Article

5 Large-Cap Stocks For Investment

01 Aug 2017 Nikita Bhoota

Large-cap stocks also popularly known as Blue-chip stocks is the one with large market capitalization. These stocks are safe and less volatile as compared to mid-cap and small-cap stocks. However, with a lot of options available, and in such an expensive market where Nifty has crossed the 10000 mark for the first time, picking up the right large-cap stocks for investment is a real challenge. Mentioned below are some of the large-cap stocks that are good for long-term investment bets.

HDFC Bank
HDFC Bank is the largest private sector bank in India in terms of loan book. The Bank has a customer base of ~4 cr with a network of 4,715 branches as of 31st March 2017. Retail & wholesale business forms are ~53% & ~47% of its loan mix respectively. Its CASA ratio is comparatively better than its peers (~48% as on Q1FY18). The rising proportion of high yielding retail segment is likely to increase the NIMs from 4.2%-4.5% over FY17-FY19E. HDFC Bank has registered ~21% loan book CAGR over past 3 years to ~Rs 5.46 lakh cr as of FY17. It is expected to grow at a similar run rate of ~21% CAGR over FY17-FY19E led by diversified product mix and strong branch network. It is expected to register ~19% PAT CAGR over FY17-FY19E as a result of improving advances and better loan mix. The company’s GNPA and NNPA ratio stands at 1.2% and 0.4% as on Q1FY18. We expect an upside of 20% from CMP of Rs 1,787 over next 12 months.


Untitled1

Source: 5paisa research

Larsen & Toubro
L&T is India’s largest engineering and construction company with no real competitors when compared to breadth and strength of their offerings. We expect the revenue CAGR of 12% over FY17-FY19E on account of strong order book and pickup in domestic investment cycle particularly in defence, infrastructure and power sector. The company has a total order book of Rs 2,61,300 cr which provides strong revenue visibility for the next 2 years. EBITDA is expected to grow at 14% CAGR over FY17-FY19E due to L&T’s strong efforts to scale up its high margin hydrocarbon business and better product mix. We estimate PAT CAGR of 11% over FY17-FY19E. We expect an upside of 19% from CMP of Rs 1,181 over next 12 months.


Untitled2

Source: 5paisa research

* Numbers are adjusted for bonus issue of 1:2 in May 2017

Britannia Industries
Britannia is an established brand in the Indian food market with strong domestic presence in biscuit segment. It has 33% market share in the biscuit business. The company has recently launched new products such as Tiger Cream, Jim-jam priced at Rs 10, Vita Mariegold, Nutri choice oats milk cookies and Good Day Wonderfulls with three variants in India. Thus, we expect revenue CAGR of 15% over FY17-FY19E. Britannia has tied up with a Greek company with 60% share, Chipita, for the manufacturing and sale of ‘ready to eat’ filled croissants and is expected to be commercialized by Q2FY18E. Britannia is also looking out for potential partnership opportunities for dairy business and biscuit business. EBITDA is expected to grow at 18% CAGR over FY17-FY19E as the company is planning a price hike of ~4% in biscuit segment and increase in product offerings. We expect PAT CAGR of 17% over FY17-FY19E. We expect an upside of 18% from CMP of Rs 3,870 over next 12 months.


Untitled3

Source:5paisa research

Motherson Sumi Systems Ltd (MSSL)
Motherson Sumi Systems Limited (MSSL) - flagship company of the Samvardhana Motherson Group, is a joint venture between Samvardhana Motherson International Limited (SMIL) and Sumitomo Wiring Systems, Ltd., Japan (SWS). The standalone company- MSSL is India’s largest manufacturer of automotive wiring harnesses. Through its subsidiary- Samvardhana Motherson Reflectec (SMR); MSSL is present in rearview mirrors market for passenger cars and has a 24% global market share. It’s other subsidiary, Samvardhana Motherson Peguform (SMP), manufactures IP modules, door trims and bumpers for European OEMs. SMRPBV’s (JV between MSSL and SMIL)’s order book at EUR 12.9bn (FY17) provides strong revenue visibility in the coming years. In addition, acquisition of PKC Group (Finland), a truck wire maker company will also aid revenue growth as it widens MSSL’s customer base and increases cross-selling opportunities. We estimate revenue CAGR of 21% over FY17-FY19E. We expect EBITDA CAGR of 22% (FY17-FY19E) led by margin improvement in SMP (51% of the total sales) as its low-margin legacy orders have started phasing out. The company is de-risking its business by aiming that no country, customer or component should contribute more than 15% of the sales. We expect PAT CAGR of 22% over FY17-FY19E. We expect an upside of 19% from CMP of Rs 319 over next 12 months.


