Siddharth Sedani
Much awaited events like state election verdict and RBI monetary policy will be key factors for the market going forward.
Globally almost all the markets like commodity, currency, bond and equity have been very volatile in the last two-three months. Some of this volatility is still continuing in the developed equity markets. Market participants are now more careful of the valuations they are paying and the leverage they are taking.
The earnings season has been reasonably good with fewer surprises. After the fall in crude prices and strengthened rupee, the Indian equity markets are likely to stabilise and remain rangebound for some time. It is a good time to build a quality portfolio for investors, taking advantage of lower prices.
Some of the quality stocks that we like are:
Asian Paints | Rating: Buy | Target: Rs 1,471
The company has to its credit a leadership position in its market, proven track record of adapting to changes in market conditions, a professional management, history of innovative strategies in marketing, efficient manufacturing and logistics in place and prudent financial management.
In its latest financial results, the company has reported a growth of 8.8 percent in revenues at Rs 4,639 crore in Q2-FY19 as against Rs 4,265 crore in Q2FY18.
In terms of growth, we continue to expect the Indian paints industry to grow at around 8-12 percent in the next few years and demand factors to remain strong in terms of growth.
Larsen & Toubro | Target: Rs 1,894
In terms of the order book, the company’s unexecuted orders stood at Rs 2,81,200 crore as of September 2018.
During the quarter Q2FY19, L&T has received orders worth Rs 41,900 crore, a growth of 46 percent over the same quarter previous year.
Management has maintained its earlier guidance for a growth of 10 percent to 12 percent in orders while it maintains a revenue growth target of around 15 percent.
Infrastructure and development projects like Bharatmala, Sagarmala, Inland Waterways, Smart Cities, Amrut, Railways, Defence, etc. with a total estimated cost of more than Rs 15 lakh crore which should drive better performance going ahead.
Aarti Industries | Rating: Buy | Target: Rs 1,600
One of the global leaders in benzene-based chemistry through its process chemistry and scale-up engineering competencies, Aarti Industries’ revenue and profit are expected to grow at 20 percent and 22 percent CAGRs over FY18-21, driven by scale-ups in its specialty chemical and pharmaceutical businesses and the new toluene capacity.
For Q2FY19, Aarti’s revenue surged 46.4 percent y/y to Rs 1,290 crore due to strong volume growth and the increasing share of high-value products.
The specialty chemicals, pharmaceuticals and home and personal-care divisions brought respectively 80 percent, 14.8 percent and 5.2 percent to revenue. The good performance and higher capacity utilisation boosted the EBIDTA margin 58bps y/y to 18.6 percent. Thus, due to the good operational performance, PAT swelled 56.6 percent y/y to Rs 120 crore.
Its capex of ~Rs 1,700 crore in the next three years, strong operating performance of all divisions, focus on R&D and strong relationships with clients would shift growth to a higher trajectory in future.
We maintain our Buy rating, with a target price of 1,600 a share. At this price, the stock is valued at a PE of 31x FY19e and 21x FY21e.
The author is Vice President — Equity Advisory, Anand Rathi Shares and Stock Brokers.
Disclaimer: 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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