Article

5 Stocks to BUY during Coronavirus (COVID 19) Crisis

31 Mar 2020 Nikita Bhoota

The spread of Coronavirus (Covid 19) epidemic has created panic all over the world. In India, the number of coronavirus cases is also on the rise. According to recent media reports, 1,170 people are affected by coronavirus. To break the chain of coronavirus spread, the GOI has declared 21 days lockdown. Although, the lockdown may curb the coronavirus spread but will continue to slow down the economic activity and will shake the investor confidence in the market. However, the Government has announced Rs.1.7lakh cr relief package to support the stressed pockets in the economy and to keep the situation from getting out of control.

Largely, due to COVID impact, the Indian equity market has tumbled 22.7% Nifty 50 and 22.1% Sensex from February 28, 2020 to March 27, 2020.  Besides the crude oil war on increasing the production at a time when the demand is low due to Covid19 have also impacted the market performance. After, witnessing such a huge fall in the market, investors are rushing to liquidate their portfolio and book loss in a view that market will fall further.

However, selling the portfolio in a falling market is not the right approach, the investor should rather consider such a huge correction in the market as an opportunity to accumulate the right stock for long term wealth creation. Therefore, based, on fundamentals, management outlook and attractive valuations, 5paisa have cherry-picked below 5 stocks that can appreciate in the long-run.

Bharti Airtel

CMP: Rs. 448
Target Price: Rs595 (1-year)
Upside: 32.8%

We are positive on the stocks as the telecom player is well placed to benefit from the likely tariff up-cycle in the industry, in the next 2-3 years. TRAI’s recommendations on floor pricing may result in price hikes. Bharti is confident that its AGR dues are Rs130bn, based on self-assessment. A reconciliation exercise with DoT could result in a significant reduction in Bharti’s dues compared to the Rs370bn demanded by them. Bharti also managed to raise US$8bn in equity and debt in the past 12 months, which is timely, considering the potential impending credit squeeze in the markets. This should enable it to continue its high-capex trajectory and gain RMS. Additionally, COVID-19 impact on 4G handset supply chain that may result in higher dependence on used smart-phones (Favorable for older telcos) is beneficial for Bharti. Thus, we expect revenue CAGR of 11.8%over FY19-FY21E. We expect EBITDA CAGR of 31.5% over the same period. The stock is trading at EV/EBITDA of 9.4x FY21E

Year

Net Sales (Rs Cr)

OPM (%)

PAT(Rs Cr)

EPS(Rs)

EV/EBITDA

FY19

80,780

31.7

410

0.8

12.9

FY20E

86,848

41.7

(27,200)

-49.9

10.9

FY21E

100,912

43.9

2,100

3.8

9.4

Source: 5paisa Research

ICICI Lombard (ILOM)

CMP: Rs 1,023
Target Price: Rs 1,400 (1-year)
Upside: 36.9%

ICICI Lombard (ILOM) has corrected sharply from its highs, due to broader market sell-off driven by the COVID-19 pandemic. We see a comparatively lower risk to ILOM’s earnings, as it remains relatively insulated from the economic impact of COVID-19. We are positive on the stock as ILOM net beneficiary in the dynamic motor segment. The Structural changes in Motor TP regulations continue to give market share gains to ILOM, especially in OD, due to its strong OEM-dealer relationships. The recent Motor Vehicles Act should result in improved TP loss ratios, but in lower annual price hikes and investment float. Additionally, With GIC Re raising reinsurance rates in various sub-segments, effective Jan-2020, following up on the increase in Apr-2019, we expect Fire to be a key growth driver for ILOM. Health remains a structurally-high growth area, potentially more so after the pandemic, leading to marginal 3.6% GDPI CAGR for ILOM over FY19-21E. The stock trades at 29.5x FY21E EPS.

