Hero Motocorp Ltd (NSE: HEROMOTOCO ) (Share Price: Rs.2526): Potential Buy Valuation:Fairly-Valued stock with TTM PE of 15x Reasons to consider: Hero MotoCorp (Hero) has reported results for the Q4. Revenue at Rs. 7,885 crores declined by 8% yoy and net Profit down 25% to Rs 730 cr yoy. The drop in revenue can be attributed to a sharp 11% decline in volumes, while realization per vehicle rose by 3.5% yoy on account of price hikes taken by the company. Hero’s management has identified the reasons for falling market share and renewed its focus on the 150-200cc segment (where buyers are moving) and on the scooters (where Hero is late entrant). Since the auto industry has seen a slowdown in 1HFY20 but due to the good festive season, pre-buying ahead of the implementation of BSVI, a lower base, the expectation of near normal monsoon and further interest rate reduction would make 2HFY20 better. Drivers: Hero has displayed great concepts in the premium segment (200cc & 250cc) and is expected to launch three new motorcycles (Xpulse200, Xpulse 200T and HX250R). On the operating performance front, commodity prices have stabilized from the last few quarters, focus on the premium motorcycles & scooters and higher realization post BS6 to aid further. We believe the EBITDA Margins have bottomed out and is ready to bounce back gradually in the coming years due to cost rationalization and a combination of multiple things, along with Hero’s strategy of taking price increase in small steps. However, for the next 1-2 quarters, the margins to hover around the current levels as the headwinds and tailwinds are neutralizing each other. Financial: Company had reported a Revenue of Rs 7885 cr in Q4FY19 Vs Rs 8564 cr in Q4FY18 down 8%, Net Profit down 25% to Rs 730 cr in Q4FY19 vs Rs 967.5 cr in Q4FY18, whereas EBITDA stands at Rs 1069 cr in Q4FY19 vs Rs 1371 cr in Q4FY18 down 22%. EBITDA margins declined 240bps to 13.6% in Q4FY19 from 16% in"/>

12th Jul 2019 | 16:40 PM IST

Free Share Market Tips Today: Stop & Read Before You Invest In Stocks

Various popular stock market news portals and TV channels discuss trending stocks and provide free share market tips based on technical charts and often without in-depth research. Our research desk analyses these trending stock market tips and provides their 360-degree analysis in a single place so you can avoid making wrong decisions with your hard earned money. Here are the share market tips for holding duration of around six months.

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Share Market Tips For July 2019: 2nd Week

Larsen & Toubro Ltd(NSE: LT) (Share Price: Rs.1475): Potential Buy

Valuation:Fairly-Valued stock with TTM PE of 24x.

Reasons to consider: L&T said that public capex remained robust in rail, metro, power T&D, and hydrocarbons, although private sector capex was tentative. The company expects ordering to pick up more meaningfully in 2HFY20, in line with what it said in 4Q2019. L&T management said it has well articulated plans in different verticals, including plans to leverage its experience to help clients in their automation process. It is confident of further expanding RoE (RoEs improved 120bps in FY19), as outlined in the current strategic plan which ends in FY21, and has already started developing its next strategic plan for beyond FY22. The order inflow was Rs 1,768 bn in FY19, a growth of 15.6% YoY. The EBITDA margin for the year was 11.6%, up 20bps YoY. The PAT margins were 6.3%, marginally up from 6.1% in FY18. The working capital was well managed at 18% of sales, from 20% in FY18, which helped increase RoEs in FY19 to 15.3%, from 14.1% in FY18. On the debt profile continued to be stable as L&T maintained the net debt equity at 1.5x, the same as FY18.

Drivers: The company’s order inflow and revenue guidance for FY20 was strong, and we believe the improving margins and robust order book of Rs 2.9trn, it give us clear visibility of achieving the revenue growth and target RoEs. The Company has established price discovery mechanisms such as zero level costing, historical benchmarks, market intelligence, XaaS Costing Model, Digital AI Weighment systems have been introduced at the Kancheepuram Works. For its Aerospace business, two programs have been approved for procurement under SP viz. Naval Utility Helicopters (NUH) and Program 75(I) for construction of Conventional AIP Submarines indigenously. While, the EoI for NUH program has been released for Indian and Foreign OEMs in FY19, the same is expected for P75(I) in Q1 of FY20. High-speed Railway projects – modernization of railway stations, the Ahmedabad – Mumbai High-speed rail and depots are expected to gain momentum in FY20. Orders were also secured for engineering, procurement and construction of one of the tallest office structures in Amravati, construction of Cancer hospitals at 18 locations in Assam, expansion of the IIT Campus at Hyderabad, a commercial complex from a major developer and construction of a botanical garden at Oman.

