Market Outlook
August 29, 2019
Market Cues
Domestic Indices
Chg (%)
(Pts)
(Close)
Indian markets are likely to open negative tracking global indices and SGX Nifty.
BSE Sensex
(0.5)
(190)
37,451
Nifty
(0.5)
(60)
11,046
The US stocks showed a significant turnaround over the course of the trading day on
Mid Cap
(0.9)
(125)
13,355
Wednesday. The rebound reflected a reversal from the previous session, when stocks
turned lower after seeing initial strength. Dow jumped 1 percent to 26,036 and the
Small Cap
(0.6)
(81)
12,508
Nasdaq rose 0.4 percent to 7,856.
Bankex
(1.2)
(371)
31,379
The UK stocks rose on Wednesday as the pound fell sharply on news the
government is looking to suspend parliament from around mid-September. The
Global Indices
Chg (%)
(Pts)
(Close)
FTSE 100 was up by 0.4 per cent to 7,116.
Dow Jones
1.0
259
26,036
Nasdaq
0.4
30
7,856
On domestic front, Indian shares may open on a cautious note on Thursday as oil
prices continued to climb and investors awaited further clarity on U.S.-China trade
FTSE
0.4
27
7,116
negotiations. The benchmark BSE Sensex ended down by 0.5 percent to 37,451.
Nikkei
0.1
24
20,479
Hang Seng
(0.2)
(49)
25,615
News Analysis
Shanghai Com
(0.3)
(9)
2,893
Toyota, Suzuki enter into capital alliance amid a shake-up in auto industry
Detailed analysis on Pg2
Advances / Declines
BSE
NSE
Advances
933
692
Investor’s Ready Reckoner
Declines
1,608
1,147
Key Domestic & Global Indicators
Unchanged
143
96
Stock Watch: Latest investment recommendations on 150+ stocks
Refer Pg5 onwards
Volumes (` Cr)
Top Picks
BSE
1,870
CMP
Target
Upside
Company
Sector
Rating
(`)
(`)
(%)
NSE
29,719
Blue Star
Capital Goods
Buy
736
867
17.7
ICICI Bank
Financials
Buy
413
490
18.6
Net Inflows (` Cr)
Net
Mtd
Ytd
Parag Milk Foods
Others
Buy
137
330
140.1
FII
-1,044 -12,007
-2,41,181
Bata India
Others
Buy
1,508
1,643
9.0
*MFs
243
11,219
30,979
KEI Industries
Capital Goods
Buy
470
612
30.1
More Top Picks on Pg4
Top Gainers
Price (`)
Chg (%)
39
10.6
23
7.3
NIITTECH
1,523
5.7
280
5.5
10
4.7
Top Losers
Price (`)
Chg (%)
26
-9.2
HCC
8
-7.1
95
-7.8
441
-5.7
67
-4.5
As on Aug 28, 2019
Market Outlook
August 29, 2019
News Analysis
Toyota, Suzuki enter into capital alliance amid a shake-up in
auto industry
Strengthening their existing collaboration to develop futuristic technologies,
Wednesday announced a “capital alliance” for equity investment into each other.
While Toyota will acquire 4.94 per cent shares of Suzuki, worth $908 million, the
latter will make a $454-million investment in the biggest automaker of Japan. The
latest investment comes months after the two companies announced a cross-
badging deal under which they would manufacture vehicles for each other in the
Indian market. Premium products from the Maruti stable such as the Baleno, Ciaz
and Vitara Brezza will be sold under the Toyota brand with small changes. In
return, Maruti will get technical know-how, which will help the company develop
hybrid and electric cars. With the government giving impetus to cleaner fuel, the
industry expects Maruti will have a significant advantage where it can develop such
vehicles using Toyota’s research and development prowess.
After the deal’s announcement on Wednesday, the stock price of Maruti Suzuki
(MSIL), which contributes 34 per cent of the consolidated revenue of Suzuki, fell
around 3 per cent. Analysts are divided over near-term benefits to Maruti from this
partnership. “Through this crucial capital alliance, we believe MSIL has hedged its
need for technology as the sector embraces for disruption through connected,
autonomous, shared, electric, considering Toyota’s massive R&D capabilities and
current technological know-how.
