Market Outlook
July 27, 2018
Market Cues
Domestic Indices
Chg (%)
(Pts)
(Close)
Indian markets are likely to open positive tracking global indices and SGX Nifty.
BSE Sensex
0.3
126
36,985
U.S. stocks are turning in a mixed performance in morning trading on Thursday. The
Nifty
0.3
35
11,167
Dow Jones was up by 0.5% to 25,533 and the Nasdaq is down by 0.9% at 7,857.
Mid Cap
0.8
118
15,763
U.K. shares were marginally lower on Thursday even as other European markets
Small Cap
0.3
51
16,306
rallied after the U.S. and the EU agreed to work on lowering trade barriers. The
Bankex
1.4
430
30,426
benchmark FTSE 100 was down by 0.7% to 7,652.
On domestic front, Indian shares eked out modest gains to reach fresh record highs
Global Indices
Chg (%)
(Pts)
(Close)
on Thursday as earnings optimism prevailed and trade tensions eased after the U.S.
Dow Jones
0.5
119
25,553
and the EU agreed to work on lowering trade barriers. The BSE Sensex inched up by
Nasdaq
(0.9)
(75)
7,857
0.3% to 36,985.
FTSE
(0.7)
(10)
7,652
News Analysis
Nikkei
(0.1)
(27)
22,587
Tata Steel's Bhushan Steel acquisition hits NCLAT hurdle
Hang Seng
(0.5)
(140)
28,781
Shanghai Com
(0.7)
(21)
2,882
After DoT nod, Vodafone-Idea set to be country's largest telecom operator
Detailed analysis on Pg2
Advances / Declines
BSE
NSE
Advances
1,346
985
Investor’s Ready Reckoner
Declines
1,243
816
Key Domestic & Global Indicators
Unchanged
137
93
Stock Watch: Latest investment recommendations on 150+ stocks
Refer Pg5 onwards
Volumes (` Cr)
Top Picks
BSE
3,515
CMP
Target
Upside
Company
Sector
Rating
(`)
(`)
(%)
NSE
43,976
Blue Star
Capital Goods
Buy
679
867
27.7
Dewan Housing Finance
Financials
Buy
623
720
15.5
Net Inflows (` Cr)
Net
Mtd
Ytd
Parag Milk Foods
Others
Buy
294
410
39.5
FII
54
(2,041)
-6,881
Bata India
Others
Accumulate
915
955
4.4
*MFs
(199)
5,512
74,115
KEI Industries
Capital Goods
Buy
453
589
30.2
More Top Picks on Pg4
Top Gainers
Price (`)
Chg (%)
Key Upcoming Events
Previous
Consensus
WELCORP
127
13.7
Date
Region
Event Description
ReadingExpectations
J&KBANK
53
9.8
Jul 27, 2018
Euro Zone ECB announces interest rates
-
-
SRTRANSFIN
1410
9.8
Jul 30, 2018
Euro Zone Euro-Zone Consumer Confidence
(0.60)
Jul 31, 2018
US
Consumer Confidence
126.40
126.00
RECLTD
107
9.2
Jul 31, 2018
Germany Unemployment change (000's)
(15.00)
VIJAYABANK
58
8.6
Jul 31, 2018
China
PMI Manufacturing
51.50
51.30
More Events on Pg7
Top Losers
Price (`)
Chg (%)
INTELLECT
193
-8.2
NAUKRI
1390
-6.0
BAJAJELEC
597
-5.2
AVANTI
436
-5.2
HATHWAY
16
-5.1
As on July 26, 2018
Market Outlook
July 27, 2018
News Analysis
Tata Steel's Bhushan Steel acquisition hits NCLAT hurdle
Tata Steel’s acquisition of Bhushan Steel may hit a hurdle as the National
Company Law Appellate Tribunal (NCLAT) will re-examine Tata Steel’s eligibility as
a bidder. Besides, the NCLAT has also admitted a petition by operational creditor,
Larsen & Toubro (L&T) which has sought Rs 9 billion from Bhushan Steel. If the
NCLAT or the Supreme Court when appealed, gives any order which goes against
Tata’s acquisition, then it could mean increased acquisition cost for Tata Steel
which has already paid Rs 352 billion to the banks.
After DoT nod, Vodafone-Idea set to be country's largest telecom
operator
Vodafone Idea is on its way to becoming the largest telecom operator in the
country, dethroning Bharti Airtel, as the Department of Telecommunications (DoT)
has given its final nod to the merger. The approval came after the companies
deposited over Rs 72 billion to DoT on July 23 under protest. The firms have
deposited a bank guarantee of Rs 33.22 billion for one-time spectrum charges
and Rs 39.26 billion cash for liberalising spectrum up to 4.4 MHz assigned to
Vodafone administratively. The firms now need to register the merged entity with
the Registrar of Companies.
The new entity, to be headed by Vodafone insider and current Chief Operating
Officer (India) Balesh Sharma, will have a revenue market share of about 37.4 per
cent and more than 438 million subscribers. The UK-headquartered telecom
major, Vodafone, had announced the merger of its India operations with Kumar
Mangalam Birla-led Idea Cellular in March last year. After the final nod, DoT will
now transfer Vodafone India’s licences to Idea Cellular. The department will also
start transferring Vodafone’s bank guarantees for deferred spectrum payments to
Idea Cellular.
