1
Please refer to important disclosures at the end of this report
1
1
Angel Top Picks – July 2020
Indian market outperforms in June driven by FPI flows – Post the under
performance in the month of May Indian equities rallied sharply in June on the
back of positive FPI inflows of `21,832 cr. Nifty was up by 7.4% for the month as
compared to the DJIA which was down by 2.1% for the month. As expected the
rally was also more broad based and cyclical sectors like Auto, banking, consumer
goods also participating in the rally.
Unlock 1.0 has led to improvement in economic activities - Market sentiments were
also helped by the `21lakh cr. stimulus package by the Government which along
with significant relaxations of restrictions from June has resulted in increase in
economic activities. The recovery is reflected in high frequency numbers like auto
sales and the manufacturing PMI numbers. Most auto companies reported strong
sequential growth in monthly sales numbers for June while the manufacturing PMI
has also improved to 47.2 from 30.8 in May. The recovery is expected to sustain in
July given pent up demand in the economy.
Rural economy to outperform urban in near term - While the Covd-19 crisis has
had an adverse impact on the urban economy the rural economy has been doing
well given a good rabi season and limited impact of the Covid-19 crisis. Further
prospects a good monsoon also bodes well for the Kharif season and will be a
shot in the arm for the rural economy. We believe that strong rural growth coupled
with opening up of the economy will lead help mitigate the slowdown in the urban
economy to some extent.
Increase in new Covid – 19 cases is key risk for markets going forward - There has
been an increase in new Covid-19 cases globally led by resurgence of new cases
in the US. As a result few states in the US have either paused or rolled back their
reopening plan which has led to a pause in global equity rally. India too witnessed
an increase in new cases over the past month which coincided with opening up of
the economy. Therefore the Government has delayed further opening up of the
economy as of now while various state Governments are imposing localized lock
downs in the worst affected areas. While the current Covid-19 situation in India is
not a cause for major concern, any significant increase in daily new cases from
here on could derail the economic recovery and result in increased market volatility
down the line.
Stock selection will be the key to generate alpha going forward - While proactive
action by Governments and central banks globally has prevented the situation
from deteriorating significantly, it is unlikely that the recovery will be a V shaped
one and it may take some time for the global economy to recover to its pre Covid
levels. Therefore while we remain positive on the markets from a longer term
perspective we feel that investors should be judicious in their stock selection from
here on and should focus on companies with high quality business franchises
which have strong revenue visibility going forward.
Top Picks Performance
Return Since Inception (30th Oct, 2015)
Top Picks Return
50.9%
BSE 100
27.1%
Outperformance
23.9%
Source: Company, Angel Research
Top Picks
Company
CMP `
TP `
FMCG
Colgate-Palmolive
1,382
1,620
Hindustan Unilever
2,172
2,404
Britannia Industries
3,540
3,920
Other Consumer Goods
Avenue Supermarts
2,288
2,735
Healthcare & Pharma
IPCA Laboratories
1,663
1,900
Dr Reddy's Lab
3,921
4,570
IT
L&T Infotech
1,977
2,145
Chemicals/Agrochemicals
PI Industries
1,576
1,889
Galaxy Surfactants
1,600
1,750
Aarti Industries
925
1,165
Telecom/Others
Bharti Airtel
581
672
Reliance Industries
1,787
1,937
Larsen & Toubro
945
1,093
Banking
ICICI Bank
361
410
HDFC Ltd
1,886
2,075
Axis Bank
429
500
IDFC First Bank
27
32
Bajaj Finance
2,932
3,250
Auto
Escorts
1,060
1,150
Others
Endurance Tech.
877
1,015
Swaraj Engines
1,385
1,566
Source: Company, Angel Research
Note: Closing price as on 3rd July,2020
2
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Angel Top Picks | July 2020
July 4, 2020
2
Top Picks
3
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Angel Top Picks | July 2020
July 4, 2020
3
Avenue Supermarts
Avenue Supermarts owns and operates the supermarket chain ‘D-MART’.
Focused on value retailing, it offers a wide range of fast-moving consumer
(food and non-food) products, general merchandise and apparel.
Currently, the company has 214 D-MART stores and it expects to open 30
stores every year through its cluster approach.
DMART offers significant discount compared to e-commerce, Modern trade
(~6%) and General trade (~18%), which would drive revenue growth.
Operating margin is higher compared to its peers due to the company’s low
cost structure.
