Article

5 Stocks to Buy This Diwali

07 Aug 2019 Nikita Bhoota

During the past one year (Samvat 2074 - 2075), Indian equity market has been highly disappointing for investors. The benchmark indices i.e. Nifty 50 and Sensex have given only ~2% and ~6% returns respectively from last Diwali i.e. October 19, 2017 till October 31, 2018. Nifty Midcap 50 and Nifty Smallcap 50 tanked ~3% and ~33% respectively in the same period. Fluctuating oil prices, plunging rupee vs. dollar and fear of interest rate hike by the RBI have created havoc in the stock markets.  In October 2018, Brent crude touched a closing high of ~$86 per barrel, while, rupee has touched record closing low of ~Rs74.3. Likewise, state elections in major three states i.e. MP, Rajasthan and Jharkhand over December 2018 – January 2019, and general elections in 2019 have made investors cautious on investing in equity markets.

Well, are you also wondering which stocks to buy this Diwali considering the falling markets?  With just a week to go for Samvat 2075, 5paisa has cherry picked 5 Stocks to Buy on the auspicious occasion of Diwali based on the fundamentals, management outlook and future growth potential of the company in order to enhance their portfolio.

Reliance Industries (RIL)

RIL is a vertically integrated company with business interests in energy, materials, media and mobile telecom. Its revenue for Q2FY19 comprised of refining business (51%), petrochemical business (23%) and others (26%). The company has rapidly grown its broadband business (4G) through RJio owing to strong operating competitiveness and healthy consumer traction. RIL’s margins are estimated to remain strong on the back of firm demand and improvement in petchem segment. RIL’s GRM (Gross Refining Margin) is expected to be in the range of US$10.5-11.5/bbl over FY19-20E. Company’s petcoke gasifiers are under commissioning, which will ramp up over FY19E. Refinery Off-Gas Cracker (ROGC) has been commissioned and fully operational now. We estimate revenue CAGR of 27% over FY18-20E. In addition, traction in subscriber base and new service offerings in RJio would enhance profitability. Jio’s RMS (revenue market share) is expected to be ~43% over next few years. Consequently, we expect PAT CAGR of 18% over FY18-20E. We expect 24% upside from CMP of Rs1,061 from one-year point of view.

Year

 

Net Sales
(Rs cr)

OPM (%)

PAT (Rs cr)

EPS (Rs)

PE (x)

FY18

391,677

16.4

36,075

56.9

18.6

FY19E

606,316

14.3

46,104

72.7

14.6

FY20E

630,569

15.5

50,023

78.9

13.4

Source: 5Paisa Research

Biocon

Biocon is a fully-integrated biopharma player and has API manufacturing facilities, strong capabilities in biologics, innovative drug development and a branded generics business in India. In India, it is the largest biologics company and has products like INSUGEN, BASALOG, CANMAb etc. Biocon is developing several biosimilars with its two commercial partners, Mylan and Sandoz. Its pipeline with Mylan has started to see approvals and launches which will aid Biocon’s PAT growth by 5-6x over next five years. Additionally, pipeline with Sandoz will create further growth opportunity for Biocon. Biocon/Mylan have received USFDA approvals for Trastuzumab (Ogivri)/Pegfilgrastim (Fulphila) in US and Insulin Glargine (Semglee) in Europe. Ogivri and Fulphila are expected to be launched in Europe over next few months following recent positive CHMP opinion. Fulphila has been launched in US in Q2FY19, while Ogivri launch is expected in H2FY19E. Biocon’s research subsidiary, Syngene, has tailwinds like rupee depreciation and rising penetration of R&D outsourcing in pharmaceutical R&D spend. Syngene’s revenue/PAT is expected to grow at 27%/30% CAGR over FY18-20E on the back of new client additions, foray in API manufacturing and strong outlook on biologics. We expect Biocon to report PAT CAGR of 114% over FY18-20E. We expect 17% upside from CMP of Rs658 from one-year point of view.

