Article

Invest in these stocks before Union Budget 2018-19

12 Jan 2018 Nikita Bhoota and Gautam Upadhyaya

Union Budget 2018-19 is the most widely discussed topic these days. Everyone has high expectations from this budget particularly, as it is the first budget post GST era and the last full budget of the NDA Government for its term from 2014-19. It is expected that this budget will continue to focus on infrastructure development, job creation to stimulate the economy and improving rural income. The major topics likely to be discussed in the upcoming budget are, change in long-term capital gain tax norms and increase in the tax exemption limit from Rs2.5 lakh to Rs.3 lakh p.a.  It may also introduce new policies and reforms to uplift the rural economy, thus resulting in improving the rural consumption.

Union Budget 2018-19 is expected to be the next big trigger for the Stock market. Almost all the stocks are likely to benefit from the announcements to be made in the forthcoming budget. Based on the fundamentals, management outlook, growth prospects and technical charts we have cherry picked the below mentioned stocks for investing before the Union Budget 2019.

DB Corp

Fundamental View

DB Corp is the largest print media company with an added presence in radio and digital media. Its revenue consisted of printing & publishing (91%), Radio (6%) and Others (3%) in FY17. The company enjoys leadership position in radio listenership in cities of Rajasthan, MP and Chhattisgarh.  We expect revenue CAGR of 7.5% over FY17-19E on account of traction in local print media and increase in circulation revenue backed by increasing copies in existing markets and launch of new edition in Surat in Q1FY18E. Additionally, company's foray into radio business is seeing good traction.  Its acquisition of 13 stations to further augment the radio revenue albeit on a small base. Due to better realizations, we expect EBITDA CAGR of 8.3% over FY17-19E. Consequently, PAT would register CAGR of 11.6% over FY17-19E.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) BVPS (Rs) P/BV (x)
FY17 2,258 28.4 374 20.4 18.6 87.0 4.4
FY18E 2,425 28.3 403 22.0 17.3 104.3 3.6
FY19E 2,608 28.8 466 25.5 14.9 124.9 3.0

Source: 5 Paisa Research

Technical View

Stock DB CORP
Recommendation

The stock has managed to give a breakout above the declining trend line on the daily chart backed by a surge in volumes. The stock has also managed to give a close above its 200 day EMA. We expect the positive momentum to continue in the stock. 

Buy/Sell Range Target Stop Loss
Buy (cash) 372-376 414 348
NSE Code Market Cap(Rs in Cr) 52-week High / low 200 M.A
DBCORP 6,899 395/338 367

Texmaco Rail

Fundamental View

Texmaco’s acquisitions, Kalindee Rail Nirman (track work and signaling) and Bright Power Projects (railway electrification) have positioned it as a ‘Total Rail Solutions’ company. The company now operates in three segments - Heavy Engineering (wagons/freight cars), Steel Foundry and Rail EPC, contributing ~ 49%, 15.9% and 35.4% respectively to FY17 sales. We expect finalization of tender for 9,500 wagons by Indian Railway may help strengthen its wagon division order book. The RAIL EPC division’s sales and profitability is improving on back of completion of legacy contracts. Further, speedy electrification and completion of Dedicated Freight Corridor (DFC) projects will be positive for the company. The company’s foray into international markets - South East Asia, West Asia, Middle East Asia and Africa are likely to aid future growth in all the segments. Thus, we project revenue CAGR of 20% over FY17-19E. The present order book is ~Rs3,800cr (2.8xFY17 sales) providing strong sales visibility. We expect incremental sales to result in EBITDA margin expansion by 490bps by FY19E. PAT is expected to grow (led by improving operating performance and decline in interest) at 83% over the same period.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) P/BV (x)
FY17 1,154 5.0 34 1.6 2.5
FY18E 1,000 4.0 2 0.1 2.5
FY19E 1,650 9.9 114 5.2 2.3

Source: 5 Paisa Research

Technical View

Stock Texmaco Rail & Engineering Limited
Recommendation

The stock is in a higher top higher bottom chart structure on the daily chart and has managed to take support along the rising trend line. The trend and strength analysis indicates that the current momentum is likely to continue further.

Buy/Sell Range Target Stop Loss
Buy(cash) 117-119 136 108
NSE Code Market Cap (Rs in Cr) 52-week High / low 200 Day M.A
TEXRAIL 2,609 128/84 103

Ingersoll- Rand Ltd

Fundamental View

Ingersoll Rand (IRIL) manufactures and sells air compressors, which include reciprocating compressors, centrifugal compressors and system components. IRIL enjoys strong market positioning in domestic compressors market. We believe that pick up in user industries (automotive, metals, pharmaceuticals and textile) along with introduction of new products and development of Naroda as an export base for large reciprocating compressor packages and parts is likely to drive future sales. Thus, we see revenue CAGR of 12.5% over FY17-19E. Indigenization of most of its products and high realization from new products is likely to help the company maintain EBITDA margin despite pricing pressure. Hence, we project PAT CAGR of 12.5% over FY17-19E. The company’s debt free status and unencumbered promoter holding of 74% adds further stability. 