We expect DMART to report consolidated revenue/PAT CAGR of 19s%/26%,
respectively over FY2019-22E.
Key Financials
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
FY2021E
27781
8.4
1419
21.9
17.1
104.1
17.8
5.3
FY2022E
33730
8.8
1825
28.2
18.0
80.9
14.6
4.4
Source: Company, Angel Research
Dr Reddy’s Lab
Dr Reddy’s has a very strong product portfolio with 55%-65% of its revenue
coming from its chronic which is a high growth segment and will be least
impacted due to lockdown globally.
The company has a very healthy US pipeline with 99 ANDA’s pending
approval from the US FDA including 30 FTF’s. The company intends to launch
25 new products FY21.
DRL has incurred large capex over last 5 years with net block increasing from
INR 5380cr in 2015 to INR 9300cr in 2020. With current capacity utilization at
50% we do not envisage any significant capex for the company going forward.
DRL has acquired domestic business of Wockhardt pharma for 800cr in an all
cash deal, which is expected to complete in Q1FY21. DRL will get 62 brands
with total annual sales of 1830cr which we believe is value accretive for the
company
Key Financials
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
FY2021E
18840
23.5%
2705
166.6
30.5
23.5
3.6
3.3
FY2022E
20855
25%
3137
192.6
32
20
3.2
3.1
Source: Company, Angel Research
Stock Info
CMP
2,288
TP
2,735
Upside
19.5%
Sector
Retail
Market Cap (` cr)
148,256
Beta
0.7
52 Week High / Low
2,559/1,290
3 year-Chart
Source: Company, Angel Research
-
500
1,000
1,500
2,000
2,500
3,000
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
Stock Info
CMP
3,921
TP
4,570
Upside
16.6%
Sector
Pharma
Market Cap (` cr)
65,178
Beta
0.5
52 Week High / Low
4,189/2,352
3 year-Chart
Source: Company, Angel Research
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
4
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ence
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Angel Top Picks | July 2020
July 4, 2020
4
Bharti Airtel
There is going to be some impact on subscribers from the low income group
especially daily wage earners due to the lockdown. However a sharp increase
in data consumption should make up for a significant portion of the loss.
Therefore we expect limited impact on Bharti from the lockdown.
Bharti has raised capital of USD 2bn from a QIP at `445 per share along with
FCCB issues of USD 1bn in January 2020. Therefore Bharti is much better
placed as compared to Vodafone Idea in terms of liquidity.
Telecom operators have increased tariffs by ~35% in Nov’19. There is a
possibility of another round of tariff hikes by telecom companies in FY21 given
that tariffs are still very low. If this were to happen then it would lead to further
upsides to our estimates for FY21 and FY22.
Even if there is no major tariff hike in FY21 and Vodafone Idea goes out of
business, Bharti would benefit significantly from addition of subscribers.
Key Financials
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
FY2021E
101322
43.1
4046
5.5
3.6
105.8
3.9
3.8
FY2022E
114360
44.4
8056
12.5
7.7
46.5
3.6
3.2
Source: Company, Angel Research
Larsen & Toubro
L&T is India’s largest EPC Company with a strong presence across various
verticals including Infra, Hydrocarbon and services segment. The company
also has a very strong presence in the IT services and NBFC space through its
various subsidiary companies which are also growth drivers for the company.
The company has a strong order backlog of ~INR 3lakh cr. Majority of the
order book is from the central government, state government and PSU, where
risk of cancellation is low.
On the macro front it seems that the covid 19 situation is well under control in
Europe, while the worst of the outbreak seems to be behind for the US which is
leading to a risk on rally globally. We therefore feel that while there will be
near term challenges for the company in terms of order flow and execution,
the stock is trading at significant discount to historical average valuations and
offers favorable risk reward from current levels given global tailwinds.
Key Financials
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(x)
(%)
(%)
(x)
FY2021E
62140
6.2
3652
25.3
6.0
37.4
2.0
2.8
FY2022E
85369
9.7
7605
54.2
10.9
17.4
1.8
2.0
Source: Company, Angel Research (Standalone nos.)
Stock Info
CMP
945
TP
1,093
Upside
15.7%
Sector
Infrastructure
Market Cap (` cr)
132,607
Beta
1.1
52 Week High / Low
1,591/661
3 year-Chart
Source: Company, Angel Research
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
Stock Info
CMP
581
TP
672
Upside
15.7%
Sector
Telecom
Market Cap (` cr)
317,022
Beta
0.8
52 Week High / Low
611/321
3 year-Chart
Source: Company, Angel Research
-
100
200
300
400
500
600
700
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
5
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Angel Top Picks | July 2020
July 4, 2020
5
PI Industries Ltd.
