Article

5 Evergreen Stocks to pick this Winter

31 Dec 2018

Today being the last day 2018, people are busy making new year plans, organizing parties and deciding new year resolutions. Have you thought of making investment resolutions for 2019 yet? Do you know that you can invest your savings now to earn multifold returns in the long run?  

It is advisable to make financial plans in the early age. This helps to build huge corpus to meet the personal as well as medical obligations in the long term. Indian equity markets witnessed huge volatility in the year 2018 with the market touching an all-time closing high of 11,738 (Nifty) and 38,896 (Sensex) respectively in August 2018; however, the market failed to sustain the rally and dipped 7.5% and 7.2% respectively. Fluctuating oil prices, weakening rupee and fear of upcoming general elections have affected the markets.

Considering the volatility and risk in the markets, 5paisa has picked the below 5 stocks based on historical performance, management outlook and earnings growth potential for investment from the long term perspective.

Asian Paints (APNT)

APNT enjoys 54% market share in India, ahead of Berger and Kansai Nerolac with 18% and 17% share respectively. It derives ~83% revenues (FY18) from decorative segment followed by exports (13%), industrial paints (2%) and home improvement (2%). Further, economic revival and focus on housing segment are expected to push decorative volume growth to double digits from FY19E onwards (~13/11% yoy volume growth in the decorative segment for Q1/Q2FY19). The GST rate cut in paints from 28% to 18% is expected to aid the shift in volumes from unorganised segment. APNT is planning to expand capacity from 1.1mn MT currently to 2.2mn MT over next 1-1.5 years. We project revenue and PAT CAGR of 13.3% and 12.7% respectively over FY18-20E. With moderation in crude inflation and price hike (1.5% effective December 01, 2018, over and above the 2.35% taken on October 01, 2018), we expect pressure on EBITDA margin to taper and project 60bps yoy expansion over FY18-20E to 19.6% in FY20E.

Year

Net Sales (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

16,843

19.0%

2,038

21.3

64.7

FY19E

18,947

18.7%

2,151

22.4

61.3

FY20E

21,658

19.6%

2,589

27.0

50.9

Source: 5paisa research

Maruti Suzuki (MSIL)

Maruti Suzuki is India’s largest PV player, dominating ~50% of domestic market. The automobile industry in India currently faces headwinds such as weakness in demand, higher input costs (due to weak INR), rising cost of vehicle ownership and heavy discounts prevailing in the PV space. All these factors could lead to margin drag over the next couple of quarters as costs get passed through with a lag. Despite these difficulties, we believe that MSIL is a safer bet compared to many other stocks in the auto space. It will benefit from its leadership position in the PV space (>50% market share) and planned price hikes. Moreover, petrol cars will see least price increase post BS-VI implementation, hence impact on demand will be limited. We expect revenue, EBITDA and PAT CAGR of 11%, 9% and 13% respectively over FY18-20E.

Year

Net Sales (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

79,762

15.1%

7,722

255.7

29.6

FY19E

88,152

14.4%

8,271

273.9

27.6

FY20E

98,302

14.5%

9,802

324.6

23.3

Source: 5paisa research

Dabur

Dabur is a diversified company with presence across (a) consumer care (47.6% of revenue), (b) foods (12.8%), (c) healthcare (5.9%), and (d) international business (30.2%). Company’s international business spans across Southeast Asia, MENA and USA. It enjoys a strong brand portfolio including Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola, Real, etc. We are positive on the company given market share gains in select categories (especially in juices and toothpaste categories), abating competition from Patanjali, distribution strategy (adoption of cluster-based strategy, direct distribution) and focus on new launches. Driven by the aforementioned factors, we estimate domestic volume CAGR of 9% over FY18-20E. Moreover, anniversarisation of both, currency and operating issues, would aid international performance. Thus, we expect revenue and PAT CAGR of 12.9% and 15% respectively over FY18-20E. However, due to rising inflation and lower price hike (1.5% in Q2FY19 and 2.5% expected in Q3FY19E), we expect the expansion in EBITDA margin to be marginal at 80bps yoy over FY18-20E.

