Market Outlook
July 03, 2019
Market Cues
Domestic Indices
Chg (%)
(Pts)
(Close)
Indian markets are likely to open flat tracking global indices and SGX Nifty.
BSE Sensex
0.3
130
39,816
Nifty
0.4
45
11,910
US stocks showed a lack of direction over the course of the trading session on
Mid Cap
0.2
36
14,981
Tuesday before eventually ending the day modestly higher. The S&P 500 reached a
new record closing high, while the Dow ended the session at a nine-month closing
Small Cap
0
44
14,283
high. The Dow rose by 0.3 percent to 26,787 and the Nasdaq inched up by 0.2
Bankex
0.2
55
35,137
percent to 8,109.
U.K. stocks shrugged off weak regional leads to edge higher on Tuesday, with
Global Indices
Chg (%)
(Pts)
(Close)
financials and energy stocks leading the surge. The FTSE 100 was up by 0.5 percent
Dow Jones
0.3
69
26,787
to 7,535.
Nasdaq
0.2
18
8,109
On domestic front, Indian shares fluctuated before finishing modestly higher on
FTSE
0.5
37
7,535
Tuesday amid mixed global cues and ahead of this week's Union Budget.The
Nikkei
2.1
454
21,730
benchmark BSE Sensex was up by 0.3 percent to 39,816.
Hang Seng
-0.3
-79
28,543
Shanghai Com
2.2
66
3,045
News Analysis
Steel mills to roll over product prices in July despite hike in input costs
Advances / Declines
BSE
NSE
Detailed analysis on Pg2
Advances
1,141
835
Declines
1,350
951
Investor’s Ready Reckoner
Unchanged
154
105
Key Domestic & Global Indicators
Stock Watch: Latest investment recommendations on 150+ stocks
Volumes (` Cr)
Refer Pg5 onwards
BSE
1,652
Top Picks
NSE
27,769
CMP
Target
Upside
Company
Sector
Rating
(`)
(`)
(%)
Blue Star
Capital Goods Accumulate
768
867
12.9
Net Inflows (` Cr)
Net
Mtd
Ytd
ICICI Bank
Financials
Buy
437
490
12.2
FII
46
1,602
82,131
Parag Milk Foods
Others
Buy
260
330
26.8
*MFs
52
6,607
7,878
Bata India
Others
Buy
1,458
1,643
12.7
KEI Industries
Capital Goods
Buy
476
612
28.5
More Top Picks on Pg4
Top Gainers
Price (`)
Chg (%)
ADANIGREEN
50
10.3
Key Upcoming Events
Previous
Consensus
ADANIPOWER
65
7.6
Date
Region
Event Description
ReadingExpectations
ADANITRANS
236
5.3
June 10, 2019
TU Central Bank Inflation Report
APLLTD
530
5.2
June 11, 2019
TH Exports YoY
0.06
--
MANPASAND
39
5.0
June 13, 2019
TH Exports
$22380m
--
June 15, 2019
TH Imports YoY
0.24
--
June 18, 2019
TH Imports
$21776m
--
Top Losers
Price (`)
Chg (%)
More Events on Pg7
GODREJPROP
959
-12.6
YESBANK
101
-7.6
QUESS
517
-6.6
SYNDIBANK
39
-5.1
COX&KINGS
33
-4.9
As on July 02, 2019
Market Outlook
July 03, 2019
News Analysis
Steel mills to roll over product prices in July despite hike in input
costs
India’s current account deficit (CAD) narrowed sharply to 0.7 per cent of the gross
Primary steel producers in India are likely to roll over the prices of their products in
July despite the sustained increase in raw material costs, which has been
squeezing
their
margins
over
the
past
few
months.
Steel prices have declined nearly 20 per cent the past three months due to weak
demand and the trend is likely to continue during the ongoing monsoon season
following slow infrastructure and construction activity. Mills are unwilling to risk an
upward
price
revision
despite
profit
margin
pressures.
While iron ore prices have surged by a staggering 36 per cent in three months and
13 per cent in June alone, to trade currently at $112 a tonne in international
markets, Coking coal and hot rolled cold prices posted a decline of up to 22 per
cent.