PI Industries is a leading player in providing Custom synthesis and
manufacturing solutions (CSM) to global agrochemical players. The CSM
business accounted for 72% of the company’s revenues in FY20 and is
expected to be the key growth driver for the company in future
The company has been increasing its share of high margin CSM business
driven by strong relationship with global agrochemical players. PI is leveraging
its chemistry skill sets and is looking to diversify its CSM portfolio to electronic
chemicals, Pharma API, fluoro chemicals, etc. which will help drive business.
Management has provided strong growth guidance for FY2021 despite
uncertainties over the Covid-19 situation drive by both the CSM and Indian
agrochemical business. The company is also raising capital to augment
capacity which will drive the next leg of growth for the company.
Key Financials:
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
FY2021E
4,077
22.0
583
42.3
18.4
37.3
3.4
5.4
FY2022E
5,126
22.3
745
54.0
19.5
29.2
2.8
4.3
Source: Company, Angel Research
Colgate-Palmolive (India)
Colgate-Palmolive India Ltd (CPIL) is engaged in manufacturing & selling of
oral care products such as toothpastes and toothbrushes.
CPIL has leadership position in both toothpastes (52% market share) and
toothbrushes (45% market share).
CPIL continuously invests on ad-spends to strengthen the Colgate brand.
Colgate is India’s No. 1 Most Trusted Oral Care Brand.
CPIL has increased its distribution 2.3x over the last 6-7 years and is
continuously making efforts to deepen its penetration.
We believe that CPIL should ultimately be able to see sharper market share
gain in toothpastes segment on the back of higher ad-spend and re-launch of
Colgate Strong Teeth (decent traction seen in last quarter).
Key Financials
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
FY2021E
4566
26.6
786
28.9
37.6
47.8
18.0
8.1
FY2022E
4897
27.9
893
32.8
36.5
42.1
15.4
7.6
Source: Company, Angel Research
Stock Info
CMP
1,382
TP
1,620
Upside
17.2%
Sector
FMCG
Market Cap (` cr)
37,593
Beta
0.5
52 Week High / Low
1,641/1,065
3 year-Chart
Source: Company, Angel Research
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
Stock Info
CMP
1,576
TP
1,889
Upside
19.9%
Sector
Agro Chemicals
Market Cap (` cr)
21,769
Beta
0.7
52 Week High / Low
1,688/973
3 year-Chart
Source: Company, Angel Research
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
6
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Angel Top Picks | July 2020
July 4, 2020
6
L&T Infotech
L&T InfoTech (LTI) is one of the fastest growing mid cap IT Company in India.
IT is part of the L&T group and provides services like ADM, Enterprise
solutions, Infrastructure management services etc.
Company has a very strong presence to the BFSI & manufacturing verticals,
which accounts for ~45% and 17.5% of the company’s revenues and are
amongst the least impacted vertical due to the shutdown on account of Covid -
19. The company doesn't have a very large exposure to service oriented
verticals like travel & Tourism which are amongst the worst impacted due to
the Covid – 19 outbreak.
LTI has been growing significantly faster than both mid and large cap peers
have over the past few years on the back of strong deal wins and we expect
the outperformance to continue for the company.
Key Financials
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(x)
(%)
(%)
(x)
FY2021E
11,588
18.9
1,611
92.6
0.2
21.4
4.9
2.7
FY2022E
13,085
19.6
1,867
107.3
0.2
18.4
4.1
2.3
Source: Company, Angel Research
Galaxy Surfactants
Galaxy Surfactants is a market leader in oleo chemical-based surfactants,
which is used in personal and home care products including skin care, oral
care, hair care, cosmetics, toiletries and detergent products.
The company has been increasing its share of high margin specialty care
products in its portfolio which now accounts for ~ 40% of its revenues while
the balance is accounted for by the performance surfactant business.
Company has very strong relationship with MNC clients like Unilever, P&G,
Henkel, Colgate-Palmolive and supplies raw materials to them not only in
India but also in US, EU and MENA region.
Though the company’s operations had been impacted due to the Covid-19
outbreak in April management has highlighted that operations have improved
significantly in May and June given that their supply is predominantly to the
FMCG sector.