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) P/BV (x)
FY17 664 19.0% 77 24.4 35.7 2.6
FY18E 730 18.9% 85 26.9 32.4 2.4
FY19E 840 19.0% 97 30.9 28.2 2.2

Source: 5 Paisa Research

Technical View

Stock INGERSOLL RAND LTD
Recommendation

The stock is on the verge of witnessing a symmetrical triangle breakout on the monthly chart and has also witnessed a smart uptick in volumes. The positive strength shown by the stock on the weekly MACD Histogram affirms our bullish view on the stock. 

Buy/Sell Range Target Stop Loss
Buy(cash) 858-868 998 784
NSE Code Market Cap(Rs in Cr) 52-week High / low 200 Day M.A
INGERRAND 2,841 940/645 795

Cera Sanitaryware

Cera Sanitaryware is a pioneer in the sanitaryware segment in India. It is the third largest player in the organised sanitaryware business with market share of ~23%. It generates revenue from sanitaryware (~62%), faucets (~21%) and tiles (~17%) business. We see revenue CAGR of 23% over FY17-19E as company’s tie-up with Italian luxury brand ISEVA will help company to tap premium sanitaryware market. New innovative launches in faucet segment as well as commissioning of tiles plant in south, where presence of organised players is limited will also boost the revenues. Further, the replacement demand in India forms only 10-15% of total demand, whereas worldwide it contributes around 75-80%. Hence, with rising standard of living, the replacement demand for sanitary ware and faucet is expected to witness northward movement. Consequently, we expect ~23% CAGR in revenue over FY17-19E. The entry into premium segment, GST implementation and improving operating performance would drive PAT at ~27% CAGR over FY17-19E.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) P/BV (x)
FY17 1,006 17.0% 99 76.2 49.6 9.4
FY18E 1,172 17.00% 120 92.3 40.9 7.9
FY19E 1,383 17.0% 144 110.8 34.1 6.6

Source: 5 Paisa Research

Technical View

Stock Cera Sanitaryware Limited
Recommendation The stock is in a higher top higher bottom chart structure on the monthly and weekly chart. The stock has also formed an ascending triangle formation on the daily chart; we expect the stock to breach its upper resistance trend line and head higher.
Buy/Sell Range Target Stop Loss
Buy(cash) 3,770-3,790 4,210 3,490
NSE Code Market Cap(Rs in Cr) 52-week High /low 200 M.A
CERA 4,912 4,300/2,023 3,150

Reliance Industries Ltd

Fundamental View

Reliance Industries (RIL) is one of the largest private sector enterprises in India. RIL is a vertically integrated company with business interests in energy and materials value chain. Its revenue in FY17 comprised of refining business (64%), petrochemical business (24%) and others (12%). The company has rapidly grown its broadband business (4G) through RJio owing to strong operating competitiveness and healthy consumer traction. We estimate revenue CAGR of 18.2% over FY17-19E on account of expansion of RJio and strong refining margin outlook.  Jio’s RMS (revenue market share) is expected to be ~30% over next few years. Company’s margins are expected to remain robust due to firm demand and improving utilization in polyester segment. Refinery off-gas cracker (ROGC) has been commissioned and will be ramped up to full utilization by FY18E. In addition, company has commissioned 4 of its 10 petcoke gasifiers, which will ramp up over FY18-19E. Our outlook on refining remains strong with growth in petro-product demand outpacing supply additions. This should keep RIL’s GRM (Gross Refining Margin) in the US$11-11.5/bbl range. Consequently, we expect PAT CAGR of 12.2% over FY17-19E.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) P/BV (x)
FY17 305,400 15.1% 29,800 50.3 18.6 2.1
FY18E 392,700 15.0% 34100 57.6 16.3 1.9
FY19E 427,100 17.4% 37,600 63.5 14.8 1.7

Source: 5 Paisa Research

Technical View

Stock Reliance Industries Limited
Recommendation The stock is currently trading in a rising channel formation on the weekly chart. It has also witnessed a bullish crossover on the daily MACD Indicator. We expect the stock to trend higher and to move towards the upper end of the channel.
Buy/Sell Range Target Stop Loss
SELL-Jan Futures 935-940 1,010 888
NSE Code Market Cap(Rs in Cr) 52-week High /low 200 M.A
RELIANCE 594,779 957/508 801

Research Disclaimer

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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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Invest in these stocks before Union Budget 2018-19

12 Jan 2018 Nikita Bhoota and Gautam Upadhyaya

Union Budget 2018-19 is the most widely discussed topic these days. Everyone has high expectations from this budget particularly, as it is the first budget post GST era and the last full budget of the NDA Government for its term from 2014-19. It is expected that this budget will continue to focus on infrastructure development, job creation to stimulate the economy and improving rural income. The major topics likely to be discussed in the upcoming budget are, change in long-term capital gain tax norms and increase in the tax exemption limit from Rs2.5 lakh to Rs.3 lakh p.a.  It may also introduce new policies and reforms to uplift the rural economy, thus resulting in improving the rural consumption.

