Get ready for a Diwali like never before; 10 market-beating stocks: Sharekhan

The stock picks, which the domestic brokerage firm has chosen, are largely from key investment themes such as financialisation of household savings, increased government spending on infrastructure development in absence of private investments and benefits accruing to consumption companies, from a shift in market share to organised companies from unorganised ones.

Aurobindo Pharma: Market Cap: Rs 43,560 crore

Aurobindo Pharma (Aurobindo), headquartered at Hyderabad, manufactures generic pharmaceuticals and active pharmaceutical ingredients. The company’s manufacturing facilities are approved by several market leading regulatory agencies such as the USFDA, UK MHRA, among others.

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Its product portfolio encompasses leading regulatory agencies such as the USFDA, UK MHRA, among others. Its product portfolio encompasses antibiotics, anti‐retrovirals, CVS, CNS, gastroenterologicals, pain management drugs and anti‐allergics.

Management expects to launch over 25 products (more approvals of complex products) in the coming years, which will help Aurobindo to achieve higher growth and mitigate increasing pricing pressure in the US which will help Aurobindo to achieve higher growth and mitigate increasing pricing pressure in the US market.

Bajaj Finserv: Market Cap: Rs 84,255 crore

Bajaj Finserv (BFS) is the holding company comprising of lending business and insurance companies. Bajaj Finance Limited (BFL), subsidiary of BFS (58% stake), is the lending arm with a strong and well‐diversified loan book with niche segments.

Its strong operating performance with a healthy asset quality diversified loan book with niche segments. Its strong operating performance with a healthy asset quality, achieved on the back of a 38.9% y‐o‐y growth in assets under management (AUMs) indicates the strength of its business model.

We believe BFL, BAGIC, and BALIC have plenty of headroom to grow and can outperform the industry in terms of growth. Hence, we find significant long‐term value in BFS and expect its subsidiaries’ earnings momentum to continue.

Bata India: Market Cap: Rs 9,505 crore

Bata India is the largest retailer and manufacturer of footwear in India with a network of over 1,300 stores; unmatched by any of its peers. The company has strong brands such as Bata, Hush Puppies and Power catering to varied strata of population in the Indian market.

With redefined strategies and senior management changes, Bata is transforming itself from a conventional footwear player to branded footwear player.

Sustained store expansion, premiumisation and steady same-store sales growth (SSSG) would help the company’s revenue and profit after tax (PAT) to clock CAGRs of 11 percent and 22 percent over FY17‐FY20, respectively.

IndusInd Bank: Market Cap: Rs 1,00,909 crore

IndusInd Bank (IndusInd) has been among the best‐performing private sector banks with its superior operating metrics. Its advances have recorded a 27.1% CAGR during FY14‐FY17, while net profit clocked a 26.8%. Net interest margin stood at a healthy 4.0% in FY17.

Currently, the bank is in merger talks with Bharat Financial Inclusion Ltd, which if successful, could bring in a lot of synergies for IndusInd.

These include the acquisition of high‐yielding loans, enhanced priority‐sector lending and capital release from Bharat Financial for the merged entity.

KNR Constructions: Market Cap: Rs 2,942 crore

KNR Constructions (KNR) is a leading EPC service provider, mainly operating in the roads and highways segment (that forms 85% of order book). KNR has exposure to two build‐operate‐transfer (BOT) projects.

The company has over two decades of experience, having executed of more than 6,000 km of road projects across 12 states in India. KNR has in‐house construction capabilities, which insures project completion on time

We expect KNR to report more than a 15% CAGR in standalone revenue and EBITDA during FY2017‐FY2019. We see the intake of order inflow for KNR as a key re‐rating trigger.

Mahindra & Mahindra: Market Cap: Rs 80,866 crore

Mahindra & Mahindra (M&M) benefits from the encouraging outlook for farm equipment segment, given the normal monsoon and higher minimum support prices (MSPs) that will boost farm incomes. Further, its focus on introducing new products will help it outpace industry growth.

M&M is the only Indian automobile company having a track record of manufacturing passenger electric vehicles (EVs).

Given the government’s push for EVs and M&M’s planned new launches in this space, it will clearly enjoy the first‐mover advantage and significantly benefit from the shift to EVs.

RBL Bank: Market Cap: Rs 21,413 crore

RBL Bank (RBL) has been among the fastest growing private sector banks in the past 5‐6 years, with advances CAGR of 44.1% over FY2014‐FY2017. RBL has a wide range of products, catering to various segments from corporate to retail customers.

Over the past few years, RBL has invested significantly to improve its system and processes. As a result, the bank’s cost‐to‐income ratio has remained high.

However, as these investments bring economies of scale, we can expect costs to decline in the coming years, which in turn boost return on assets (RoA) and return on equity (RoE).

TV Today Network: Market Cap: Rs2147 crore

TV Today, a leading TV News broadcaster in India, operates four news channels and three FM radio stations. Through its flagship channel AajTak, the company has been maintaining its dominant position in the Hindi general news genre whereas India Today (its English news channel) has improved its market share steadily general news genre, whereas India Today (its English news channel) has improved its market share steadily to become one of the leading English news channels in India.

TV Today is in a sweet spot to leverage the uptrend in advertising spends and full digitalisation regime, which augurs well for the company’s further growth prospects.

With 20% earnings CAGR over FY2017‐FY2020E coupled with impressive return ratios, TV Today is an ideal investment bet in the TV broadcasting space.

V‐Guard Industries Industries: Market Cap: Rs 8,084 crore

V‐Guard Industries Ltd (V‐Guard) is an established brand in the electrical and household goods space, particularly in south India and has grown its earnings impressively at 46% CAGR over FY2015‐2017.

We believe V‐Guard will continue to generate strong cash flow and returns ratios at a sustainable basis to create shareholders value. The company plans to be a pan‐India player, aggressively expanding in non‐south markets (adding 15,000 retailers over a period of 5 years) and is particularly focusing on the tier‐II and III cities where there is a lot of pent‐up demand for its products. We believe this to drive earnings and expect 26% CAGR from FY2017-2019E.

Sundaram Fasteners: Market Cap: Rs 9,500 crore

Sundram Fasteners Ltd (SFL) is introducing new products like engine components, pump assemblies, powder metal parts, and shafts. This would help the company broaden its offerings and outpace industry growth.

SFL’s focus on high‐value products (transmission and electric vehicle products) would lead to sustained higher margins. Improved operating performance and a low-interest cost would boost the earnings.

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