Key Financials
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
FY2021E
2,555
13.9
230
65.0
0.2
27.4
4.7
2.3
FY2022E
2,993
13.8
207
58.5
0.2
22.9
4.1
1.9
Source: Company, Angel Research
Stock Info
CMP
1,600
TP
1,750
Upside
9.4%
Sector
Chemicals
Market Cap (` cr)
5,673
Beta
0.6
52 Week High / Low
1,790/975
3 year-Chart
Source: Company, Angel Research
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Feb-18
May-18
Aug-18
Nov-18
Feb-19
May-19
Sep-19
Dec-19
Mar-20
Jun-20
Stock Info
CMP
1,977
TP
2,145
Upside
8.5%
Sector
IT
Market Cap (` cr)
34,441
Beta
0.7
52 Week High / Low
2,050/1,207
3 year-Chart
Source: Company, Angel Research
-
500
1,000
1,500
2,000
2,500
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
7
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ence
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Angel Top Picks | July 2020
July 4, 2020
7
IPCA Laboratories
IPCA’s 54% of revenue comes from domestic generic and API business.
Generics and API continues to provide revenue growth for Ipca. Expected to
outperform the Indian Pharmaceutical market (IPM) by 8%-10% p.a in FY 22.
EU generic & branded which account for 15% of the company’s revenues are
on growth trajectory along with higher margins (40% EBITDA margins).
Current capacity utilization of plants which supply to Europe is at 20% which is
expected to ramp up from current levels. We expect the European business to
show 30-35% PAT growth.
Ipca manufacture over 350 formulations and 80 APIs for various therapeutic
segments like Pain management. Currently the company has 18 ANDA
sapprovals, 46 ANDA filled with authorities while 8 products are in clinical
trials.
Britannia Industries
Britannia Industries (BRIT)’s principal activity is manufacture and sale of
biscuits, bread, rusk, cakes and dairy products.
BRIT has brands like Tiger, Good-Day, and 50:50 under its fold with an
estimated market share of 33% in the Indian biscuits industry. Biscuits
contribute more than 80% of the company’s turnover.
BRIT has an overall distribution reach of 5.5 million outlets. With consistent
focus on distribution expansion, BRIT has narrowed the gap with the No. 1
player. The gap with largest distributed brand is now just 0.8 million outlets.
In Q4FY20 BRIT have outperformed other companies in FMCG space with
YOY growth of 2.5%/20bp/27% in Revenue/EBITDA/PAT respectively. Going
ahead in near term, food industry is witnessing a shift from dining out/ street
food to home consumption. BRIT being a low price product with trusted brands
is well positioned to cater the shift.
Stock info
CMP
1,663
TP
1,900
Upside
14.3%
Sector
Pharma
Market Cap (` cr)
21,008
Beta
0.3
52 Week High / Low
1,821/844
3 year-Chart
Source: Company, Angel Research
Key Financials
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
FY2021E
5360
22.5%
821
65.7
18.8
25.3
4.9
4.0
FY2022E
6111
23.0
976
78.1
18.6
21.3
4.2
3.5
Source: Company, Angel Research
Stock Info
CMP
3,540
TP
3,920
Upside
10.7%
Sector
FMCG
Market Cap (` cr)
85,158
Beta
0.9
52 Week High / Low
3,704/2,100
3 year-Chart
Source: Company, Angel Research
Key Financials
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
FY2021E
13,142
15.7
1536.5
63.9
29.5
55
19.3
6.7
FY2022E
14,587
15.7
1713.7
71.3
28.6
49.6
16
6.0
Source: Company, Angel Research
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
8
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ence
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Angel Top Picks | July 2020
July 4, 2020
8
HDFC Ltd.
HDFC has sufficient capital (Tier-1 -16.6%) and Liquidity (Rs.30,000cr) to tide
over this situation.
HDFC’s superior know how of the segment; strict underwriting practices and
buffer provision would help it to better manage the credit loss
As per NHB norms, HDFC is required to carry total provision of Rs. 4,188cr,
against which actual provisions as of Q4FY2020 were at Rs. 10,988cr, which
is over and above regulatory requirement and provides investor comfort.
HDFC is currently available at ~1.75x its FY2022E BV, which we
believe is reasonable considering its robust operating metrics, experience
management, Healthy provision and sustainable business model.
Swaraj Engines
Swaraj Engines is engaged in the business of manufacturing diesel engines
and hi-tech engine components. Diesel Engines are specifically designed for
tractor application.