Union Budget 2018-19 is expected to be the next big trigger for the Stock market. Almost all the stocks are likely to benefit from the announcements to be made in the forthcoming budget. Based on the fundamentals, management outlook, growth prospects and technical charts we have cherry picked the below mentioned stocks for investing before the Union Budget 2019.

DB Corp

Fundamental View

DB Corp is the largest print media company with an added presence in radio and digital media. Its revenue consisted of printing & publishing (91%), Radio (6%) and Others (3%) in FY17. The company enjoys leadership position in radio listenership in cities of Rajasthan, MP and Chhattisgarh.  We expect revenue CAGR of 7.5% over FY17-19E on account of traction in local print media and increase in circulation revenue backed by increasing copies in existing markets and launch of new edition in Surat in Q1FY18E. Additionally, company's foray into radio business is seeing good traction.  Its acquisition of 13 stations to further augment the radio revenue albeit on a small base. Due to better realizations, we expect EBITDA CAGR of 8.3% over FY17-19E. Consequently, PAT would register CAGR of 11.6% over FY17-19E.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) BVPS (Rs) P/BV (x)
FY17 2,258 28.4 374 20.4 18.6 87.0 4.4
FY18E 2,425 28.3 403 22.0 17.3 104.3 3.6
FY19E 2,608 28.8 466 25.5 14.9 124.9 3.0

Source: 5 Paisa Research

Technical View

Stock DB CORP
Recommendation

The stock has managed to give a breakout above the declining trend line on the daily chart backed by a surge in volumes. The stock has also managed to give a close above its 200 day EMA. We expect the positive momentum to continue in the stock. 

Buy/Sell Range Target Stop Loss
Buy (cash) 372-376 414 348
NSE Code Market Cap(Rs in Cr) 52-week High / low 200 M.A
DBCORP 6,899 395/338 367

Texmaco Rail

Fundamental View

Texmaco’s acquisitions, Kalindee Rail Nirman (track work and signaling) and Bright Power Projects (railway electrification) have positioned it as a ‘Total Rail Solutions’ company. The company now operates in three segments - Heavy Engineering (wagons/freight cars), Steel Foundry and Rail EPC, contributing ~ 49%, 15.9% and 35.4% respectively to FY17 sales. We expect finalization of tender for 9,500 wagons by Indian Railway may help strengthen its wagon division order book. The RAIL EPC division’s sales and profitability is improving on back of completion of legacy contracts. Further, speedy electrification and completion of Dedicated Freight Corridor (DFC) projects will be positive for the company. The company’s foray into international markets - South East Asia, West Asia, Middle East Asia and Africa are likely to aid future growth in all the segments. Thus, we project revenue CAGR of 20% over FY17-19E. The present order book is ~Rs3,800cr (2.8xFY17 sales) providing strong sales visibility. We expect incremental sales to result in EBITDA margin expansion by 490bps by FY19E. PAT is expected to grow (led by improving operating performance and decline in interest) at 83% over the same period.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) P/BV (x)
FY17 1,154 5.0 34 1.6 2.5
FY18E 1,000 4.0 2 0.1 2.5
FY19E 1,650 9.9 114 5.2 2.3

Source: 5 Paisa Research

Technical View

Stock Texmaco Rail & Engineering Limited
Recommendation

The stock is in a higher top higher bottom chart structure on the daily chart and has managed to take support along the rising trend line. The trend and strength analysis indicates that the current momentum is likely to continue further.

Buy/Sell Range Target Stop Loss
Buy(cash) 117-119 136 108
NSE Code Market Cap (Rs in Cr) 52-week High / low 200 Day M.A
TEXRAIL 2,609 128/84 103

Ingersoll- Rand Ltd

Fundamental View

Ingersoll Rand (IRIL) manufactures and sells air compressors, which include reciprocating compressors, centrifugal compressors and system components. IRIL enjoys strong market positioning in domestic compressors market. We believe that pick up in user industries (automotive, metals, pharmaceuticals and textile) along with introduction of new products and development of Naroda as an export base for large reciprocating compressor packages and parts is likely to drive future sales. Thus, we see revenue CAGR of 12.5% over FY17-19E. Indigenization of most of its products and high realization from new products is likely to help the company maintain EBITDA margin despite pricing pressure. Hence, we project PAT CAGR of 12.5% over FY17-19E. The company’s debt free status and unencumbered promoter holding of 74% adds further stability. 