Year

Net Sales

(Rs cr)

OPM (%)

PAT (Rs cr)

EPS (Rs)

PE (x)

FY18

4,129

20.1

372

6.2

106.1

FY19E

4,865

28.2

706

11.8

55.9

FY20E

6,904

41.8

1,707

28.5

23.1

Source: 5Paisa Research

Powergrid (PGCIL)

PGCIL, a Navratna company, is engaged in the transmission of power in India. It owns 85% of Inter State Transmission System (ISTS) network in the country. Besides its dominant position, the company has strategic importance as the Central Transmission Utility (CTU) of India. The company operated a transmission network consisting of transmission lines of 148,327ckm and 236 substations at the end of FY18. PGCIL also operates a telecom business which generated a revenue of Rs607cr in FY18. The total order book for PGCIL stood at Rs1.1 lakh cr, as on March 2018. The company has set a capex target of Rs25,000cr for FY19. PGCIL is likely to benefit from healthy project commissioning (Rs28,000-30,000cr per annum) leading to revenue CAGR of 12.3% over FY18-20E. This revenue growth is likely to lead to PAT CAGR of 18.7% over FY18-20E with an EBITDA margin of 88.3% in FY20E.  We see an upside of 24% from CMP of Rs186 from one-year point of view.

Year

Net Sales
(Rs cr)

OPM (%)

PAT (Rs cr)

EPS (Rs)

PE (x)

FY18

29,959

87.3

8,239

15.7

11.8

FY19E

34,255

88.4

10,122

19.3

9.6

FY20E

37,810

88.3

11,618

22.2

8.4

Source: 5Paisa Research

ICICI Prudential Life Insurance (IPru)

IPru Life has consistently been the market leader among private sector life insurance companies in India on a Retail Weighted Received Premium (RWRP) basis. IPru Life’s product mix majorly consists of ULIPs (~82% H1FY19 APE), par life savings (~8%) and protection product (~8%). It has a strong capital position with a solvency ratio of 2.34x (September 30, 2018). IPru is well positioned to capture growth opportunities arising from increase in penetration of life insurance and strong brand identity. It sources its business through the large network of ICICI Bank under bancassurance channel (~56.2% of H1FY19 annual premium equivalent). IPru Life’s 13th month persistency ratio of ~85.2% in H1FY19 is one of the best in the industry. We expect VNB (value for new business premium) margin to be around 18.8% in FY20E. We expect new business premium and PAT CAGR of 13% and 15% respectively over FY18-20E.  The embedded value of the company ~Rs19,248cr (September 30, 2018).  We see an upside of 27% from CMP of Rs331 from one-year point of view.

Year

NBP

(Rs cr)

APE (Rs cr)

VNB margin (%)

PAT (Rs cr)

P/EV (x)

FY18

9,212

7,792

16.5

1,619

2.6

FY19E

10,385

8,875

17.9

1,734

2.3

FY20E

11,739

9,970

18.8

2,152

2.0

Source: 5Paisa Research

Mphasis

Mphasis, a mid-sized IT company (part of Blackstone group), is likely to post industry leading growth on the back of traction in Direct core and HP channel. Direct core accounts for 78%/55% to Direct International/Overall revenues. Direct International deal TCV in H1FY19 reached USD363mn vs. USD551mn in FY18 of which, new-gen services made up ~77%. Significant deal wins in new-gen services (across accounts and new clients) provides good revenue visibility and hence, we expect Direct core USD revenue CAGR of ~14% over FY18-20E. HP channel (~28% of overall revenues) has turned into a valuable contributor after years of underperformance and steady mining of the channel is likely to aid USD revenue CAGR of ~13% over FY18-20E.  We project overall revenue and PAT CAGR of 17% and 23% respectively with margins improving by ~200bps over FY18-20E to 18.3%. We project an upside of 35% from CMP of Rs986 from one-year point of view.