Going forward, we expect recovery in tractor industry (due to robust Rabi crop
production, hike in MSP & the forecast of a normal monsoon) will benefit
player like Swaraj Engines.
The company has healthy balance sheet along with free cash flow and higher
profitability.
The company is trading at reasonably lower valuations.
Stock Info
CMP
1,886
TP
2,075
Upside
10.0%
Sector
Banking
Market Cap (` cr)
327,121
Beta
1.3
52 Week High / Low
2,500/1,473
3 year-Chart
Source: Company, Angel Research
Key Financials
Y/E
Op. Inc
NIM
PAT
EPS
ABV
ROA
ROE
P/E
P/ABV
March
(` cr)
(%)
(` cr)
(`)
(`)
(%)
(%)
(x)
(x)
FY2021E
12,216
3.4
7,978
46
543
1.4
10
41
3.5
FY2022E
13,421
3.4
10,260
59
590
1.7
12
32
3.2
Source: Company, Angel Research
Stock Info
CMP
1,385
TP
1,566
Upside
13.1%
Sector
Others
Market Cap (` cr)
1,680
Beta
0.8
52 Week High / Low
1,480/808
3 year-Chart
Source: Company, Angel Research
Key Financials
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
FY2021E
781
16.7
71
58.6
16.2
23.6
3.8
2.0
FY2022E
899
17.0
86
71.2
12.9
19.4
2.5
1.7
Source: Company, Angel Research
-
500
1,000
1,500
2,000
2,500
3,000
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
-
500
1,000
1,500
2,000
2,500
3,000
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
9
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Angel Top Picks | July 2020
July 4, 2020
9
Aarti Industries
Aarti Industries is the lowest cost producer in Benzene based derivatives.
Company accounts for 20% of world’s Nitrochloro Benzene (NCB) and 10% of
dichloride benzene (DCB) capacity.
Company has been constantly increasing its share of high margin downstream
products which now accounts for 70% of the company’s revenues. Company is
expanding its NCB capacity which would be utilized for manufacture of high
margins downstream products.
Company is well diversified across product, customer, geography and end
user industry and is not likely to be impacted too much from the Covid-19
outbreak. Exports account for 40% of revenues while balance 60% is from
domestic sales. Significant opportunity for company arising from
environmental related issues in China and companies looking to diversify
supply chains.
Endurance Tech.
It mainly caters to two and three-wheeler OEMs in India and supplies
aluminum casting products to four-wheeler OEMs in Europe.
The company operates 17 plants in India, 9 plants overseas and 4 R&D sites
Post Covid19, evolving consumer preference for lower ticket priced means of
private transport amid pressurized incomes & awareness around social
distancing are expected to act as tailwinds for domestic 2-Ws in India, 4-Ws
across developed nations.
Going ahead, given the company’s ability to gain new businesses & market
share across categories; we recommend a buy for Endurance.
Stock Info
CMP
925
TP
1,165
Upside
25.9%
Sector
Chemicals
Market Cap (` cr)
16,125
Beta
0.8
52 Week High / Low
1,192/662
3 year-Chart
Source: Company, Angel Research
Key Financials
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
FY2021E
4822
21.7
538
30.3
16.8
30.6
4.9
3.3
FY2022E
5886
22.2
711
40.1
19.6
23.1
4.2
2.7
Source: Company, Angel Research
Stock Info
CMP
877
TP
1,015
Upside
15.7%
Sector
Others
Market Cap (` cr)
12,330
Beta
0.4
52 Week High / Low
1,202 /562
3 year-Chart
Source: Company, Angel Research
Key Financials
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
FY2021E
6750
15.5
452.0
32.1
18.3
27.3
4.4
1.9
FY2022E
7357
16.0
576.0
40.9
17.5
21.4
3.4
1.7
Source: Company, Angel Research
-
200
400
600
800
1,000
1,200
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
10
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Angel Top Picks | July 2020
July 4, 2020
10
Reliance Industries
Reliance Industries Ltd. (RIL) is India’s largest company with dominant
presence in Refining, Petrochemicals, Telecom and Retail businesses.
RIL has built up a dominant telecom business and has already attained market
leader status with 38.3 cr. subscribers at the end of Q4FY20. Telecom
business to witness robust growth over next few years due to tariff hikes and
shift of subscribers from Vodafone Idea to other telecom players.
RIL has also built a very strong retail business which is the largest organized
retailing company in India. We expect the retail business to be a key value
driver for Reliance over the long run though there would be some impact on
business in FY21 due to the Covid 9 outbreak.