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) P/BV (x)
FY17 664 19.0% 77 24.4 35.7 2.6
FY18E 730 18.9% 85 26.9 32.4 2.4
FY19E 840 19.0% 97 30.9 28.2 2.2

Source: 5 Paisa Research

Technical View

Stock INGERSOLL RAND LTD
Recommendation

The stock is on the verge of witnessing a symmetrical triangle breakout on the monthly chart and has also witnessed a smart uptick in volumes. The positive strength shown by the stock on the weekly MACD Histogram affirms our bullish view on the stock. 

Buy/Sell Range Target Stop Loss
Buy(cash) 858-868 998 784
NSE Code Market Cap(Rs in Cr) 52-week High / low 200 Day M.A
INGERRAND 2,841 940/645 795

Cera Sanitaryware

Cera Sanitaryware is a pioneer in the sanitaryware segment in India. It is the third largest player in the organised sanitaryware business with market share of ~23%. It generates revenue from sanitaryware (~62%), faucets (~21%) and tiles (~17%) business. We see revenue CAGR of 23% over FY17-19E as company’s tie-up with Italian luxury brand ISEVA will help company to tap premium sanitaryware market. New innovative launches in faucet segment as well as commissioning of tiles plant in south, where presence of organised players is limited will also boost the revenues. Further, the replacement demand in India forms only 10-15% of total demand, whereas worldwide it contributes around 75-80%. Hence, with rising standard of living, the replacement demand for sanitary ware and faucet is expected to witness northward movement. Consequently, we expect ~23% CAGR in revenue over FY17-19E. The entry into premium segment, GST implementation and improving operating performance would drive PAT at ~27% CAGR over FY17-19E.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) P/BV (x)
FY17 1,006 17.0% 99 76.2 49.6 9.4
FY18E 1,172 17.00% 120 92.3 40.9 7.9
FY19E 1,383 17.0% 144 110.8 34.1 6.6

Source: 5 Paisa Research

Technical View

Stock Cera Sanitaryware Limited
Recommendation The stock is in a higher top higher bottom chart structure on the monthly and weekly chart. The stock has also formed an ascending triangle formation on the daily chart; we expect the stock to breach its upper resistance trend line and head higher.
Buy/Sell Range Target Stop Loss
Buy(cash) 3,770-3,790 4,210 3,490
NSE Code Market Cap(Rs in Cr) 52-week High /low 200 M.A
CERA 4,912 4,300/2,023 3,150

Reliance Industries Ltd

Fundamental View

Reliance Industries (RIL) is one of the largest private sector enterprises in India. RIL is a vertically integrated company with business interests in energy and materials value chain. Its revenue in FY17 comprised of refining business (64%), petrochemical business (24%) and others (12%). The company has rapidly grown its broadband business (4G) through RJio owing to strong operating competitiveness and healthy consumer traction. We estimate revenue CAGR of 18.2% over FY17-19E on account of expansion of RJio and strong refining margin outlook.  Jio’s RMS (revenue market share) is expected to be ~30% over next few years. Company’s margins are expected to remain robust due to firm demand and improving utilization in polyester segment. Refinery off-gas cracker (ROGC) has been commissioned and will be ramped up to full utilization by FY18E. In addition, company has commissioned 4 of its 10 petcoke gasifiers, which will ramp up over FY18-19E. Our outlook on refining remains strong with growth in petro-product demand outpacing supply additions. This should keep RIL’s GRM (Gross Refining Margin) in the US$11-11.5/bbl range. Consequently, we expect PAT CAGR of 12.2% over FY17-19E.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) P/BV (x)
FY17 305,400 15.1% 29,800 50.3 18.6 2.1
FY18E 392,700 15.0% 34100 57.6 16.3 1.9
FY19E 427,100 17.4% 37,600 63.5 14.8 1.7

Source: 5 Paisa Research

Technical View

Stock Reliance Industries Limited
Recommendation The stock is currently trading in a rising channel formation on the weekly chart. It has also witnessed a bullish crossover on the daily MACD Indicator. We expect the stock to trend higher and to move towards the upper end of the channel.
Buy/Sell Range Target Stop Loss
SELL-Jan Futures 935-940 1,010 888
NSE Code Market Cap(Rs in Cr) 52-week High /low 200 M.A
RELIANCE 594,779 957/508 801

Research Disclaimer