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Diwali gems: William O Neil picks these 7 stocks for Samvat 2077

Balkrishna Industries, Divis Lab and Escorts are among the top picks.
Nov 12, 2020 / 11:19 AM IST
Sensex
Indian market touched new highs after rising for eight straight sessions on the back of positive development on COVID vaccine and victory for Joe Biden in the US Presidential Election. Brokerage firm William O Neil is now bullish on these seven stocks which can ben added this Diwali:
Polycab | Buy Range: Rs 939 - 986 | The company reported better-than-expected Q2 FY21 results. It has ROE of 20%. The company engages in steady investments in setting up new plants, capacity expansion, and automation, which has helped it stay ahead of the competition. The company maintains its quality, efficiency, and logistics through strategic backward integration in its manufacturing process. Polycab has more than 25 manufacturing facilities in strategic locations, of which four manufacture FMEG products, supported by 30 depots across India.
Polycab | Buy Range: Rs 939 - 986 | The company reported better-than-expected Q2 FY21 results. It has ROE of 20%. The company engages in steady investments in setting up new plants, capacity expansion, and automation, which has helped it stay ahead of the competition. The company maintains its quality, efficiency, and logistics through strategic backward integration in its manufacturing process. Polycab has more than 25 manufacturing facilities in strategic locations, of which four manufacture FMEG products, supported by 30 depots across India.
Balkrishna Industries | Buy Range: Rs 1,514 – 1,590. The company is steadily gaining market share in the industry through lower-priced products compared with peers. It currently has less than 5% market share and targets 10%. Its products meet the international standards, yet they are priced 10-15% lower compared with other major players. Replacement demand from agriculture has been robust this year, driven by domestic as well as key export markets. Sales in the U.S. were impacted by the China–U.S. trade war but broking house expect new opportunities and demand recovery as the U.S. has put additional duty on tire imports from China.
Balkrishna Industries | Buy Range: Rs 1,514 – 1,590 | The company is steadily gaining market share in the industry through lower-priced products compared with peers. It currently has less than 5% market share and targets 10%. Its products meet the international standards, yet they are priced 10-15% lower compared with other major players. Replacement demand from agriculture has been robust this year, driven by domestic as well as key export markets. Sales in the US were impacted by the China-US trade war but broking house expects new opportunities and demand recovery as the US has put additional duty on tire imports from China.
Divis Laboratories | Buy Range: Rs 3,389 – 3,559. The company has a total of 39 drug master files (DMFs), with USFDA and 22 CEPs (Certificates of Suitability) issued by EDQM authorities. It also has a strong patent pipeline, with a total of 35+ patents filed for generic products. The company does not have any pending regulatory hurdles, which will help in continuous growth and attract more investors. The company is cash-rich and has implemented a large capex program through internal accruals. In Q2 FY21, it beat estimates on all fronts. PAT was up 46% y/y to Rs 520 crore, and margin expanded 850bps y/y to 42.4%.
Divis Laboratories | Buy Range: Rs 3,389 – 3,559 | The company has a total of 39 drug master files (DMFs), with USFDA and 22 CEPs (Certificates of Suitability) issued by EDQM authorities. It also has a strong patent pipeline, with a total of over 35 patents filed for generic products. The company does not have any pending regulatory hurdles, which will help in continuous growth and attract more investors. The company is cash-rich and has implemented a large capex program through internal accruals. In Q2 FY21, it beat estimates on all fronts. PAT was up 46% YoY to Rs 520 crore, and margin expanded 850bps YoY to 42.4%.
HDFC Life | Buy Range: Rs 647 - 679. The company’s market share in terms of Individual WRP has expanded by 235bps to 17.5% in H1 FY21 from 15.2% in H1 FY20. The company has neutralized its Q1 de-growth and recorded a 2% growth during H1 FY21. The performance is the best as compared with peers in the private industry, which shrank 11% on a base of 16% growth for H1 last year. The company’s market share for the group products and overall new business segments amongst private sector players stood at 27.4% and 23.3%, respectively.
HDFC Life | Buy Range: Rs 647 - 679 | The company’s market share in terms of Individual WRP has expanded by 235bps to 17.5% in H1 FY21 from 15.2% in H1 FY20. The company has neutralized its Q1 de-growth and recorded a 2% growth during H1 FY21. The performance is the best as compared with peers in the private industry, which shrank 11% on a base of 16% growth for H1 last year. The company’s market share for the group products and overall new business segments amongst private sector players stood at 27.4% and 23.3%, respectively.
Escorts | Buy Range: Rs 1,342 – 1,410. The agriculture sector looks encouraging due to positive rural sentiment, driven by the better-than-expected output of crop and higher reservoir level due to good monsoon. Tractor demand is expected to remain higher in the near term on aggressive procurement of crops by the government and higher MSP. As of September 30, the order book is worth more than Rs 350 crore and has an execution time of 6-8 months. The unprecedented pandemic situation during H1 FY2021 has affected fresh order tendering and order inflow. However, management expects the tendering process to get back to the pre-Covid level by Q4FY21.
Escorts | Buy Range: Rs 1,342 – 1,410 | The agriculture sector looks encouraging due to positive rural sentiment, driven by the better-than-expected output of crop and higher reservoir level due to good monsoon. Tractor demand is expected to remain higher in the near term on aggressive procurement of crops by the government and higher MSP. As of September 30, the order book is worth more than Rs 350 crore and has an execution time of 6-8 months. The unprecedented pandemic situation during H1 FY2021 has affected fresh order tendering and order inflow. However, management expects the tendering process to get back to the pre-Covid level by Q4FY21.
Muthoot Finance
Muthoot Finance | Buy Range: Rs 1,274 – 1,377 | Muthoot Finance is the country’s largest gold financing company in terms of the loan portfolio. Its core service is gold loans. Being a market leader in the gold-financing segment, the company enjoys higher profit margins when compared to its peers. It also offers a wide range of products to cater to diverse customer demands. This also helped the company retain its market leadership.
 Vaibhav Global | Buy Range: Rs 1,945 – 2,042. The company has created a niche for itself in the global retail product segments in two of the largest economies of the world - the US and the UK. The current disruption brought about by the pandemic has threatened business continuity for traditional retail formats while opening massive home-shopping format opportunities. The post-pandemic retail world would comprise of changing consumption patterns, a transition to home-shopping avenues (teleshopping and digital platforms), and the consolidation of retailers, decisively altering the competitive landscape. Vaibhav Global, already having an omnichannel sales platform, can benefit.
Vaibhav Global | Buy Range: Rs 1,945 – 2,042 | The company has created a niche for itself in the global retail product segments in two of the largest economies of the world - the US and the UK. The current disruption brought about by the pandemic has threatened business continuity for traditional retail formats while opening massive home-shopping format opportunities. The post-pandemic retail world would comprise of changing consumption patterns, a transition to home-shopping avenues (teleshopping and digital platforms), and the consolidation of retailers, decisively altering the competitive landscape. Vaibhav Global, already having an omnichannel sales platform, can benefit.
Rakesh Patil
first published: Nov 12, 2020 11:19 am

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