The company has raised INR 1.17lakh cr. from marquee investors like
Facebook, General Atlantic, KKR, Intel etc reaffirms our conviction in the
company’s potential transformation to a digital play from a pure brick and
mortar company.
Escorts
Escorts are a prominent tractor player domestically with market share in excess
of 11%. The company’s brand of tractors is particularly strong in the northern
as well as the eastern belt of India.
With rural India relatively less impacted due to Covid-19, record food-grain
procurement by government agencies as well as expectation of normal
monsoon 2020, we expect the tractor industry to outperform the larger
automobile space in FY21E with Escorts a key beneficiary.
Escorts in the recent past has also entered into a strategic partnership with
Kubota Corporation of Japan (one of the global leaders in farm machinery
and implements), which provides further visibility of growth for the company,
going forward.
Stock Info
CMP
1,787
TP
1,937
Upside
8.4%
Sector
Diversified
Market Cap (` cr)
1,170,410
Beta
1.1
52 Week High / Low
1,804/867
3 year-Chart
Source: Company, Angel Research
Key Financials
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
FY2021E
3,73,215
13.8
30,272
59.2
6.4
37.4
2.4
6.1
FY2022E
4,57,539
13.3
37,510
47.8
7.8
30.2
2.4
5.0
Source: Company, Angel Research (Standalone nos.)
Stock Info
CMP
1,060
TP
1,150
Upside
8.5%
Sector
Auto
Market Cap (` cr)
12,991
Beta
1.5
52 Week High / Low
1,070/423
3 year-Chart
Source: Company, Angel Research
Key Financials
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
FY2021E
5,927
11
534.0
43.5
16.8
24.6
4.2
2.1
FY2022E
6,744
11.5
676.0
51.00
15.6
21.0
3.8
1.9
Source: Company, Angel Research
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
-
200
400
600
800
1,000
1,200
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
11
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ence
sourc
Angel Top Picks | July 2020
July 4, 2020
11
Hindustan Unilever
HUL is engaged in manufacturing of branded and packaged FMCG products
including soap, detergent, personal care products and processed food. The
company also produces ice creams, cooking oils, fertilizers and hybrid seed
HUL has strong brand recall of its products and HUL has extensive distribution
reach of 7+ million outlets and direct distribution of 3.5+ million retail outlets.
Strong balance sheet along with free cash flow and higher profitability.
Going forward, we expect HUL to report healthy bottom-line growth due to
healthy volume growth on back of strong brand, wide distribution network.
ICICI Bank
The Ability to raise sufficient liquidity at Low cost would be The Key criteria for
banks to navigate the current situation, as asset side inflow would be limited.
ICICI Bank is clearly better positioned in the liability side (in Q4FY20, Deposit
grew 18% yoy and CASA ratio of 45%). Easier and cheaper availability of
deposits gives an advantage to manage ALM given limited inflow from
advance due to moratorium and lower impact on NIM.
Strong liability franchise, Healthy asset mix, higher than 70% provision for bad
asset and More than 80% of incremental lending to high rated corporate
provide comfort.
ICICI Bank is trading (Core Banking Business – 1.2x FY22ABV) at a significant
discount to historical average valuations and offers favourable risk reward
from current levels given global tailwinds.
Stock Info
CMP
2,172
TP
2,404
Upside
10.7%
Sector
FMCG
Market Cap (` cr)
510,392
Beta
0.7
52 Week High / Low
2,614/1,660
3 year-Chart
Source: Company, Angel Research
Key Financials
Y/E
Sales
OPM
PAT
EPS
ROE
P/E
P/BV
EV/Sales
March
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
FY2021E
39853
24.6
6961
32.2
63.8
67.4
43.0
11.6
FY2022E
43815
24.8
7736
35.8
61.3
60.6
37.2
10.6
Source: Company, Angel Research
Stock Info
CMP
361
TP
410
Upside
13.6%
Sector
Banking
Market Cap (` cr)
233,782
Beta
1.4
52 Week High / Low
552/269
3 year-Chart
Source: Company, Angel Research
Key Financials
Y/E
Op. Inc
NIM
PAT
EPS
ABV
ROA
ROE
P/E
P/ABV
March
(` cr)
(%)
(` cr)
(`)
(`)
(%)
(%)
(x)
(x)
FY2021E
35,063
3.4
8,814
14
179
0.8
7
26
2.0
FY2022E
36,508
3.3
11,909
18
194
1.0
9
20
1.9
Source: Company, Angel Research
-
500
1,000
1,500
2,000
2,500
3,000
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
-
100
200
300
400
500
600
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
12
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ence
sourc
Angel Top Picks | July 2020
July 4, 2020
12
Axis Bank
The Ability to raise sufficient liquidity at Low cost would be The Key criteria for
banks to navigate the current situation, as asset side inflow would be limited.