Year

GDPI (Rs cr)

PAT(Rs Cr)

EPS(Rs)

PE (x)

FY19

14,488

1,049

23.1

44.3

FY20E

13,948

1,213

26.7

38.3

FY21E

15,546

1,572

34.6

29.5

Source: 5paisa Research

Torrent Pharma

CMP: Rs 1,856
Target Price: Rs 2,200 (1-year)
Upside: 18.5%

The company is expected to outperform market growth in India by 150-200bps pa, driven by new product launches and in-licensing opportunities. Torrent’s recent new launches (e.g. Vildagliptin, Ticagrelor, Remogliflozin) have seen good traction till now. Thus, we expect revenue CAGR of 6.4% over FY19-21E. Management believes that OAI status on the Dahej facility is not likely to escalate into a warning letter, on the basis of the discussions of Torrent management with the USFDA. Re-inspection of the Dahej plant is expected by mid-2020, and clearance expected in 1HFY21. Indrad facility will be offered for re-inspection by 3QFY21, with clearance expected in 2HFY21.  Torrent’s deleveraging plans are on track. In 1HFY20. For full-year FY20, Torrent expects to reduce its net debt by Rs8-9bn. We project EBITDA and PAT CAGR of 9.6% and 58.1% respectively over FY19-21E. The stock is trades at 28.8x FY21E EPS.

Year

Net Sales (Rs Cr)

OPM (%)

PAT(Rs Cr)

EPS(Rs)

PE(x)

FY19

7,610

26.1

436

25.8

71.9

FY20E

7,924

27.2

947

56.0

33.1

FY21E

8,609

27.7

1,090

64.5

28.8

Source: 5paisa Research

Deepak Nitrite (DNL)

CMP: Rs 376
Target Price: Rs 570 (1-year)
Upside: 51.7%

We expect strong topline growth of 29.2% CAGR over FY19-21E driven by growth in the Basic Chemicals and the Fine & Specialty segments. Downstream derivatives of phenol and acetone should start contributing to growth from FY21E. The company continues to invest in R&D, and efforts are underway to launch new fine & specialty chemicals that are agrochemical and pharma intermediates. Further, Management expects DNL to benefit from the unfortunate outbreak of the novel coronavirus, which will likely accelerate the search for non-China suppliers. EBITDA margins are expected to improve 450 bps over FY19-21E due to continuous strength in basic chemicals, Fine and Specialty chemical segment and products business. We see PAT CAGR of 70.2% over FY19-21E. The stock is trades at 10.2x FY21E EPS.

Year

Net Sales (Rs Cr)

OPM (%)

PAT(Rs Cr)

EPS(Rs)

PE(x)

FY19

2,699

15.3

173

12.7

29.6

FY20E

4,270

23.0

560

41.1

9.2

FY21E

4,505

19.8

501

36.7

10.2

Source: 5paisa Research

Kansai Nerolac (KNPL)

CMP: Rs 359
Target Price: Rs 520 (1-year)
Upside: 45%

Kansai Nerolac (KNPL), the Indian subsidiary of Kansai Japan, with a higher industrial share than peers, will see 5% revenue CAGR over FY19-21E supported by decorative paint segment. Decorative paint demand would be driven by repainting demand and rising dealer networks in tier II and tier III cities. However, we believe industrial segment performance would largely depend on recovery of automotive industry. But, a shift in focus towards other industrial categories like coil coating & functional powder coatings would help drive segment performance. We expect EBITDA CAGR of 11.6% over FY19-21E fall in raw material price. We expect PAT CAGR of 14.9% over FY19-21E. The stock trades at 32.4x FY21E EPS.

Year

Net Sales (Rs Cr)

OPM (%)

PAT(Rs Cr)

EPS(Rs)

PE(x)

FY19

5,424

13.9

452

8.4

42.8

FY20E

5,431

15.4

536

9.9

36.1

FY21E

5,999

15.6

597

11.1

32.4

Source: 5paisa Research

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    This article claims RJio was given a "Backdoor Entry" into the 4G Based Voice Routing. The peculiar aspect is without the Voice License, Rjio would have been a mere ISP. With the license, it is now a holistic communications service provider, with ability to exponentially scale the bouquet of products. The events indicate it was meticulously planned way before the auctions because the auctions were clear on the agenda: 4G for internet only.