Steel prices on the Indian Commodity Exchange (ICEX) reported a decline of 19
per cent in the last three months to trade currently at Rs 30,000 a tonne, from Rs
37,000 a tonne in February. Producers like JSW Steel, however, are working on
the demand of specific products to take a final call on price revision. Government-
owned NMDC Ltd kept its iron ore prices unchanged for July at Rs 3,100 a tonne
and Rs 2,860 a tonne of lump and fines respectively.
Economic and Political News
Gujarat govt presents modified Rs 2 trillion budget with Rs 572 cr surplus
Corporate News
Tata Communications managing director and Group CEO Vinod Kumar
Market Outlook
July 03, 2019
Top Picks
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
Favorable outlook for the AC industry to augur well
for Cooling products business which is out pacing
Blue Star
7,399
768
867
12.9
the market growth. EMPPAC division's profitability
to improve once operating environment turns
around.
Well capitalized with CAR of 18.1% which gives
sufficient room to grow asset base. Faster
ICICI Bank
2,81,849
437
490
12.2
resolution of NPA would reduce provision cost,
which would help to report better ROE.
High order book execution in EPC segment, rising
KEI Industries
3,759
476
612
28.5
B2C sales and higher exports to boost the revenues
and profitability
GST regime and the Gujarat plant are expected to
Maruti Suzuki
1,98,134
6,559
8,552
30.4
improve the company’s sales volume and margins,
respectively.
Third largest brand play in luggage segment
Increased product offerings and improving
Safari Industries
1,481
663
1,000
50.8
distribution network is leading to strong growth in
business. Likely to post robust growth for next 3-4
years
We expect financialisation of savings and
Aditya Birla Capital
20,088
91
130
42.5
increasing penetration in Insurance & Mutual fund
would ensure steady growth.
One of the leading Indian dairy products
companies in India created strong brands in dairy
products. Rising revenue share of high-margin
Parag Milk Foods
2,188
260
330
26.8
Value Added Products and reduction in interest cost
is likely to boost margins and earnings in next few
years.
HDFC Bank maintained its steady growth in the
4QFY18. The bank’s net profit grew by 20.3%.
Steady growth in interest income and other income
HDFC Bank
6,81,659
2,494
2,660
6.6
aided PAT growth. The Strong liability franchise
and healthy capitalisation provides strong earning
visibility. At the current market price, the bank is
trading at 3.2x FY20E ABV.
We expect strong PAT growth on back of healthy
growth in automobile segment (on back of new
launches and facelifts in some of the model ) and
M&M
82,834
666
1,050
57.6
strong growth in Tractors segment coupled by its
strong brand recall and improvement in rural
sentiment
Market leader in the room air conditioner (RAC)
outsourced manufacturing space in India with a
market share of 55.4%. It is a one-stop solutions
Amber Enterprises
2,602
827
910
10.0
provider for the major brands in the RAC industry
and currently serves eight out of the 10 top RAC
brands in India
BIL is the largest footwear retailer in India, offering
footwear, accessories and bags across brands. We
expect BIL to report net PAT CAGR of ~16% to
Bata India
18,744
1,458
1,643
12.7
~`3115cr over FY2018-20E mainly due to new
product launches, higher number of stores addition
and focus on women’s high growth segment and
margin improvement
Market Outlook
July 03, 2019
Continued...
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
SHTF is in the sweet spot with benefits from
stronger CV volumes, NIMs unaffected by rising
Shriram Transport Finance
24,223
1,068
1,470
37.7
bond yields on the back of stronger pricing
power and an enhancing ROE by 750bps over
FY18-20E, supported by decline in credit cost.
We expect JSPL’s top line to grow at 27% CAGR
over FY19-FY20 on the back of strong steel
demand and capacity addition. On the bottom
Jindal Steel & Power Limited
14,310
141
250
77.5
line front, we expect JSPL to turn in to profit by
FY19 on back of strong operating margin
improvement.