Year

Net Sales

(Rs cr)

OPM (%)

PAT (Rs cr)

EPS (Rs)

PE (x)

FY18

6,545

16.2

837

43.3

22.8

FY19E

7,828

17.2

1,115

57.7

17.1

FY20E

9,043

18.3

1,283

66.4

14.8

Source: 5Paisa Research

Research Disclaimer


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  • Patidar Samaj

    - 2 hrs ago

    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 This Diwali

07 Aug 2019 Nikita Bhoota

During the past one year (Samvat 2074 - 2075), Indian equity market has been highly disappointing for investors. The benchmark indices i.e. Nifty 50 and Sensex have given only ~2% and ~6% returns respectively from last Diwali i.e. October 19, 2017 till October 31, 2018. Nifty Midcap 50 and Nifty Smallcap 50 tanked ~3% and ~33% respectively in the same period. Fluctuating oil prices, plunging rupee vs. dollar and fear of interest rate hike by the RBI have created havoc in the stock markets.  In October 2018, Brent crude touched a closing high of ~$86 per barrel, while, rupee has touched record closing low of ~Rs74.3. Likewise, state elections in major three states i.e. MP, Rajasthan and Jharkhand over December 2018 – January 2019, and general elections in 2019 have made investors cautious on investing in equity markets.

Well, are you also wondering which stocks to buy this Diwali considering the falling markets?  With just a week to go for Samvat 2075, 5paisa has cherry picked 5 Stocks to Buy on the auspicious occasion of Diwali based on the fundamentals, management outlook and future growth potential of the company in order to enhance their portfolio.

Reliance Industries (RIL)

RIL is a vertically integrated company with business interests in energy, materials, media and mobile telecom. Its revenue for Q2FY19 comprised of refining business (51%), petrochemical business (23%) and others (26%). The company has rapidly grown its broadband business (4G) through RJio owing to strong operating competitiveness and healthy consumer traction. RIL’s margins are estimated to remain strong on the back of firm demand and improvement in petchem segment. RIL’s GRM (Gross Refining Margin) is expected to be in the range of US$10.5-11.5/bbl over FY19-20E. Company’s petcoke gasifiers are under commissioning, which will ramp up over FY19E. Refinery Off-Gas Cracker (ROGC) has been commissioned and fully operational now. We estimate revenue CAGR of 27% over FY18-20E. In addition, traction in subscriber base and new service offerings in RJio would enhance profitability. Jio’s RMS (revenue market share) is expected to be ~43% over next few years. Consequently, we expect PAT CAGR of 18% over FY18-20E. We expect 24% upside from CMP of Rs1,061 from one-year point of view.

Year

 

Net Sales
(Rs cr)

OPM (%)

PAT (Rs cr)

EPS (Rs)

PE (x)

FY18

391,677

16.4

36,075

56.9

18.6

FY19E

606,316

14.3

46,104

72.7

14.6

FY20E

630,569

15.5

50,023

78.9

13.4

Source: 5Paisa Research

Biocon

Biocon is a fully-integrated biopharma player and has API manufacturing facilities, strong capabilities in biologics, innovative drug development and a branded generics business in India. In India, it is the largest biologics company and has products like INSUGEN, BASALOG, CANMAb etc. Biocon is developing several biosimilars with its two commercial partners, Mylan and Sandoz. Its pipeline with Mylan has started to see approvals and launches which will aid Biocon’s PAT growth by 5-6x over next five years. Additionally, pipeline with Sandoz will create further growth opportunity for Biocon. Biocon/Mylan have received USFDA approvals for Trastuzumab (Ogivri)/Pegfilgrastim (Fulphila) in US and Insulin Glargine (Semglee) in Europe. Ogivri and Fulphila are expected to be launched in Europe over next few months following recent positive CHMP opinion. Fulphila has been launched in US in Q2FY19, while Ogivri launch is expected in H2FY19E. Biocon’s research subsidiary, Syngene, has tailwinds like rupee depreciation and rising penetration of R&D outsourcing in pharmaceutical R&D spend. Syngene’s revenue/PAT is expected to grow at 27%/30% CAGR over FY18-20E on the back of new client additions, foray in API manufacturing and strong outlook on biologics. We expect Biocon to report PAT CAGR of 114% over FY18-20E. We expect 17% upside from CMP of Rs658 from one-year point of view.

