The Indian equity market has witnessed strong gains in Samvat 2076 and Samvat 2077 now looks much brighter, thanks to signs of economic recovery and encouraging reports of the COVID-19 vaccine.
Experts point out that growth is likely to come back strongly looking at the high-frequency indicators.
On the front of the COVID-19 vaccine, media reports suggest there are some ten COVID vaccine candidates in phase 3 trials, and vaccination can be expected by early 2021.
While the road ahead looks brighter, analysts and brokerages advise being prudent while picking stocks.
Here are 10 stocks suggested by brokerage firm Samco Securities for Samvat 2077. Take a look:
HDFC Life Insurance
HDFC Life is a strong contender in the life insurance space and even after a weak Q1 performance with a 30 percent decline in premiums, HDFC Life surpassed its peers with a stellar 21 percent year-on-year (YoY) increase in new premiums in the second quarter.
As a front-runner in the protection segment through its Banca channel, HDFC Life is efficiently leveraging its first-mover advantage.
Favorable product mix and repricing of protection products have also aided in margin expansion. Amidst the pandemic, a 25-26 percent margin guidance for FY21 by the management seems achievable, hence HDFC Life could be a strong compounding story.
Moreover, its moat lies in the powerful brand, qualified management, strong return and persistency ratios, improved solvency ratio and higher operating ROEV.
Pidilite Industries is the leader in the domestic market for adhesives, sealants and construction chemicals.
Its product portfolio has high recall among consumers which enables a strong market leadership and demand for brands such as Fevicol, Dr.Fixit and Fevikwik.
A recent acquisition of the maker of Araldite is further expected to strengthen its leadership in the adhesive space. The huge scope of growth from the construction chemicals industry builds confidence in Pidilite's future outlook.
A unique moat enables it to deliver robust financial performance with 18 percent CAGR growth in PAT over 5 years and rich cash flow generation with OCF at Rs 1,280 crore and FCF at Rs 827 crore seen in FY20.
Overall, a well-rounded company with an identifiable brand presence and robust financials make Pidilite Industries a wealth generator for investors.
When most industries were impacted due to lockdowns, a few agri-businesses managed to escape. Bharat Rasayan, a leading maker of technical-grade pesticides in India, is one of them.
As farming-related activities continued, demand for pesticides continued to remain strong which allowed the company to maintain robust operating margins in the range of 18-23 percent.
It has also delivered an exemplary revenue CAGR of 23 percent over the past 5 years with strong cash flow generation.
Bharat Rasayan is expected to grow at the current pace given the growing market opportunity and superior R&D capabilities facilitating innovation and high margin product development.
Even amidst a challenging scenario, it has a strong product portfolio, vast distribution network and brand equity which enable steady performance.
All these factors coupled with attractive valuations enable strong returns to shareholders.
Larsen & Toubro
The lockdown impacted its core engineering business but the IT business flourished as digitization and cloud-adaptation became the norm for companies globally, resulting in strong financial performance from this segment.
What guides L&T's future is its magnificent order book including a Rs 24,985 crore deal for developing a 237km-line for Mumbai-Ahmedabad bullet train with long-term revenue prospects.
The stock has taken quite the battering which makes it attractive from a valuation perspective and very limited scope for further downside.
Attractive margins, stable free cashflows, robust order book, recovery in engineering business and large opportunities from the defence segment make L&T a compelling addition to the portfolio.
In the telecom sector's largely duopoly environment, Bharti is well-positioned to serve the premium end of the subscriber base and continues to gain market share in top-end subscribers, driving superior ARPUs.
The recently concluded fundraising of Rs 550 crore via QIP/rights issue and a stake sale of the Africa business aided in making its balance sheet resilient to stressful times.
Bharti can also consider monetizing its 53.51 percent stake in Bharti Infratel in the future to invest in 5G and future technologies.
With a sound business model of a partnership approach rather than an ownership approach, Bharti can leverage its growing partner ecosystem to build digital assets and compete against the mighty
With rising ARPUs, robust EBITDA performance, contained debt levels, a large asset base, Bharti seems to be in a sweet spot with a strong growth outlook from an investment perspective.
Kotak Mahindra Bank
This bank has always maintained a very conservative stance and its actions such as providing for nearly 177 percent of its total net NPA reflect the same conservative approach which seems adequate amidst a contracting economy.
Going forward, the management aims to focus on its asset engine for growth while maintaining a resilient capital position.
Not only does Kotak have robust NIMs, comfortable asset quality and a top-notch liability franchise, it also has adequate margin levers. RBI's ruling on the restructuring of loans and deferment in reporting NPLs post-August will surely delay the true asset deterioration but even then Kotak seems to have an upper hand in managing its assets well with prudent risk management.
It seems to be hitting all the right nerves to be regarded as a strong contender to ride the COVID wave.
This NBFC mammoth has a long-standing track record of operations, adequate capitalisation levels, strong resource raising ability, stringent underwriting standards and top-notch risk management procedures.
Despite facing a hard hit in its retail lending business due to national lockdowns, HDFC has efficiently managed to bring about recovery in its numbers this quarter.
In fact, the disbursements in October 2020 were the second-highest in HDFC's history.
The environment down the road seems conducive for the housing finance sector given the low-interest rates, softer property prices, reduction in stamp duty in certain states and inherent strong demand for home loans and HDFC seems to be in a comfortable liquidity position to benefit from these macros. It is undoubtedly a strong brand to hold in an investor's portfolio.
Dixon Tech is India's largest electronic manufacturing player and is currently witnessing a confluence of rising demand, import substitution and booster in the form of the PLI Scheme by the Government.
Under the scheme, the company will get an incentive of 4 percent to 6 percent on incremental sales of goods manufactured in the country. The management also expects an eight-fold jump in its mobile revenues in FY22.
Dixon is currently in the growth phase and undergoing an aggressive scale-up across product segments. This along with a backward integration model, fungible capacities and a focused approach will drive its growth going ahead.
Being the only listed EMS player in the organized space, Dixon is richly valued however with a strong order book and a leaner working capital cycle, growth is expected to meet expectations in the upcoming quarters.
Hence, Dixon can be looked at from a portfolio perspective.
Marico is a robust FMCG player and one of the major beneficiaries of the unprecedented rise in the in-home consumption of products during the first half of FY21.
With double-digit growth in its India business in Q2 and strong momentum in its Parachute, Saffola and other major brands, the company is on its path to deliver strong growth, especially from rising rural demand.
On an international front, its Bangladesh business is clocking hefty volumes and the company also plans to replicate the same strategy in Vietnam.
In the medium-term, Marico aims to deliver a mix of healthy top and bottom-line growth with 19-20 percent operating margins.
All these factors bode well for shareholders who have been receiving an average ROE of 35 percent in the past 5 years and a dividend yield of 1.8 percent.
Considering all the tailwinds, Marico seems like a good fit from an investment perspective.
Ambuja combined with ACC and the Holcim group is the second-largest cement player in India with an individual capacity of 29.7 MT.
It has a stronghold in the North and Central markets and a respectable presence in the eastern markets which was the least impacted by the pandemic.
Compared to ACC and Ultratech, Ambuja fared better in its Q2 realization levels. Moreover, the company has also undergone stringent cost-cutting measures to deliver efficient operational performance.
Its next leg of growth consists of adding new capacities at Marwar and expansion in the central region.
With the infra boost by the government, Ambuja seems to be well-placed to ramp-up a few orders and boost sales.
To summarize, Ambuja is a cheaply valued stock trading at a one-year forward EV/EBITDA of 7 times with strong potential to benefit from the upcoming infra boom in India.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.