Untitled4

Source: 5paisa research

* Numbers are adjusted for bonus issue of 1:2 in May 2017

Reliance Industries
Reliance Industries is one of the leading private sector companies in India. The company derived 64% of its total revenue from refining business, 23.5% from petrochemicals and rest from oil & gas and retail business in FY17. Reliance has rapidly grown its broadband business (4G) and has reached a customer base of 125 million vs 108 million in March 2017. Additionally, in petrochemicals, it has doubled its PX capacity from 1.9 MMT to 3.77 MMT making it world’s second largest producer of PX with 11% global market share. Further, Reliance’s USD 18.5 billion projects (pet coke gasification, polyester expansion, off-gas cracker and ethane sourcing) are on the completion stage which will improve the returns and cash flows going forward. Retail re-opening of 1441 fuel outlets is also in the last stage and is projected to be completed by Q2FY18E. Thereby, we expect revenue CAGR of 15% over FY17-FY19E. EBITDA is expected to grow at 17% over FY17-FY19E due to firm margin outlook in refining and petrochemicals business supported by delay in capacity additions in the US. Gross Refining Margin (GRM) is expected to be at $12/barrel by FY19E. However, PAT is expected to remain flat due to loss in telecom business. We expect an upside of 18% from CMP of Rs 1,592 over the next 12 months.


Untitled5

Source: 5paisa research

* Numbers are not adjusted for bonus issue of 1:1 in July 2017

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5 Large-Cap Stocks For Investment

01 Aug 2017 Nikita Bhoota

Large-cap stocks also popularly known as Blue-chip stocks is the one with large market capitalization. These stocks are safe and less volatile as compared to mid-cap and small-cap stocks. However, with a lot of options available, and in such an expensive market where Nifty has crossed the 10000 mark for the first time, picking up the right large-cap stocks for investment is a real challenge. Mentioned below are some of the large-cap stocks that are good for long-term investment bets.

HDFC Bank
HDFC Bank is the largest private sector bank in India in terms of loan book. The Bank has a customer base of ~4 cr with a network of 4,715 branches as of 31st March 2017. Retail & wholesale business forms are ~53% & ~47% of its loan mix respectively. Its CASA ratio is comparatively better than its peers (~48% as on Q1FY18). The rising proportion of high yielding retail segment is likely to increase the NIMs from 4.2%-4.5% over FY17-FY19E. HDFC Bank has registered ~21% loan book CAGR over past 3 years to ~Rs 5.46 lakh cr as of FY17. It is expected to grow at a similar run rate of ~21% CAGR over FY17-FY19E led by diversified product mix and strong branch network. It is expected to register ~19% PAT CAGR over FY17-FY19E as a result of improving advances and better loan mix. The company’s GNPA and NNPA ratio stands at 1.2% and 0.4% as on Q1FY18. We expect an upside of 20% from CMP of Rs 1,787 over next 12 months.


Untitled1

Source: 5paisa research

Larsen & Toubro
L&T is India’s largest engineering and construction company with no real competitors when compared to breadth and strength of their offerings. We expect the revenue CAGR of 12% over FY17-FY19E on account of strong order book and pickup in domestic investment cycle particularly in defence, infrastructure and power sector. The company has a total order book of Rs 2,61,300 cr which provides strong revenue visibility for the next 2 years. EBITDA is expected to grow at 14% CAGR over FY17-FY19E due to L&T’s strong efforts to scale up its high margin hydrocarbon business and better product mix. We estimate PAT CAGR of 11% over FY17-FY19E. We expect an upside of 19% from CMP of Rs 1,181 over next 12 months.