Economic and Political News
Corporate News
NCLT approves Liberty House resolution plan to acquire Amtek Auto
Market Outlook
July 27, 2018
Quarterly Bloomberg Brokers Consensus Estimate
ICICI Bank Ltd - July 27, 2018
Particulars ( ` cr)
1QFY19E
1QFY18
y-o-y (%)
4QFY18
q-o-q (%)
PAT
1,306.60
2049
(36.2)
1,020
28.1
Bank of Baroda - July 27, 2018
Particulars ( ` cr)
1QFY19E
1QFY18
y-o-y (%)
4QFY18
q-o-q (%)
PAT
166
203
(18)
-3,102
-
Mahindra & Mahindra Financial Services Ltd - July 27, 2018
Particulars ( ` cr)
1QFY19E
1QFY18
y-o-y (%)
4QFY18
q-o-q (%)
PAT
233
58
301
499
(53)
Reliance Industries Ltd - July 27, 2018
Particulars (` cr)
1QFY19E
1QFY18
y-o-y (%)
4QFY18
q-o-q (%)
Sales
1,26,900
83,471
52.0
1,16,915
8.5
EBIDTA
18,281
12,554
45.6
18,461
(1.0)
%
14.4
15.0
15.8
PAT
9,554
9,079
5.2
9,459
1.0
HCL Technologies Ltd - July 27, 2018
Particulars (` cr)
1QFY19E
1QFY18
y-o-y (%)
4QFY18
q-o-q (%)
Sales
13,921
12,149
14.6
13,178
5.6
EBIDTA
3,190
2,694
18.4
3,022
5.5
%
23
22
23
PAT
2294
2,210
3.8
2,230
2.9
NTPC Ltd - July 28, 2018
Particulars (` cr)
1QFY19E
1QFY18
y-o-y (%)
4QFY18
q-o-q (%)
Sales
21,879
19,879
10.1
23,100
(5.3)
EBIDTA
5,873
5,040
16.5
5,909
(0.6)
%
27
25
26
PAT
2,691
2,618
2.8
2,925
(8.0)
Market Outlook
July 27, 2018
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
6,533
679
867
27.7
the market growth. EMPPAC division's profitability
to improve once operating environment turns
around.
With a focus on the low and medium income (LMI)
consumer segment, the company has increased its
Dewan Housing Finance
19,546
623
720
15.5
presence in tier-II & III cities where the growth
opportunity is immense.
Well capitalized with CAR of 18.1% which gives
sufficient room to grow asset base. Faster resolution
ICICI Bank
1,83,829
286
416
45.6
of NPA would reduce provision cost, which would
help to report better ROE.
High order book execution in EPC segment, rising
KEI Industries
3,546
453
589
30.2
B2C sales and higher exports to boost the revenues
and profitability
Expected to benefit from the lower capex
Music Broadcast Limited
1,740
305
475
55.7
requirement and 15 year long radio broadcast
licensing.
Strong brands and distribution network would boost
Siyaram Silk Mills
2,485
530
851
60.5
growth going ahead. Stock currently trades at an
inexpensive valuation.
GST regime and the Gujarat plant are expected to
Maruti Suzuki
2,83,854
9,397
10,619
13.0
improve the company’s sales volume and margins,
respectively.
We expect loan book to grow at 24.3% over next
GIC Housing
1,903
353
591
67.3
two year; change in borrowing mix will help in NIM
improvement
Third largest brand play in luggage segment
Increased product offerings and improving
Safari Industries
1,621
727
800
10.0
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
31,578
143
218
52.0
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
2,473
294
410
39.5
Value Added Products and reduction in interest cost
is likely to boost margins and earnings in next few
years.
We expect MCL to report net revenue CAGR of
~15% to ~`450cr over FY2018-20E mainly due to
strong growth in online matchmaking & marriage
Matrimony.com Ltd
1,670
735
1,016
38.2
related services. On the bottom-line front, we
expect a CAGR of ~28% to `82cr over the same
period on the back margin improvement.
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
5,70,141
2,189
2,350
7.3
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.
Source: Company, Angel Research
Market Outlook
July 27, 2018
Top Picks
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
We expect strong PAT growth on back of
healthy growth in automobile segment (on back
of new launches and facelifts in some of the
M&M
1,13,254
911
1,050
15.3
model ) and 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
Amber Enterprises
2,908
925
1,230
33
solutions 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
~`3115cr over FY2018-20E
Bata India
11,762
915
955
4.4
mainly due to new product launches, higher
number of stores addition and focus on
women’s high growth segment and margin
improvement
SHTF is in the sweet spot with benefits from
stronger CV volumes, NIMs unaffected by rising
Shriram Transport Finance
31,988
1,410
1,764
25.1
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
18,942
196
350
78.6
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
1,344.
920
1,020
10.9
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
34,158
583
780
33.3
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.
Well planned strategy to grow small business
loans and cross-selling would propel fees
Yes Bank
85,219
370
435
17.6
income. We expect YES to grow its advance
much higher than industry and improvement in
asset quality to support profitability.
We believe advance to grow at a healthy CAGR
of 35% over FY18-20E. Below peers level ROA
RBL Bank
24,010
568
670
16.1
(1.2% FY18) to expand led by margin
expansion and lower credit cost.
Source: Company, Angel Research
Market Outlook
July 27, 2018
Fundamental Call
Market Cap
CMP
Target
Upside
Company
Rationale
(` Cr)
(`)
(`)
(%)
CCL is likely to maintain the strong growth
CCL Products
3,618
272
360
32.4
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
2,554
1,712
2,178
27.2
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
1,578
1,990
2,500
25.6
demand from several industries which are expected
to register 10%+ CAGR in demand in the coming
years.
Greenply Industries Ltd (GIL) manufactures plywood
& allied products and medium density fibreboards
(MDF). GIL to report net revenue CAGR of ~14% to
Greenply Industries
2,478
202
333
64.8
~`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
35,534
178
210
17.9
ROE of 18% by 2020 and recent capital infusion of
`3000cr would support advance growth.