Year

Net Sales (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

7,653

21.1

1,357

7.7

56.3

FY19E

8,591

21.4

1,525

8.7

50.1

FY20E

9,759

21.9

1,794

10.2

42.6

Source: 5paisa research

HDFC Bank

HDFC Bank is the largest private sector bank in India in terms of loan book. HDFC Bank has ~4.5% market share in loan book terms. Its loan book for Q2FY19-end stood at Rs7.5 lakh cr. For Q2FY19, HDFC Bank's retail and wholesale loan mix was 54:46. We expect judicious mix of wholesale and retail loan assets coupled with robust CASA growth to improve margins. Revenues to improve over FY18-20E owing to acceleration in retail loans and fee income. We believe the bank to deliver loan book CAGR of ~22% over FY18-20E augmented by its strong branch network and capital position. NIMs are expected to be stable at ~4.5% over FY18-20E due to higher credit/deposit ratio and high yield retail segment.

Year

Net profit (Rs cr)

P/BV (x)

ROE (%)

FY18

17,490

5.2

17.9

FY19E

21,160

3.9

16.7

FY20E

26,400

3.4

16.7

Source: 5paisa research

Larsen & Toubro Ltd (L&T)

Larsen & Toubro Ltd (L&T) is India’s largest and diversified engineering & construction company. The company’s business mix spans a large spectrum—from complex engineering, procurement and construction (EPC) contracts in the hydrocarbon, process, metals and cement sectors to development of infrastructure projects in sectors like ports, roads, metro rail and airports. L&T’s order book as of Q2FY19 stood at Rs2.8 lakh cr. The order inflow (ex-services) grew by 51% yoy to Rs33,900cr during Q2FY19 led by pickup in tendering activity post GST related headwinds. Higher share of shorter-cycle water and T&D projects in the order book is expected to lead to faster execution in coming quarters. We expect L&T’s order book to report CAGR of 10% over FY18-20E. We estimate revenue CAGR of 14% over FY18-20E. We believe that L&T’s focus on improving profitability will lead to PAT CAGR of 13% over FY18-20E.

Year

Net Sales

(Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

119,683

11.3

7,370

52.6

27.4

FY19E

137,119

11.4

8,984

64.1

22.4

FY20E

155,821

11.2

9,485

67.7

21.3

Source: 5paisa research

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5 Evergreen Stocks to pick this Winter

31 Dec 2018

Today being the last day 2018, people are busy making new year plans, organizing parties and deciding new year resolutions. Have you thought of making investment resolutions for 2019 yet? Do you know that you can invest your savings now to earn multifold returns in the long run?  

It is advisable to make financial plans in the early age. This helps to build huge corpus to meet the personal as well as medical obligations in the long term. Indian equity markets witnessed huge volatility in the year 2018 with the market touching an all-time closing high of 11,738 (Nifty) and 38,896 (Sensex) respectively in August 2018; however, the market failed to sustain the rally and dipped 7.5% and 7.2% respectively. Fluctuating oil prices, weakening rupee and fear of upcoming general elections have affected the markets.

Considering the volatility and risk in the markets, 5paisa has picked the below 5 stocks based on historical performance, management outlook and earnings growth potential for investment from the long term perspective.

Asian Paints (APNT)

APNT enjoys 54% market share in India, ahead of Berger and Kansai Nerolac with 18% and 17% share respectively. It derives ~83% revenues (FY18) from decorative segment followed by exports (13%), industrial paints (2%) and home improvement (2%). Further, economic revival and focus on housing segment are expected to push decorative volume growth to double digits from FY19E onwards (~13/11% yoy volume growth in the decorative segment for Q1/Q2FY19). The GST rate cut in paints from 28% to 18% is expected to aid the shift in volumes from unorganised segment. APNT is planning to expand capacity from 1.1mn MT currently to 2.2mn MT over next 1-1.5 years. We project revenue and PAT CAGR of 13.3% and 12.7% respectively over FY18-20E. With moderation in crude inflation and price hike (1.5% effective December 01, 2018, over and above the 2.35% taken on October 01, 2018), we expect pressure on EBITDA margin to taper and project 60bps yoy expansion over FY18-20E to 19.6% in FY20E.