GMM Pfaudler Limited (GMM) is the Indian
market leader in glass-lined (GL) steel
equipment. GMM is expected to cross CAGR
GMM Pfaudler Ltd
1,992
1,363
1,570
15.2
15%+ in revenue over the next few years
mainly led by uptick in demand from user
industries and it is also expecting to increase its
share of non-GL business to 50% by 2020.
Aurobindo Pharmaceuticals, amongst the
Indian Pharmaceutical companies, is well
placed to face the challenging generic markets,
given its focus on achieving growth through
Aurobindo Pharmaceuticals
35,794
611
890
45.7
productivity. Aurobindo will report net revenue
& net profit CAGR of ~13% & ~8% resp.
during FY2018-20E. Valuations are cheap V/s
its peers and own fair multiples of 17-18x.
We believe advance to grow at a healthy CAGR
of 35% over FY18-20E. Below peers level ROA
RBL Bank
27,930
653
775
18.7
(1.2% FY18) to expand led by margin
expansion and lower credit cost.
TTK Prestige has emerged as one of the leading
brands in kitchen appliances in India after its
successful transformation from a single product
TTK Prestige
9,237
6,664
7,708
15.7
company to offering an entire gamut of home
and kitchen appliances. We are expecting a
CAGR of 18% in revenue and 25% in PAT over
FY2018-20.
Maintain Hold.
Source: Company, Angel Research
Market Outlook
July 03, 2019
Fundamental Call
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
CCL is likely to maintain the strong growth
CCL Products
3,423
257
360
39.9
trajectory over FY18-20 backed by capacity
expansion and new geographical foray
We forecast Nilkamal to report top-line CAGR of
~9% to `2,635cr over FY17-20E on the back of
Nilkamal
1,793
1,202
2,178
81.2
healthy demand growth in plastic division. On the
bottom-line front, we estimate
~10% CAGR to
`162cr owing to improvement in volumes.
Elantas Beck India is the Indian market leader in
liquid insulation segment used in electrical
equipments like motors, transformers etc. It derives
Elantas Beck India Ltd
1,647
2,077
2,500
20.3
demand from several industries which are expected
to register 10%+ CAGR in demand in the coming
years. We can book out from the stock with 16%
profit at Rs. 2500 TP.
Greenply Industries Ltd (GIL) manufactures plywood
& allied products and medium density fibreboards
(MDF). GIL to report net revenue CAGR of ~14% to
Greenply Industries
2,041
166
256
53.8
~`2,478cr over FY2017-20E mainly due to healthy
growth in plywood & lamination business on the
back of strong brand and distribution network
L&T Fin’s new management is on track to achieve
L&T Finance Holding
23,305
117
210
80.2
ROE of 18% by 2020 and recent capital infusion of
`3000cr would support advance growth.
We expect loan book to grow at 24.3% over next
GIC Housing
1,361
253
424
67.8
two year; change in borrowing mix will help in NIM
improvement
Strong brands and distribution network would boost
Siyaram Silk Mills
1,458
311
549
76.5
growth going ahead. Stock currently trades at an
inexpensive valuation.
Expected to benefit from the lower capex
Music Broadcast Limited
1,600
58
95
64.2
requirement and 15 year long radio broadcast
licensing.
We expect Inox Wind to report exponential growth
in top-line and bottom-line over FY19-20E. The
growth would be led by changing renewable energy
industry dynamics in favor of wind energy segment
Inox Winds
1,572
71
120
69.4
viz. changes in auction regime from Feed-In-Tariff
(FIT) to reverse auction regime and Government’s
guidance for 10GW auction in FY19 and FY20
each.
Considering the strong CV demand due to change
in BS-VI emission norms (will trigger pre-buying
activities), pick up in construction activities and no
Ashok Leyland
25,789
88
156
77.6
significant impact on industry due to recent axle
load norms, we recommend BUY on Ashok Leyland
at current valuations.
Well planned strategy to grow small business loans
and cross-selling would propel fees income. We
Yes Bank
23,386
101
NA
NA
expect YES to grow its advance much higher than
industry and improvement in asset quality to
support profitability.