Economic and Political News
RBI may drop dividend next year, likely to have changed methodology
FDI norms eased for single brand retail, digital media, manufacturing
India Ratings cuts growth forecast for FY 2019-20 to 6-year low at 6.7%
Cabinet approves Rs 6,268 crore export subsidy for 6 mn tonnes of sugar
Corporate News
Lakshmi Vilas Bank MD & CEO Parthasarathi Mukherjee announces
resignation
Macquarie targets $675-mn bet on green, tech assets to ramp up investment
Toyota, Suzuki enter into capital alliance amid a shake-up in auto industry
Brookfield in talks with Aditya Birla to buy its Real Estate Fund 1 assets
CG Power plans Rs 500-cr equity-based funding, new debt repayment
schedule
IOC to invest Rs 2 trn in 5-7 yrs, develop a new energy storage technology
Market Outlook
August 29, 2019
Top Picks
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
Favorable outlook for the AC industry to augur well
for Cooling products business which is out pacing
Blue Star
7,093
736
867
17.7
the market growth. EMPPAC division's profitability
to improve once operating environment turns
around.
Well capitalized with CAR of 18.1% which gives
sufficient room to grow asset base. Faster
ICICI Bank
2,66,667
413
490
18.6
resolution of NPA would reduce provision cost,
which would help to report better ROE.
High order book execution in EPC segment, rising
KEI Industries
3,712
470
612
30.1
B2C sales and higher exports to boost the revenues
and profitability
GST regime and the Gujarat plant are expected to
Maruti Suzuki
1,84,115
6,095
8,552
40.3
improve the company’s sales volume and margins,
respectively.
Third largest brand play in luggage segment
Increased product offerings and improving
Safari Industries
1,264
566
1,000
76.7
distribution network is leading to strong growth in
business. Likely to post robust growth for next 3-4
years
We expect financialisation of savings and
Aditya Birla Capital
19,310
88
130
48.2
increasing penetration in Insurance & Mutual fund
would ensure steady growth.
One of the leading Indian dairy products
companies in India created strong brands in dairy
products. Rising revenue share of high-margin
Parag Milk Foods
1,156
137
330
140.1
Value Added Products and reduction in interest cost
is likely to boost margins and earnings in next few
years.
HDFC Bank maintained its steady growth in the
4QFY18. The bank’s net profit grew by 20.3%.
Steady growth in interest income and other income
HDFC Bank
6,14,637
2,248
2,660
18.3
aided PAT growth. The Strong liability franchise
and healthy capitalisation provides strong earning
visibility. At the current market price, the bank is
trading at 3.2x FY20E ABV.
We expect strong PAT growth on back of healthy
growth in automobile segment (on back of new
launches and facelifts in some of the model ) and
M&M
67,120
540
724
34.1
strong growth in Tractors segment coupled by its
strong brand recall and improvement in rural
sentiment
Market leader in the room air conditioner (RAC)
outsourced manufacturing space in India with a
market share of 55.4%. It is a one-stop solutions
Amber Enterprises
2,643
840
910
8.3
provider for the major brands in the RAC industry
and currently serves eight out of the 10 top RAC
brands in India
BIL is the largest footwear retailer in India, offering
footwear, accessories and bags across brands. We
expect BIL to report net PAT CAGR of ~16% to
Bata India
19,378
1,508
1,643
9.0
~`3115cr over FY2018-20E mainly due to new
product launches, higher number of stores addition
and focus on women’s high growth segment and
margin improvement
Market Outlook
August 29, 2019
Continued...
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
SHTF is in the sweet spot with benefits from
stronger CV volumes, NIMs unaffected by
Shriram Transport Finance
rising bond yields on the back of stronger
22,494
991
1,470
48.3
pricing power and an enhancing ROE by
750bps over FY18-20E, supported by decline
in credit cost.
We expect JSPL’s top line to grow at 27%
CAGR over FY19-FY20 on the back of strong
steel demand and capacity addition. On the
Jindal Steel & Power Limited
9,772
96
250
161.0
bottom line front, we expect JSPL to turn in to
profit by FY19 on back of strong operating
margin improvement.