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5 Stocks to BUY during Coronavirus (COVID 19) Crisis

31 Mar 2020 Nikita Bhoota

The spread of Coronavirus (Covid 19) epidemic has created panic all over the world. In India, the number of coronavirus cases is also on the rise. According to recent media reports, 1,170 people are affected by coronavirus. To break the chain of coronavirus spread, the GOI has declared 21 days lockdown. Although, the lockdown may curb the coronavirus spread but will continue to slow down the economic activity and will shake the investor confidence in the market. However, the Government has announced Rs.1.7lakh cr relief package to support the stressed pockets in the economy and to keep the situation from getting out of control.

Largely, due to COVID impact, the Indian equity market has tumbled 22.7% Nifty 50 and 22.1% Sensex from February 28, 2020 to March 27, 2020.  Besides the crude oil war on increasing the production at a time when the demand is low due to Covid19 have also impacted the market performance. After, witnessing such a huge fall in the market, investors are rushing to liquidate their portfolio and book loss in a view that market will fall further.

However, selling the portfolio in a falling market is not the right approach, the investor should rather consider such a huge correction in the market as an opportunity to accumulate the right stock for long term wealth creation. Therefore, based, on fundamentals, management outlook and attractive valuations, 5paisa have cherry-picked below 5 stocks that can appreciate in the long-run.

Bharti Airtel

CMP: Rs. 448
Target Price: Rs595 (1-year)
Upside: 32.8%

We are positive on the stocks as the telecom player is well placed to benefit from the likely tariff up-cycle in the industry, in the next 2-3 years. TRAI’s recommendations on floor pricing may result in price hikes. Bharti is confident that its AGR dues are Rs130bn, based on self-assessment. A reconciliation exercise with DoT could result in a significant reduction in Bharti’s dues compared to the Rs370bn demanded by them. Bharti also managed to raise US$8bn in equity and debt in the past 12 months, which is timely, considering the potential impending credit squeeze in the markets. This should enable it to continue its high-capex trajectory and gain RMS. Additionally, COVID-19 impact on 4G handset supply chain that may result in higher dependence on used smart-phones (Favorable for older telcos) is beneficial for Bharti. Thus, we expect revenue CAGR of 11.8%over FY19-FY21E. We expect EBITDA CAGR of 31.5% over the same period. The stock is trading at EV/EBITDA of 9.4x FY21E

Year

Net Sales (Rs Cr)

OPM (%)

PAT(Rs Cr)

EPS(Rs)

EV/EBITDA

FY19

80,780

31.7

410

0.8

12.9

FY20E

86,848

41.7

(27,200)

-49.9

10.9

FY21E

100,912

43.9

2,100

3.8

9.4

Source: 5paisa Research

ICICI Lombard (ILOM)

CMP: Rs 1,023
Target Price: Rs 1,400 (1-year)
Upside: 36.9%

ICICI Lombard (ILOM) has corrected sharply from its highs, due to broader market sell-off driven by the COVID-19 pandemic. We see a comparatively lower risk to ILOM’s earnings, as it remains relatively insulated from the economic impact of COVID-19. We are positive on the stock as ILOM net beneficiary in the dynamic motor segment. The Structural changes in Motor TP regulations continue to give market share gains to ILOM, especially in OD, due to its strong OEM-dealer relationships. The recent Motor Vehicles Act should result in improved TP loss ratios, but in lower annual price hikes and investment float. Additionally, With GIC Re raising reinsurance rates in various sub-segments, effective Jan-2020, following up on the increase in Apr-2019, we expect Fire to be a key growth driver for ILOM. Health remains a structurally-high growth area, potentially more so after the pandemic, leading to marginal 3.6% GDPI CAGR for ILOM over FY19-21E. The stock trades at 29.5x FY21E EPS.