  • Mumbai coastal road project.
  • Construction of Thane creek bridge connecting Mumbai to Navi Mumbai.
  • Underground metro packages in phase 2 of Bengaluru metro.
  • Bharatmala Pariyojana Phase 1, and execution proceeded in during FY2019.
  • L&T’s transportation business won the largest value single domestic order for the expansion of Delhi International Airport. Secured various orders for construction of
  • Highways as well as city infrastructure development projects.
  • 8-Lane Mumbai – Nagpur Expressway (57.9 km), Maharashtra.
  • Construction of utilities and roads for Amaravati Government Complex and Zone 12 A projects.
  • A Design & Build Systems Package for a Mass Transit System in Dhaka.
  • Overhead electrification and signaling & telecommunication package in the Eastern Dedicated Freight Corridor.

Financial: Total revenue Rs 30,822 cr in Q4FY19 vs Rs 26,941 cr in Q4FY18 up 14.4%. Net Profit at Rs. 2,394 cr in Q4FY19 vs Rs 2,301 cr in Q4FY18. Ebitda remain flat at Rs 3,460.9 cr in Q4FY19 vs Rs 3,459.5 cr in Q4FY18.

Finolex Industries Ltd(NSE: FINPIPE) (Share Price: Rs.498): Potential Buy

Valuation: Fairly-Valued stock with TTM PE of 17.8x.

Reasons to consider: Finolex Industries is one of India's leading manufacturers of pvc -U pipes & fittings and pvc resin. Its pipes and fittings largely find use in the agriculture segment followed by construction and industrial segments. It is positive on PVC pipes demand in the longer run and believes that GST would be positive for the organized players. In pipes segment, the company passes on the impact of raw material prices with a lag. Based on strong brand and quality products, the company pass on any increase in raw material prices which also protects margin during rising raw material prices. We believe that the PVC pipes demand would improve particularly in rural segment in H2FY20 based on expectation of strong Rabi season in FY20 positively impacting rural demand. And recent correction in crude prices with rupee appreciation will impact positively on margins & profitability.

Drivers: Government infrastructural projects push such as Swachh Bharat Mission, Pradhan Mantri Krishi Sinchai Yojana and the Smart City Programme, India's PVC pipes market is estimated to grow at double digit (though low) over the next few years. Industry reports contend that unparalleled focus on smart water, waste management and rainwater harvesting would give great fillip to Indian piping industry. We believe that FIL would be a major beneficiaries from government’s focus on irrigation and improvement in rural consumption in the long term. The company is targeting to grow its product range across both agri and nonagri pipes in the longer run. Addition of CPVC pipes is one such step in that direction. Further, it is expanding its product range in fittings segments. Its fittings SKUs which now stands at 1,500 and there is enough scope to expand it further. The company is expanding its capacity every year in order to achieve double digit volume CAGR in the longer run. FIL’s capacity addition plan of 40,000 tonne in FY19E is based on its target to achieve double digit volume growth in the longer run. Its aggressive capex in last few years would support its revenue growth. The company intends to add 10-15% capacity through internal accruals in the next 2 years. The company can further increase its capacity based on brownfield expansion at its existing three manufacturing locations.

Financial: Total revenue Rs 964 cr in Q4FY19 vs Rs 809 cr in Q4FY18 up 19%. Net Profit at Rs. 91 cr in Q4FY19 vs Rs 120 cr in Q4FY18 down 24%. Ebitda remain stands at Rs 159 cr in Q4FY19 vs Rs 191 cr in Q4FY18 down 16.7%.

KEI Industries Ltd(NSE: KEI) (Share Price: Rs.465): Potential Buy

Valuation: Fairly-Valued stock with TTM PE of 20x.

Reasons to consider: The KEI Industries (KEI) results were more than analyst estimates, driven by strong sales in the retail segment and growth in EPC and institutional orders. KEI is focusing on expanding its dealer network, as this sales channel offers higher brand stickiness as well as better margins and lower working capital requirement. The institutional sale growth was a positive and management expect this division to grow in double digits. The EHV (Extra High Voltage) sales was another growth engine and is expected to rise further, considering the government push for underground electrification and metro transport. KEI’s domestic institutional division reported a revenue growth of 14% to Rs 6,250 mn in Q4FY18. The EHV sales were up by more than 81% and EPC up by more than 32%. Exports grew 36%. The institutional segment rose 18%. Retail sales were Rs 4,060 mn, a growth of 29%. We believe this occurred due to expansion of dealer network and brand perception. Pending order as on date is Rs 47,070 Mn plus L1 is Rs 1,130 Mn for EHV.