Bank is witnessing higher deposit growth in last 2 qtr, which clearly shows
increasing deposit polarisation.
Axis Bank have a healthy asset mix, superior customer profile, liability strength
and capital comfort that is well suited to ride this challenging period.
Axis Bank is trading (Core Banking Business – 1.2x FY22ABV) at a significant
discount to historical average valuations and offers favorable risk reward from
current levels given global tailwinds.
Bajaj Finance
We remain convinced of the strength of BAF’s business model. In this scenario
BAFIN is able to manage raise fund at competitive rate.
27% of AUM has opted under moratorium, However, 68% of this have no
recent bounce history
High Capital (Tier -21.2%) and sufficient liquidity in balance sheet help then to
sail through tough time, better than other NBFC
Considering, above positive and lower valuation than historical average, we
recommend buy on Bajaj finance
Stock Info
CMP
429
TP
500
Upside
16.6%
Sector
Banking
Market Cap (` cr)
120,923
Beta
1.5
52 Week High / Low
814/285
3 year-Chart
Source: Company, Angel Research
Key Financials
Y/E
NII
NIM
PAT
EPS
ABV
ROA
ROE
P/E
P/ABV
March
(`cr)
(%)
(` cr)
(`)
(`)
(%)
(%)
(x)
(x)
FY2021E
26,400
3.1
5,390
13
206
0.6
6
33
1.99
FY2022E
28,698
3.2
6,678
16
221
0.7
7
26
1.86
Source: Company, Angel Research
Stock Info
CMP
2,392
TP
3,250
Upside
10.8%
Sector
NBFC
Market Cap (` cr)
176,420
Beta
1.4
52 Week High / Low
4,923/1,783
3 year-Chart
Source: Company, Angel Research
Key Financials
Y/E
NII
NIM
PAT
EPS
ABV
ROA
ROE
P/E
P/ABV
March
(` cr)
(%)
(`cr)
(`)
(`)
(%)
(%)
(x)
(x)
FY2021E
13,977
9.0
5,182
86
615
3.2
15
34
4.8
FY2022E
15,571
9.5
7,250
121
722
4.2
18
24
4.1
Source: Company, Angel Research
-
100
200
300
400
500
600
700
800
900
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
-
100
200
300
400
500
600
700
800
900
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
13
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ence
sourc
Angel Top Picks | July 2020
July 4, 2020
13
IDFC First Bank
The Ability to raise sufficient liquidity at Low cost would be The Key criteria for
banks to navigate the current situation, as asset side inflow would be limited.
IDFC Fist Bank, Post management change has clearly outperformed in
building liability franchise and retail lending.
Since new management took charge, every qtr. liability franchise has been
strengthened. CASA ratio improved from 10.4% in Q3FY19 to 31.9% In
Q4FY20. NIM has improved to 4.24% in Q4 FY20 as compared to 3.03% in
Q4 FY19 and 2.89% in Q3FY19. Retail constitutes 61% of funded loan assets
31st March 2020 compared to 37% as on 31 March 2019. While wholesale
books continue to decline.
The Bank is raising Rs. 2,000 crores of fresh equity capital during Q1FY21.
Post the capital raise, the Capital Adequacy Ratio will be 15.55% with CET-1
Ratio of 15.32%.
We believe efforts to build a liability franchise, fresh capital infusion, and
provision taken on the wholesale books will help to tide over this difficult time.
The IDFC First Bank is trading (0.9 x FY22ABV) at a significant discount to
historical average valuations.