Untitled2

Source: 5paisa research

* Numbers are adjusted for bonus issue of 1:2 in May 2017

Britannia Industries
Britannia is an established brand in the Indian food market with strong domestic presence in biscuit segment. It has 33% market share in the biscuit business. The company has recently launched new products such as Tiger Cream, Jim-jam priced at Rs 10, Vita Mariegold, Nutri choice oats milk cookies and Good Day Wonderfulls with three variants in India. Thus, we expect revenue CAGR of 15% over FY17-FY19E. Britannia has tied up with a Greek company with 60% share, Chipita, for the manufacturing and sale of ‘ready to eat’ filled croissants and is expected to be commercialized by Q2FY18E. Britannia is also looking out for potential partnership opportunities for dairy business and biscuit business. EBITDA is expected to grow at 18% CAGR over FY17-FY19E as the company is planning a price hike of ~4% in biscuit segment and increase in product offerings. We expect PAT CAGR of 17% over FY17-FY19E. We expect an upside of 18% from CMP of Rs 3,870 over next 12 months.


Untitled3

Source:5paisa research

Motherson Sumi Systems Ltd (MSSL)
Motherson Sumi Systems Limited (MSSL) - flagship company of the Samvardhana Motherson Group, is a joint venture between Samvardhana Motherson International Limited (SMIL) and Sumitomo Wiring Systems, Ltd., Japan (SWS). The standalone company- MSSL is India’s largest manufacturer of automotive wiring harnesses. Through its subsidiary- Samvardhana Motherson Reflectec (SMR); MSSL is present in rearview mirrors market for passenger cars and has a 24% global market share. It’s other subsidiary, Samvardhana Motherson Peguform (SMP), manufactures IP modules, door trims and bumpers for European OEMs. SMRPBV’s (JV between MSSL and SMIL)’s order book at EUR 12.9bn (FY17) provides strong revenue visibility in the coming years. In addition, acquisition of PKC Group (Finland), a truck wire maker company will also aid revenue growth as it widens MSSL’s customer base and increases cross-selling opportunities. We estimate revenue CAGR of 21% over FY17-FY19E. We expect EBITDA CAGR of 22% (FY17-FY19E) led by margin improvement in SMP (51% of the total sales) as its low-margin legacy orders have started phasing out. The company is de-risking its business by aiming that no country, customer or component should contribute more than 15% of the sales. We expect PAT CAGR of 22% over FY17-FY19E. We expect an upside of 19% from CMP of Rs 319 over next 12 months.


Untitled4

Source: 5paisa research

* Numbers are adjusted for bonus issue of 1:2 in May 2017

Reliance Industries
Reliance Industries is one of the leading private sector companies in India. The company derived 64% of its total revenue from refining business, 23.5% from petrochemicals and rest from oil & gas and retail business in FY17. Reliance has rapidly grown its broadband business (4G) and has reached a customer base of 125 million vs 108 million in March 2017. Additionally, in petrochemicals, it has doubled its PX capacity from 1.9 MMT to 3.77 MMT making it world’s second largest producer of PX with 11% global market share. Further, Reliance’s USD 18.5 billion projects (pet coke gasification, polyester expansion, off-gas cracker and ethane sourcing) are on the completion stage which will improve the returns and cash flows going forward. Retail re-opening of 1441 fuel outlets is also in the last stage and is projected to be completed by Q2FY18E. Thereby, we expect revenue CAGR of 15% over FY17-FY19E. EBITDA is expected to grow at 17% over FY17-FY19E due to firm margin outlook in refining and petrochemicals business supported by delay in capacity additions in the US. Gross Refining Margin (GRM) is expected to be at $12/barrel by FY19E. However, PAT is expected to remain flat due to loss in telecom business. We expect an upside of 18% from CMP of Rs 1,592 over the next 12 months.


Untitled5

Source: 5paisa research

* Numbers are not adjusted for bonus issue of 1:1 in July 2017