Year

GDPI (Rs cr)

PAT(Rs Cr)

EPS(Rs)

PE (x)

FY19

14,488

1,049

23.1

44.3

FY20E

13,948

1,213

26.7

38.3

FY21E

15,546

1,572

34.6

29.5

Source: 5paisa Research

Torrent Pharma

CMP: Rs 1,856
Target Price: Rs 2,200 (1-year)
Upside: 18.5%

The company is expected to outperform market growth in India by 150-200bps pa, driven by new product launches and in-licensing opportunities. Torrent’s recent new launches (e.g. Vildagliptin, Ticagrelor, Remogliflozin) have seen good traction till now. Thus, we expect revenue CAGR of 6.4% over FY19-21E. Management believes that OAI status on the Dahej facility is not likely to escalate into a warning letter, on the basis of the discussions of Torrent management with the USFDA. Re-inspection of the Dahej plant is expected by mid-2020, and clearance expected in 1HFY21. Indrad facility will be offered for re-inspection by 3QFY21, with clearance expected in 2HFY21.  Torrent’s deleveraging plans are on track. In 1HFY20. For full-year FY20, Torrent expects to reduce its net debt by Rs8-9bn. We project EBITDA and PAT CAGR of 9.6% and 58.1% respectively over FY19-21E. The stock is trades at 28.8x FY21E EPS.

Year

Net Sales (Rs Cr)

OPM (%)

PAT(Rs Cr)

EPS(Rs)

PE(x)

FY19

7,610

26.1

436

25.8

71.9

FY20E

7,924

27.2

947

56.0

33.1

FY21E

8,609

27.7

1,090

64.5

28.8

Source: 5paisa Research

Deepak Nitrite (DNL)

CMP: Rs 376
Target Price: Rs 570 (1-year)
Upside: 51.7%

We expect strong topline growth of 29.2% CAGR over FY19-21E driven by growth in the Basic Chemicals and the Fine & Specialty segments. Downstream derivatives of phenol and acetone should start contributing to growth from FY21E. The company continues to invest in R&D, and efforts are underway to launch new fine & specialty chemicals that are agrochemical and pharma intermediates. Further, Management expects DNL to benefit from the unfortunate outbreak of the novel coronavirus, which will likely accelerate the search for non-China suppliers. EBITDA margins are expected to improve 450 bps over FY19-21E due to continuous strength in basic chemicals, Fine and Specialty chemical segment and products business. We see PAT CAGR of 70.2% over FY19-21E. The stock is trades at 10.2x FY21E EPS.

Year

Net Sales (Rs Cr)

OPM (%)

PAT(Rs Cr)

EPS(Rs)

PE(x)

FY19

2,699

15.3

173

12.7

29.6

FY20E

4,270

23.0

560

41.1

9.2

FY21E

4,505

19.8

501

36.7

10.2

Source: 5paisa Research

Kansai Nerolac (KNPL)

CMP: Rs 359
Target Price: Rs 520 (1-year)
Upside: 45%

Kansai Nerolac (KNPL), the Indian subsidiary of Kansai Japan, with a higher industrial share than peers, will see 5% revenue CAGR over FY19-21E supported by decorative paint segment. Decorative paint demand would be driven by repainting demand and rising dealer networks in tier II and tier III cities. However, we believe industrial segment performance would largely depend on recovery of automotive industry. But, a shift in focus towards other industrial categories like coil coating & functional powder coatings would help drive segment performance. We expect EBITDA CAGR of 11.6% over FY19-21E fall in raw material price. We expect PAT CAGR of 14.9% over FY19-21E. The stock trades at 32.4x FY21E EPS.

Year

Net Sales (Rs Cr)

OPM (%)

PAT(Rs Cr)

EPS(Rs)

PE(x)

FY19

5,424

13.9

452

8.4

42.8

FY20E

5,431

15.4

536

9.9

36.1

FY21E

5,999

15.6

597

11.1

32.4

Source: 5paisa Research