Sumit Bilgaiyan
This week will be quite crucial for the market as it will take cues from the monsoon's progress and June automobile sales numbers. From July 2, auto companies will start declaring their monthly sales numbers. It is also necessary to keep an eye on the currency market. The Indian currency hit all-time low last week and it will be quite interesting to see at what level the Reserve Bank of India will intervene.
The Indian economy will celebrate the first birthday of GST on July 1. RITES and Fine Organic Industries will get listed on July 2. Dish TV’s open offer will also start on the same day and close on July 13.
Last week, Fortis Healthcare extended its bidding process till July 3. July 5 will be quite crucial day for the market as Reliance Industries will conduct its annual general meeting. On the same day, the Federal Open Markets Committee will declare minutes of its June 12-13 meeting. On July 6, Varroc Engineering will list on the bourses. In nutshell, the market will take cues from automobile sales numbers, minutes of FOMC meeting and updates on the monsoon's progress.
Here are 3 stock ideas to look at in the short-term:
We are quite bullish on Escorts. Its tractor business is likely to witness another year of healthy double digit growth in FY19 due to strong rural sentiments on back of higher farm incomes and projection of normal monsoon for third consecutive year.
We are projecting double digit growth in volume led by new product launches and increased focus on exports. Construction equipment segment is witnessing robust demand traction with 29% YoY growth in FY18 which we believe will continue in future.
We expect slight dip in EBITDA margins due to rising raw material cost which will put weigh on margins though we are closely watching for average realization. We have a buy call on Escorts.
Bajaj Finance has reported strong Q4FY2018 results due to continued traction in loans, led by the consumer and commercial business segments, which helped propel NIM expansion and strong NII growth.
Q4FY2018 NII of Bajaj Finance jumped by 39.6% YoY to Rs 2,342 crore, helped by healthy 35.7% growth in advances and 36bps YoY expansion in NIM. Bajaj Finance has consistently maintained strong ratings among others, which help it maintain attractive cost of funds thereby maintaining its margins even in an adverse rate environment.
Bajaj Finance is on a strong and sustainable growth path due to an attractive repeat customer base in the core consumer book, a large SME customer base, a rapidly deepening asset offering profile and strong pricing power should help Bajaj Finance maintain its growth and margins.
Currently, Bajaj Finance is trading at valuations that prima facie appear to be rich. The ability of Bajaj Finance to create new product categories, leveraging its large customer base and proactive manage risk track record are key positives to support valuations. We believe the company will likely sustain its premium valuation. We maintain a buy rating on Bajaj Finance.
PFC has reported degrowth of 42% in PAT on YoY terms. Restructured loan book is down almost 1300bps QoQ of which public restructured assets constituted to be around 6.9% of overall loan book, which is down by 870bps QoQ. Of total loan assets 65% of advances were extended to state power utilities, 8% to central power utilities, 17% to private power utilities, and 9% to joint sector power utilities. Loan book growth stood at 6.4% QoQ and 13.6% YoY as overall disbursements went almost 2.5x QoQ on the back of strong loan off take in distribution and renewables generation.
The company will remain focused towards the renewable sector due to the commissioning period in these loans is lower and the average yields are 50-100bps lower too. Admittedly, contribution to loan book is still small. Given that large part of stress pertains to state utilities, where recovery is just a matter of time we believe stock is available at a throw away price. It is trading at below band of its historic P/B value band. We are recommending a buy.
Disclaimer: The author is Founder of Equity99. The views and investment tips expressed by investment experts on moneycontrol.com are his 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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