Madhuchanda Dey Moneycontrol Research
In the past ten days while the earnings reports of Reliance Industries, Axis Bank, Kotak Bank and Maruti hogged the limelight, there were quite a few interesting results from some very well- known and some lesser known names as well that caught our attention.
Financial sector clearly put on a stellar performance with RBL Bank and The Federal Bank posting a strong show. But being the best performing banks, it didn’t come as a surprise.
The capital market focused entities like JM Financial and Motilal Oswal also posted a strong show.
The company that deserves a mention albeit its strong price performance is GIC Housing Finance. The company will be a big beneficiary of the government’s affordable housing push. The average ticket-size of its loan is around Rs 16 lakhs and 50 percent of the loan exposure is below Rs 15 lakhs. Hence, the interest subsidy from the government will have a positive rub-off on volumes. However, the valuation at 3.2X FY17 book warrants cooling.
DCM Shriram and Coromandel International – both rural-focused entities -- deserve a closer look with a forecast of good rains this year. The quarter gone by saw commendable performance from these entities. UPL (United Phosphorous) too impressed with its numbers.
The other noteworthy numbers from the midcap universe included Supreme Petrochem, Supreme Industries, Tata Sponge Iron, Hatsun Agro, Hyderabad Industries, Deep Industries, Rushil Décor and Menon Bearings.
Rajan Raheja Group promoted Supreme Petrochem is the largest producer and exporter of polystyrene polymer in India. Supreme Industries is India's largest plastic processor based in Mumbai. However, valuation comfort is warranted for fresh accumulation in these stocks.
Tata Sponge Iron benefitted from the revival in manufacturing activities in the domestic market that resulted in a rebound in sponge iron prices. Steel scrap, a substitute of sponge iron, is trading at a significant premium that should drive demand. Finally, the company is debt-free with a cash per share of Rs 369.
The CK Birla Group promoted HIL (Hyderabad Industries) produces roofing solutions, panels, walling blocks, plywood substitutes, high-quality pipes and fittings, and industrial insulation. Despite the 40 percent run-up in the stock, the valuation looks reasonable.
Menon Bearings produces bi-metal engine bearings, bushes and thrust washers for light and heavy automobile engines, two-wheeler engines and compressors for refrigerators and air conditioners. It also offers aluminium die casting component under “ALKOP” brand. The company derives 78 percent of revenue from bearing and bushes and 22 percent from ALKOP. The share of exports stands at 28 percent. An interesting idea that warrants some patience after the 55 percent run-up in the past year.
Rushil Décor, which is into the manufacturing of laminated sheets and MDF and Hatsun Agro is the largest private sector dairy company in India. Both these companies have been a favourite of savvy investors for a while and despite their strong show, valuation doesn’t lend comfort.
We would also like to highlight some decent numbers from some completely unknown names.
Tracking the unknown names for discovering future winners is key to investing success. Hence, all the winners spotted here deserve attention.
(Disclosure: RIL, which owns Reliance Jio, also owns Network18 and moneycontrol.com).
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