Drivers:KEI has completed the 2nd phase of the HT power cable expansion at Pathredi. Debottlenecking of Pathredi plant will also take place, which will increase production capacity in next 3-4 years. In Silvassa, KEI plans to expand capacity of house wires in two phases, with a capex of Rs 900-1,000mn. This expansion is expected to be completed by the end of FY20. KEI is reaping the fruits of its thrust on the retail segment, with a strong growth and higher margin profile. KEI currently has more than 1,450 dealers and is expected to grow this by at least 10% every year. The sales from this segment is expected to grow by about 25%. Given more than 50% of the sales through channel financing, KEI’s working capital remains in control. The channel financing is expected to grow to 70-80% in the next 2- 3 years. The electrician meets are being continued at a fast pace, as they are a key influencer in the buying decision of consumers. As mangement expected to grow in FY20 by 17-18 % as a whole. EPC will grow at 10%,EHV Cable has capacity to go upto 3,500-4,000 mn in FY20. Demand drivers will be government initiatives for O&G sector, metro projects, and power sector.

Financial: Total revenue Rs 1258 cr in Q4FY19 vs Rs 1030 cr in Q4FY18 up 22%. Net Profit at Rs. 60 cr in Q4FY19 vs Rs 49.5 cr in Q4FY18 up 21%. Ebitda remain stands at Rs 141 cr in Q4FY19 vs Rs 100.5 cr in Q4FY18 up 40.6%.

Sterlite Technologies Ltd(NSE: STRTECH) (Share Price: Rs.165 ): Potential Buy

Valuation: Under-Valued stock with TTM PE of 12x.

Reasons to consider:Sterlite Tech reported good set of numbers in Q4 FY19 driven by increase in revenue contribution from service and solutions business. Revenue recorded remarkable growth of 111% YoY to Rs 1791 cr driven by early execution of the navy order. EBITDA stood at Rs 326 cr, an increase of 40% YoY while margin reported at 18% which is down 800bps YoY. Decrease in margin was primarily driven by the increase in execution of service orders and softening of fibre prices. Order book remains robust at Rs 10,516 cr and gives us a good revenue visibility. Net Profit came at Rs 165 cr up 49% YoY. In Geographical mix, Europe become extremely strong market for the company and contributed 24% in FY19 to the topline.

Drivers: Company has strengthened its position in Europe through acquisition of Metallurgica Bresciana in Italy, which has added new products and customer portfolio. The management has guided that the company’s planned expansion with new industry 4.0 plant at Aurangabad is expected to be ready with (50 million fkm) fibre capacity by June 2019. Second planned capex is on track to double its fibre cable capacity of 33 million fkm by June 2020. On Service business demand was driven by national broadband initiatives of "Bharat -Net" along with the State initiatives of "Smart Cities“ and also spending on network modernization by defence and power & utilities. Customer mix has also evolved (with strengthening of new customer segment like Enterprise and citizen network which roughly contributes 37% in FY19 topline). The management expects service business contribution to increase to 50% in next 2-3 years. It has also guided EBITDA margin of 25-26% in the product business and 11-12% in the network solution business. Company to tap USD75bn data solution opportunity by 2023 with its 4 pronged Strategy which is 1) Innovate (new value added product and offering), 2) Scale (new customer and geographies), 3) Expand into new portfolio and application and 4) Integrated (moving towards integrated solutions based offering). We believe company is on a right trajectory to deliver subsequent growth amidst increase in fibre capacity and increasing execution of service orders, growing international presence and winning large number of deals. Going ahead, we believe the company is well positioned to address network creation opportunity, as telcos, cloud companies and new digital infrastructure players create hyper-scale networks, and data network solutions for Mobility, Last-mile access, Long-haul connectivity, Network modernization and Data centers, across large customer segments globally. We also expect that once roll out of 5G on a commercial basis is commenced, it would further spur the volume of optic fibre and fibre cable thereon, which requires strong network connectivity to carry the backhaul.

Financial: Total revenue Rs 1791 cr in Q4FY19 vs Rs 847 cr in Q4FY18 up 111%. Net Profit at Rs. 165 cr in Q4FY19 vs Rs 112 cr in Q4FY18 up 49%. Ebitda remain stands at Rs 326 cr in Q4FY19 vs Rs 232 cr in Q4FY18 up 40%.

Share Market Tips For July 2019: 1st Week

State Bank of India (NSE: SBIN) (Share Price: Rs.368): Potential Buy

Valuation:Under-Valued stock with TTM P/BV of 1.55x.

