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Top Large-Cap Stocks for Investment

07 Aug 2019 Nikita Bhoota

The companies with large market capitalization are known as large-cap stocks. These stocks are less volatile as compared to mid-cap and small-cap companies, therefore considered best investment options for investors demanding low risk in stock market. However, at present, picking up the right large-cap stock for investment is a challenge, as the Indian markets have reached record highs. Based on fundamentals, management outlook and business prospects, below mentioned are some of the large-cap stocks, which are good long-term investment bets.

Larsen & Toubro Ltd (L&T)

L&T is the largest engineering and construction company in India. We expect revenue CAGR of 12% over FY17-FY19E on account of strong order book and pickup in domestic investment cycle particularly in infrastructure, defence, and power sectors. L&T has a total order book of ~Rs 2,57,500cr, which provides strong revenue visibility over next 2 years. EBITDA is estimated to grow at 14% CAGR over FY17-FY19E due to L&T’s strong efforts to expand its high margin hydrocarbon business and favorable product mix. We forecast PAT CAGR of 11% over FY17-FY19E. The company will also consider divestment of non-core assets (Nabha Power, Katupalli Port, etc.).  We project an upside of 16% from CMP of Rs1,216 over the next 12 months.

Year Net Sales (Rscr) OPM (%) Net Profit (Rscr) EPS (Rs) PE (x) P/BV (x)
FY18E 122,662 11.5 7360 52.6 23 3.1
FY19E 137,995 11.8 8280 59.2 20 2.8

Source: 5paisa Research

HDFC Bank

HDFC Bank is the largest private sector bank in India in terms of loan book.  As on 31st March 2017, the bank had a customer base of ~4 cr and branch network of 4,715.Its CASA ratio stands at 42.9% as on Q2FY18.  Retail & whole sale forms ~54% & ~46% (Q2FY18) of its loan mix respectively. The rising proportion of high yielding retail segment is likely to increase the NIMs from 4.2% to 4.5% over FY17-FY19E. HDFC bank’s has registered ~21% loan book CAGR over past 3 years to ~Rs 5.46 lakh cr as of FY17. It is projected to grow at similar run rate of ~21% CAGR over FY17-FY19E on account of 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 GNPAand NNPA ratio stands at 1.2% and 0.4% as on Q2FY18. We expect an upside of 12% from CMP of Rs1,852 over next 12 months.

Year Net profit (Rscr) P/BV (x) ROE (%)
FY18E 17,458 4.5 16.9
FY19E 20,810 3.9 17.3

Source: 5paisa Research

ICICI prudential (IPru) Life Insurance Company

IPru Life is well positioned to capture growth opportunities arising from the buoyantequity markets, given its predominant positioning as seller of unit-linked products (ULIPs) and aided by robust distribution architecture and cost competitiveness. IPru Life has strong financials and a healthy balance sheet.We forecast IPru Life to deliver ~26% CAGR in value of new business (VNB) overFY17-19E driven by 14% CAGR in NBP (new business premium) and 390bps increasein VNB margins. Embedded Value (EV) will likely grow at ~11% CAGR over FY17-19E.Return on Embedded Value (ROEV) should remain robust at 14-16.5% over themedium term.A strong market and capital position, rapidly improving profitability metrics andpotential upside to earnings from stronger franchise growth should place IPru Life favorably among competitors. We project an upside of 18% from CMP of Rs.375 over the next 12 months.

Years Net Premium Income (Rs in Cr) VNB Margins (%) EPS P/EV (x) RoE (%)
FY18E 26,400 12.0 11.7 3.0 24.3
FY19E 31,200 13.0 13.5 2.7 24.1

Source: 5paisa Research

Petronet LNG

Petronet LNG Limited (PLNG) imports, re-gassifies and markets liquefied natural gas (LNG) in the Indian market. We expect revenue CAGR of 24% over FY17-19E on account of expected ramp-up in the Dahej terminal and increase in utilisation at Kochi terminal. The company’s Dahejcapacity expansion project to 17.5 MT is on track, and is projected to be completeby March 2019.Kochi utilisation is likely to improve further with completion of the Kochi-Mangalore pipeline by December 2018. In addition, PLNG is also evaluating options of setting up LNG terminals in Bangladesh (5m MT) and Sri Lanka (1m MT).  We expect EBITDA margins to improve by 70bps over FY17-19E on account of improvement in capacity utilization. We expect PAT CAGR of over FY17-19E. We project an upside of 15% from CMP of Rs.251 over the next 12 months.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS PE
FY18E 27,124 12.1 2,041 13.6 18
FY19E 30,719 11.6 2,310 15.4 16

Source: 5paisa Research

Reliance Industries

Reliance Industries (RIL) is one of the largest private sector enterprises in India. Its business revenue includes refiningbusiness (64%), petrochemical business (24%) and others (12%).  We expect revenue CAGR of 15% over FY17-19E on account of expansion of RJio and strong refining margin outlook.The company has rapidly grown its broadband business (4G) through RJio owing to strong operating competitiveness and healthy consumer traction. Jio’s RMS (revenue market share) is expected to be ~30% over next few years. 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.  RIL’s margins are expected to improve due to firm demand and improving utilization in polyester segment. We expect margins to remain in US$11-11.5/bbl range. Consequently, we expect PAT CAGR of 14% over FY17-19E.We project an upside of 12% from CMP of Rs 922 over the next 12 months.

