After a difficult FY18, Axis Bank should see many of the headwinds like incremental slippage and provisions waning in FY19, which should support earnings. Alongside an enviable retail franchise, it is also building a retail focused less risky asset book. While incrementally, the bank would on-board much less risk (at the cost of margins), we see Axis as a formidable player in the incremental market share game. Read more
Bhansali Engineering polymers, one of the two main manufacturers of ABS (acrylonitrile butadiene styrene) plastics in India, is building a fourfold increase in manufacturing capacity (by FY22). This should help in capturing the import-dependent domestic market (industry domestic capacity 60 percent of demand), improve capacity utilization (85 percent in Q1 2018 vs 64 percent in Q1 2017) and point towards better end-market demand from consumer durable goods as well. In the near-term, prospects of lower raw material costs (styrene) aids margins. Read more
Within the organised plywood market, Century enjoys 26 percent market share having strong brand recall and presence in all key segments like laminates, plywood and others. The company is executing a new facility to manufacture 198,000 cubic metres medium-density fibreboards annually, which is expected to get operational in H2FY18. This is expected to drive earnings growth and improve margins and return ratios.
The company manufactures synthetic fabric used for industrial, agriculture, and hygiene purposes. Earnings are likely to be driven by an increase in export orders, completion of polypropylene spun-bound nonwoven fabric capacity expansion, conclusion of melt-blown non-woven fabric (a unique product offering with no competitors in India) manufacturing facility set-up, and a gradual shift towards margin-accretive value-added products. Read more
IRB Infrastructure is a good play on the road construction sector with the government aiming to spend close to Rs 7-8 lakh crore over the next 5-6 years compared to the current run rate of about Rs 18,000-20,000 crore annually. Moreover, with the GST-related logistic issues easing, IRB’s BOT (build own transfer) road assets should post good traffic growth. Benefits of lower debt and interest led by launch of InvITs and strong revenue visibility of construction business, backed by a Rs 9,000-crore order book (3x revenue) should help in decent earnings growth. Read more
Manpasand Beverages should witness a steep growth in earnings on the back of doubling of its production capacity by Q1 2019. A capacity expansion plan, in sync with enhanced distribution reach (tie-up with Parle Products - 5.5 million outlets) and new product offerings (health drink), all improve earnings visibility, in our view. Read more
Minda Corp is a well-diversified auto-component manufacturer catering to passenger vehicles, and three-wheeler, two-wheeler and commercial vehicles. With marquee clients in its kitty, no client concentration, focus on R&D to develop technologically advanced products, and a turnaround at joint venture Minda Furukawa, the company beckons investor attention. Read more
SpiceJet, once on the brink of bankruptcy, has navigated well in the skies over the last few quarters. We believe SpiceJet has now got all the right ingredients that are required to fly higher. With the right management at the helm, huge capacity expansion plans, foray into ancillary services, focus on cost optimization and comfortable valuations, we advise investors to board the flight for a safe journey. Read more
Star Cement, belonging to the house of Century Plyboard, is the largest player in the north-eastern market, a region catered to by very few mainstream players. The company has the highest profitability in the industry due to subsidy in excise, freight, etc. The government’s agenda to develop infrastructure in this area would sustain demand. The improvement in performance was visible in Q1 FY18 earnings and the valuation looks reasonable in the context of superior earnings quality.
With rapid restructuring under the new management, Tata Chemicals seems to be falling back on track. The proposed sale of the low-margin Haldia plant, increased focus on consumer and salt businesses, with improved volumes post-GST roll-out, neutralization of impact of demonetization-related destocking and firming-up of the soda ash prices are a few reasons why we find the stock attractive. Read more
We are positive about the company’s restructuring initiatives having the potential to unlock value for the shareholders, in addition to its attractive valuations. While on the one hand, the company is exiting operations (Russia and China business) which are not value-accretive, on the other hand it is focusing on building core brands and premiumisation.
Initiatives towards non-black tea in international market and the launch of premium mineral water in the United States should aid margins. Read more
Tata Sponge, which supplies sponge iron to steel manufacturers, could be a good investment candidate with the company now aiming at forward integration by building a 1.5 million tonne of steel capacity utilising cash on the books (Rs 570 crore). This could create more value. In addition, Tata Sponge enjoys cost advantage because of captive power, railway infrastructure and access to group mines. Read more