GMM Pfaudler Limited (GMM) is the Indian
market leader in glass-lined (GL) steel
equipment. GMM is expected to cross CAGR
GMM Pfaudler Ltd
2,208
1,511
1,570
3.9
15%+ in revenue over the next few years
mainly led by uptick in demand from user
industries and it is also expecting to increase
its share of non-GL business to 50% by 2020.
Aurobindo Pharmaceuticals, amongst the
Indian Pharmaceutical companies, is well
placed to face the challenging generic
markets, given its focus on achieving growth
Aurobindo Pharmaceuticals
34,629
591
890
50.6
through productivity. Aurobindo will report net
revenue & net profit CAGR of ~13% & ~8%
resp. during FY2018-20E. Valuations are
cheap V/s its peers and own fair multiples of
17-18x.
We believe advance to grow at a healthy
CAGR of 35% over FY18-20E. Below peers
RBL Bank
13,488
314
650
107.2
level ROA (1.2% FY18) to expand led by
margin expansion and lower credit cost.
TTK Prestige has emerged as one of the
leading brands in kitchen appliances in India
after its successful transformation from a
TTK Prestige
7,893
5,694
7,708
35.4
single product company to offering an entire
gamut of home and kitchen appliances. We
are expecting a CAGR of 18% in revenue and
25% in PAT over FY2018-20.
Maintain Hold.
Source: Company, Angel Research
Market Outlook
August 29, 2019
Fundamental Call
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
CCL is likely to maintain the strong growth
CCL Products
3,215
242
360
49.0
trajectory over FY18-20 backed by capacity
expansion and new geographical foray
We forecast Nilkamal to report top-line CAGR of
~9% to `2,635cr over FY17-20E on the back of
Nilkamal
1,478
991
2,178
119.8
healthy demand growth in plastic division. On the
bottom-line front, we estimate
~10% CAGR to
`162cr owing to improvement in volumes.
Elantas Beck India is the Indian market leader in
liquid insulation segment used in electrical
equipments like motors, transformers etc. It derives
Elantas Beck India Ltd
1,664
2,098
2,500
19.1
demand from several industries which are expected
to register 10%+ CAGR in demand in the coming
years. We can book out from the stock with 16%
profit at Rs. 2500 TP.
Greenply Industries Ltd (GIL) manufactures plywood
& allied products and medium density fibreboards
(MDF). GIL to report net revenue CAGR of ~14% to
Greenply Industries
1,711
140
256
83.4
~`2,478cr over FY2017-20E mainly due to healthy
growth in plywood & lamination business on the
back of strong brand and distribution network
L&T Fin’s new management is on track to achieve
L&T Finance Holding
18,945
95
210
121.8
ROE of 18% by 2020 and recent capital infusion of
`3000cr would support advance growth.
We expect loan book to grow at 24.3% over next
GIC Housing
970
180
424
135.5
two year; change in borrowing mix will help in NIM
improvement
Strong brands and distribution network would boost
Siyaram Silk Mills
1,016
217
549
153.3
growth going ahead. Stock currently trades at an
inexpensive valuation.
Expected to benefit from the lower capex
Music Broadcast Limited
965
35
95
172.2
requirement and 15 year long radio broadcast
licensing.
We expect Inox Wind to report exponential growth
in top-line and bottom-line over FY19-20E. The
growth would be led by changing renewable energy
industry dynamics in favor of wind energy segment
Inox Winds
761
34
120
249.9
viz. changes in auction regime from Feed-In-Tariff
(FIT) to reverse auction regime and Government’s
guidance for 10GW auction in FY19 and FY20
each.
Considering the strong CV demand due to change
in BS-VI emission norms (will trigger pre-buying
activities), pick up in construction activities and no
Ashok Leyland
19,595
67
156
133.7
significant impact on industry due to recent axle
load norms, we recommend BUY on Ashok Leyland
at current valuations.
Well planned strategy to grow small business loans
and cross-selling would propel fees income. We
Yes Bank
15,174
60
NA
NA
expect YES to grow its advance much higher than
industry and improvement in asset quality to
support profitability.