Year Net Sales (Rscr) OPM (%) Net Profit (Rscr) EPS (Rs) PE (x)
FY18E 384,781 10.0 19,239 32.5 28
FY19E 409,792 15.3 30,734 51.9 18

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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Top Large-Cap Stocks for Investment

07 Aug 2019 Nikita Bhoota

The companies with large market capitalization are known as large-cap stocks. These stocks are less volatile as compared to mid-cap and small-cap companies, therefore considered best investment options for investors demanding low risk in stock market. However, at present, picking up the right large-cap stock for investment is a challenge, as the Indian markets have reached record highs. Based on fundamentals, management outlook and business prospects, below mentioned are some of the large-cap stocks, which are good long-term investment bets.

Larsen & Toubro Ltd (L&T)

L&T is the largest engineering and construction company in India. We expect revenue CAGR of 12% over FY17-FY19E on account of strong order book and pickup in domestic investment cycle particularly in infrastructure, defence, and power sectors. L&T has a total order book of ~Rs 2,57,500cr, which provides strong revenue visibility over next 2 years. EBITDA is estimated to grow at 14% CAGR over FY17-FY19E due to L&T’s strong efforts to expand its high margin hydrocarbon business and favorable product mix. We forecast PAT CAGR of 11% over FY17-FY19E. The company will also consider divestment of non-core assets (Nabha Power, Katupalli Port, etc.).  We project an upside of 16% from CMP of Rs1,216 over the next 12 months.

Year Net Sales (Rscr) OPM (%) Net Profit (Rscr) EPS (Rs) PE (x) P/BV (x)
FY18E 122,662 11.5 7360 52.6 23 3.1
FY19E 137,995 11.8 8280 59.2 20 2.8

Source: 5paisa Research

HDFC Bank

HDFC Bank is the largest private sector bank in India in terms of loan book.  As on 31st March 2017, the bank had a customer base of ~4 cr and branch network of 4,715.Its CASA ratio stands at 42.9% as on Q2FY18.  Retail & whole sale forms ~54% & ~46% (Q2FY18) of its loan mix respectively. The rising proportion of high yielding retail segment is likely to increase the NIMs from 4.2% to 4.5% over FY17-FY19E. HDFC bank’s has registered ~21% loan book CAGR over past 3 years to ~Rs 5.46 lakh cr as of FY17. It is projected to grow at similar run rate of ~21% CAGR over FY17-FY19E on account of 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 GNPAand NNPA ratio stands at 1.2% and 0.4% as on Q2FY18. We expect an upside of 12% from CMP of Rs1,852 over next 12 months.

Year Net profit (Rscr) P/BV (x) ROE (%)
FY18E 17,458 4.5 16.9
FY19E 20,810 3.9 17.3

Source: 5paisa Research

ICICI prudential (IPru) Life Insurance Company

IPru Life is well positioned to capture growth opportunities arising from the buoyantequity markets, given its predominant positioning as seller of unit-linked products (ULIPs) and aided by robust distribution architecture and cost competitiveness. IPru Life has strong financials and a healthy balance sheet.We forecast IPru Life to deliver ~26% CAGR in value of new business (VNB) overFY17-19E driven by 14% CAGR in NBP (new business premium) and 390bps increasein VNB margins. Embedded Value (EV) will likely grow at ~11% CAGR over FY17-19E.Return on Embedded Value (ROEV) should remain robust at 14-16.5% over themedium term.A strong market and capital position, rapidly improving profitability metrics andpotential upside to earnings from stronger franchise growth should place IPru Life favorably among competitors. We project an upside of 18% from CMP of Rs.375 over the next 12 months.

Years Net Premium Income (Rs in Cr) VNB Margins (%) EPS P/EV (x) RoE (%)
FY18E 26,400 12.0 11.7 3.0 24.3
FY19E 31,200 13.0 13.5 2.7 24.1

Source: 5paisa Research

Petronet LNG

Petronet LNG Limited (PLNG) imports, re-gassifies and markets liquefied natural gas (LNG) in the Indian market. We expect revenue CAGR of 24% over FY17-19E on account of expected ramp-up in the Dahej terminal and increase in utilisation at Kochi terminal. The company’s Dahejcapacity expansion project to 17.5 MT is on track, and is projected to be completeby March 2019.Kochi utilisation is likely to improve further with completion of the Kochi-Mangalore pipeline by December 2018. In addition, PLNG is also evaluating options of setting up LNG terminals in Bangladesh (5m MT) and Sri Lanka (1m MT).  We expect EBITDA margins to improve by 70bps over FY17-19E on account of improvement in capacity utilization. We expect PAT CAGR of over FY17-19E. We project an upside of 15% from CMP of Rs.251 over the next 12 months.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS PE
FY18E 27,124 12.1 2,041 13.6 18
FY19E 30,719 11.6 2,310 15.4 16

Source: 5paisa Research

Reliance Industries

Reliance Industries (RIL) is one of the largest private sector enterprises in India. Its business revenue includes refiningbusiness (64%), petrochemical business (24%) and others (12%).  We expect revenue CAGR of 15% over FY17-19E on account of expansion of RJio and strong refining margin outlook.The company has rapidly grown its broadband business (4G) through RJio owing to strong operating competitiveness and healthy consumer traction. Jio’s RMS (revenue market share) is expected to be ~30% over next few years. 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.  RIL’s margins are expected to improve due to firm demand and improving utilization in polyester segment. We expect margins to remain in US$11-11.5/bbl range. Consequently, we expect PAT CAGR of 14% over FY17-19E.We project an upside of 12% from CMP of Rs 922 over the next 12 months.

Year Net Sales (Rscr) OPM (%) Net Profit (Rscr) EPS (Rs) PE (x)
FY18E 384,781 10.0 19,239 32.5 28
FY19E 409,792 15.3 30,734 51.9 18

Source: 5paisa Research

Research Disclaimer