Stock Info
CMP
27
TP
32
Upside
18.5%
Sector
Banking
Market Cap (` cr)
15,201
Beta
1.2
52 Week High / Low
48 /18
3 year-Chart
Source: Company, Angel Research
Key Financials
Y/E
NII
NIM
PAT
EPS
ABV
ROA
ROE
P/E
P/ABV
March
(`cr)
(%)
(`cr)
(`)
(`)
(%)
(%)
(x)
(x)
FY2021E
6,583
4.6
-220
0
28
-0.1
-1
-69
0.9
FY2022E
7,457
4.9
980
2
30
0.6
6
16
0.9
Source: Company, Angel Research
-
10
20
30
40
50
60
70
80
May-17
Aug-17
Nov-17
Feb-18
May-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
14
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ence
sourc
Angel Top Picks | July 2020
July 4, 2020
14
Changes in Recommendation
Exhibit 1: Stocks on Hold
Stock name
Hold Date
Hold Price
Jindal Steel
05-10-2019
94
Source: Company, Angel Research
Hold – While we recommend to Hold on to existing positions at current level, we would await
for further data points before recommending any fresh purchases.
Exhibit 2: Stocks bought in last 6-months
Stock Name
Buy Call Date
Buy Price
Hawkins Cookers
09-01-2020
3,591
Asian Paints
11-03-2020
1,864
Bata India
13-03-2020
1,411
Hind. Unilever
30-03-2020
2,141
Avenue Super.
30-03-2020
2,028
Colgate-Palm.
30-03-2020
1,164
Nestle India
30-03-2020
15,110
Dr Lal Pathlabs
01-04-2020
1,384
P & G Hygiene
01-04-2020
10,161
Ipca Labs.
01-04-2020
1,398
Bharti Airtel
01-04-2020
421
Dabur India
16-04-2020
498
L & T Infotech
16-04-2020
1,493
Infosys
16-04-2020
626
Britannia Inds.
16-04-2020
2,832
Alkem Lab
17-04-2020
2,688
Reliance Inds.
17-04-2020
1,189
P I Inds.
24-04-2020
1,507
Galaxy Surfact.
24-04-2020
1,394
Aarti Inds.
24-04-2020
929
Dhanuka Agritech
07-05-2020
438
Hind. Unilever
08-05-2020
2,056
Dr Reddy's Labs
28-05-2020
3,877
H D F C
01-06-2020
1,740
Larsen & Toubro
01-06-2020
951
Escorts
01-06-2020
970
ICICI Bank
01-06-2020
345
Axis Bank
03-06-2020
424
Bajaj Fin.
03-06-2020
2,477
Can Fin Homes
03-06-2020
316
Endurance Tech.
08-06-2020
838
Swaraj Engines
08-06-2020
1,290
Source: Company, Angel Research
15
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ence
sourc
Angel Top Picks | July 2020
July 4, 2020
15
Exhibit 3: Stocks sold in last 6-months
Stock Name
Sell Date
Sell Price
HDFC Bank
21-01-2020
1,246
Siyaram Silk
27-01-2020
229
Maruti Suzuki
28-01-2020
7,065
Music Broadcast
29-01-2020
29
GIC Housing Fin
30-01-2020
154
Parag Milk Foods
01-02-2020
137
Bata India
07-02-2020
1,880
Larsen & Toubro
25-02-2020
1,250
Aditya Birla Cap
06-03-2020
75
Dr Lal Pathlabs
09-04-2020
1,462
RBL Bank
15-04-2020
121
Shriram Trans.
15-04-2020
685
KEI Inds.
16-04-2020
279
Safari Inds.
16-04-2020
402
Amber Enterp.
16-04-2020
1,116
UltraTech Cem.
21-04-2020
3,409
Inox Wind
24-04-2020
27
Hind. Unilever
04-05-2020
2,121
ICICI Bank
05-05-2020
341
Dabur India
06-05-2020
450
Asian Paints
07-05-2020
1,610
Hawkins Cookers
22-05-2020
4,235
Bata India
26-05-2020
1,265
GMM Pfaudler
26-05-2020
3,732
Alkem Lab
27-05-2020
2,425
Dhanuka Agritech
27-05-2020
573
Nestle India
08-06-2020
17,160
P & G Hygiene
08-06-2020
10,150
Infosys
08-06-2020
708
Source: Company, Angel Research
16
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ence
sourc
Angel Top Picks | July 2020
July 4, 2020
16
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
DISCLAIMER
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SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Limited is a registered entity with SEBI for Research
Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164. Angel or its associates has not
been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its
associates/analyst has not received any compensation / managed or co-managed public offering of securities of the company covered
by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the
companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine
the merits and risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the
contrary view, if any
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
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nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While
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Disclosure of Interest Statement
Top Picks
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or
relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Ratings (Based on Expected Returns: Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Over 12 months investment period) Reduce (-5% to -15%) Sell (< -15%)
Hold (Fresh purchase not recommended)
