells.
Company’s enterprise sales cater primarily to large end-users, contractors, and OEMs, while the channel sales cater to dealers and other retailers through its extensive branch network. On PAT front, it has reported 48% CAGR growth in last 3 years. It is available 32.5% lower against its 52 weeks high of Rs 2365 Shankara is an excellent proxy play on housing growth thus we are recommending it with a buy.
Suryaamba Spinning Mills is a leading manufacturer of specialty synthetic spun yarns. The core competitive strength of the company is its innovative product range, specifically tailor-made for the customers.
The company has a current capacity of 45,000 spindles with the state of the art ultra-modern manufacturing machinery. It has installed value addition equipment; aims to fulfill the demand of the export market and enhance profitability, with a capital expenditure of Rs 10 crore.
It plans to fund this capex by using a mix of promoter's equity, retained earnings and debt to ensure sustainable growth for the company in the future. The company expects good demand for its products in domestic as well as international markets. The domestic market is on the path of healthy growth because of the demonetization and GST.
With tiny equity of just Rs 2.93 crore, company has posted Rs 2.35 crore PAT for FY18 (Shows 379% jump in PAT). We believe Suryaamba is well placed to capture this structural shift aided by solid management pedigree hence we are recommending a buy.
Disclaimer: The author is Founder, Equity99. The views and investment tips expressed by investment experts on moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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