Year

Net Sales

(Rs cr)

OPM (%)

PAT (Rs cr)

EPS (Rs)

PE (x)

FY18

4,129

20.1

372

6.2

106.1

FY19E

4,865

28.2

706

11.8

55.9

FY20E

6,904

41.8

1,707

28.5

23.1

Source: 5Paisa Research

Powergrid (PGCIL)

PGCIL, a Navratna company, is engaged in the transmission of power in India. It owns 85% of Inter State Transmission System (ISTS) network in the country. Besides its dominant position, the company has strategic importance as the Central Transmission Utility (CTU) of India. The company operated a transmission network consisting of transmission lines of 148,327ckm and 236 substations at the end of FY18. PGCIL also operates a telecom business which generated a revenue of Rs607cr in FY18. The total order book for PGCIL stood at Rs1.1 lakh cr, as on March 2018. The company has set a capex target of Rs25,000cr for FY19. PGCIL is likely to benefit from healthy project commissioning (Rs28,000-30,000cr per annum) leading to revenue CAGR of 12.3% over FY18-20E. This revenue growth is likely to lead to PAT CAGR of 18.7% over FY18-20E with an EBITDA margin of 88.3% in FY20E.  We see an upside of 24% from CMP of Rs186 from one-year point of view.

Year

Net Sales
(Rs cr)

OPM (%)

PAT (Rs cr)

EPS (Rs)

PE (x)

FY18

29,959

87.3

8,239

15.7

11.8

FY19E

34,255

88.4

10,122

19.3

9.6

FY20E

37,810

88.3

11,618

22.2

8.4

Source: 5Paisa Research

ICICI Prudential Life Insurance (IPru)

IPru Life has consistently been the market leader among private sector life insurance companies in India on a Retail Weighted Received Premium (RWRP) basis. IPru Life’s product mix majorly consists of ULIPs (~82% H1FY19 APE), par life savings (~8%) and protection product (~8%). It has a strong capital position with a solvency ratio of 2.34x (September 30, 2018). IPru is well positioned to capture growth opportunities arising from increase in penetration of life insurance and strong brand identity. It sources its business through the large network of ICICI Bank under bancassurance channel (~56.2% of H1FY19 annual premium equivalent). IPru Life’s 13th month persistency ratio of ~85.2% in H1FY19 is one of the best in the industry. We expect VNB (value for new business premium) margin to be around 18.8% in FY20E. We expect new business premium and PAT CAGR of 13% and 15% respectively over FY18-20E.  The embedded value of the company ~Rs19,248cr (September 30, 2018).  We see an upside of 27% from CMP of Rs331 from one-year point of view.

Year

NBP

(Rs cr)

APE (Rs cr)

VNB margin (%)

PAT (Rs cr)

P/EV (x)

FY18

9,212

7,792

16.5

1,619

2.6

FY19E

10,385

8,875

17.9

1,734

2.3

FY20E

11,739

9,970

18.8

2,152

2.0

Source: 5Paisa Research

Mphasis

Mphasis, a mid-sized IT company (part of Blackstone group), is likely to post industry leading growth on the back of traction in Direct core and HP channel. Direct core accounts for 78%/55% to Direct International/Overall revenues. Direct International deal TCV in H1FY19 reached USD363mn vs. USD551mn in FY18 of which, new-gen services made up ~77%. Significant deal wins in new-gen services (across accounts and new clients) provides good revenue visibility and hence, we expect Direct core USD revenue CAGR of ~14% over FY18-20E. HP channel (~28% of overall revenues) has turned into a valuable contributor after years of underperformance and steady mining of the channel is likely to aid USD revenue CAGR of ~13% over FY18-20E.  We project overall revenue and PAT CAGR of 17% and 23% respectively with margins improving by ~200bps over FY18-20E to 18.3%. We project an upside of 35% from CMP of Rs986 from one-year point of view.

Year

Net Sales

(Rs cr)

OPM (%)

PAT (Rs cr)

EPS (Rs)

PE (x)

FY18

6,545

16.2

837

43.3

22.8

FY19E

7,828

17.2

1,115

57.7

17.1

FY20E

9,043

18.3

1,283

66.4

14.8

Source: 5Paisa Research

Research Disclaimer