Year

Net Sales (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

16,843

19.0%

2,038

21.3

64.7

FY19E

18,947

18.7%

2,151

22.4

61.3

FY20E

21,658

19.6%

2,589

27.0

50.9

Source: 5paisa research

Maruti Suzuki (MSIL)

Maruti Suzuki is India’s largest PV player, dominating ~50% of domestic market. The automobile industry in India currently faces headwinds such as weakness in demand, higher input costs (due to weak INR), rising cost of vehicle ownership and heavy discounts prevailing in the PV space. All these factors could lead to margin drag over the next couple of quarters as costs get passed through with a lag. Despite these difficulties, we believe that MSIL is a safer bet compared to many other stocks in the auto space. It will benefit from its leadership position in the PV space (>50% market share) and planned price hikes. Moreover, petrol cars will see least price increase post BS-VI implementation, hence impact on demand will be limited. We expect revenue, EBITDA and PAT CAGR of 11%, 9% and 13% respectively over FY18-20E.

Year

Net Sales (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

79,762

15.1%

7,722

255.7

29.6

FY19E

88,152

14.4%

8,271

273.9

27.6

FY20E

98,302

14.5%

9,802

324.6

23.3

Source: 5paisa research

Dabur

Dabur is a diversified company with presence across (a) consumer care (47.6% of revenue), (b) foods (12.8%), (c) healthcare (5.9%), and (d) international business (30.2%). Company’s international business spans across Southeast Asia, MENA and USA. It enjoys a strong brand portfolio including Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola, Real, etc. We are positive on the company given market share gains in select categories (especially in juices and toothpaste categories), abating competition from Patanjali, distribution strategy (adoption of cluster-based strategy, direct distribution) and focus on new launches. Driven by the aforementioned factors, we estimate domestic volume CAGR of 9% over FY18-20E. Moreover, anniversarisation of both, currency and operating issues, would aid international performance. Thus, we expect revenue and PAT CAGR of 12.9% and 15% respectively over FY18-20E. However, due to rising inflation and lower price hike (1.5% in Q2FY19 and 2.5% expected in Q3FY19E), we expect the expansion in EBITDA margin to be marginal at 80bps yoy over FY18-20E.

Year

Net Sales (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

7,653

21.1

1,357

7.7

56.3

FY19E

8,591

21.4

1,525

8.7

50.1

FY20E

9,759

21.9

1,794

10.2

42.6

Source: 5paisa research

HDFC Bank

HDFC Bank is the largest private sector bank in India in terms of loan book. HDFC Bank has ~4.5% market share in loan book terms. Its loan book for Q2FY19-end stood at Rs7.5 lakh cr. For Q2FY19, HDFC Bank's retail and wholesale loan mix was 54:46. We expect judicious mix of wholesale and retail loan assets coupled with robust CASA growth to improve margins. Revenues to improve over FY18-20E owing to acceleration in retail loans and fee income. We believe the bank to deliver loan book CAGR of ~22% over FY18-20E augmented by its strong branch network and capital position. NIMs are expected to be stable at ~4.5% over FY18-20E due to higher credit/deposit ratio and high yield retail segment.

Year

Net profit (Rs cr)

P/BV (x)

ROE (%)

FY18

17,490

5.2

17.9

FY19E

21,160

3.9

16.7

FY20E

26,400

3.4

16.7

Source: 5paisa research

Larsen & Toubro Ltd (L&T)

Larsen & Toubro Ltd (L&T) is India’s largest and diversified engineering & construction company. The company’s business mix spans a large spectrum—from complex engineering, procurement and construction (EPC) contracts in the hydrocarbon, process, metals and cement sectors to development of infrastructure projects in sectors like ports, roads, metro rail and airports. L&T’s order book as of Q2FY19 stood at Rs2.8 lakh cr. The order inflow (ex-services) grew by 51% yoy to Rs33,900cr during Q2FY19 led by pickup in tendering activity post GST related headwinds. Higher share of shorter-cycle water and T&D projects in the order book is expected to lead to faster execution in coming quarters. We expect L&T’s order book to report CAGR of 10% over FY18-20E. We estimate revenue CAGR of 14% over FY18-20E. We believe that L&T’s focus on improving profitability will lead to PAT CAGR of 13% over FY18-20E.

Year

Net Sales

(Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

119,683

11.3

7,370

52.6

27.4

FY19E

137,119

11.4

8,984

64.1

22.4

FY20E

155,821

11.2

9,485

67.7

21.3

Source: 5paisa research