Reasons to consider: SBIN is India's largest public sector bank. In its recent quarterly result bank has reported 13% growth in advances YoY and deposit growth was seen slightly suggish at around 7.6% YoY, while CASA was improved 6 bps YoY. NII was up 15% Rs 22,954 cr YoY and NIM was stood at 2.78% expanding to 28 bps YoY. On asset quality side bank has performed well its GNPA at 7.53% improving by 338 bps YoY while NNPA was at 3.01% improving by 94 bps YoY. PAT at Rs 838 Cr is down 78% QoQ, translating into ROA of 0.09% on account of high provisions the bank had to make in order to finish the year with cleaner books. We expect the ROA to rise in coming years to 0.55% and 0.75% by FY20/21 on the back of several recoveries in line from three major accounts: Essar Steel, Bhushan Steel and Alok Industries amounting around Rs 16,000 Cr along with a recoveries of around Rs 17,000 Cr (after 50% write-off of corporate NNPA of INR 34,000 Cr) from other NPA accounts.

Drivers: SBIN Chairman in the concall addressed with the clear guidance of the Management towards improving the asset quality of the bank. It said corporate NNPA stood at Rs 34,000 Cr at the end of March 2019,of which the banks confidently declared of recovering +50% in FY20. The management acknowledged 3 major accounts alone of Essar Steel, Bhushan Steel and Alok Industries, from where the bank expects to recover almost Rs 16,000 Cr alone during FY20 (after taking hair-cuts of around 50%). Regarding the other major accounts, the management said: IL&FS have been provisioned 900 Cr during Q3 FY19, Jet Airways provisioned fully during March 2019 while DHFL still is a standard asset but kept under watch list. On the recovery front, the Bank acknowledged the recovery of Rs 37,000 Cr during FY19 and Rs 11,000 Cr in Q4FY19, and expects similar if not more recovery during FY20 as well. Going forward, the Management also provided a FY20 PPOP (Pre-Provision operating profit) guidance of Rs 70,000 Cr from core business, 15,000 Cr of recoveries and Rs 5,000 Cr of stake sale in subsidiaries (85,0000-90,000) Cr. SBIN is currently trading at a P/Adj.BV multiple of 1.1x/1.05x on FY20E/FY21E book value and we expect the valuation of the bank to improve on back of its improving ROE outlook and asset quality metrics.

Financial: Its annouces Q4 result where, Net interest income stood at Rs 22,954 Cr in Q4FY19. Net advances grew by 13% YoY to Rs 22,935(bn). CASA grown by 6bps to 45.7% YoY. Net profit at Rs 838 cr YoY. NIM remain at 2.78% YoY.

HDFC (NSE: HDFC) (Share Price: Rs.2280): Potential Buy

Valuation: Fairly-Valued stock with TTM P/BV of 5.1x.

Reasons to consider: HDFC reported loan growth of 13.1% YoY to Rs 406607 crore. Individual loan book which constitutes 71% of the portfolio continue to grow at a healthy pace of 14.9% YoY at Rs 288819 crore. Growth in non-individual/ corporate portfolio slowed for 2nd consecutive quarter in a row to 8.4% YoY on back of unfavourable lending environment. On asset quality front, HDFC reported marginally improvement in asset quality QoQ with GNPA ratio declining 4 bps to 1.18%. GNPA in nonindividual/ corporate witnessed improvement of 12 bps QoQ to 2.34%, while individual loans GNPA remained steady at 0.7%. While, Operational performance remain stable, attributable to higher other income & healthy NII. Other income was aided by extra ordinary gains from stake sale in Gruh finance which was around Rs 1900 cr.

Drivers: Given tight liquidity conditions and headwinds in real estate, HFCs are facing twin balance sheet problem of moderation in growth as well as increasing risk of deterioration in asset quality, especially on exposure to developers financing. While, on the other side HDFC Ltd led by superior fundamental is expected to outperform its peers. It has been a consistent performer, maintaining loan spreads of 2.29-2.33% loan spreads since last 5 years, across interest rates cycles. It also enjoys the industry’s best rating (CRISIL AAA/Stable), due to its healthy asset quality (GNPA at a stable 1.18%) and a diversified and stable resource profile. We believe that lower competitive intensity should benefit strong players such as HDFC. We believe HDFC will continue to maintain its robust credit risk profile in the medium term, backed by its healthy asset quality and a strong financial risk profile. Its subsidiaries like HDFC Bank, HDFC Asset Management Company and HDFC Life are industry leaders in their own respective segments and their listing further strengthens the financial risk profile of the franchise. Govt policies thrust for housing expected to continue with the Government’s oft stated focus towards Housing, one can reasonably expect measures benefitting / encouraging demand in the segment. Earlier, in the first edition of the NDA government, steps like GST rates reduction, policy incentives for homebuyers etc were helpful. Financiers, should be a key component and beneficiary of favorable govt. policies and HDFC being the Industry leader, should be key beneficiaries.

Financial: Its annouces Q4 result where, Net interest income stood at Rs 2,847 Cr in Q4FY19. Net advances grew by 5.5% to Rs 406,607 YoY. Net profit at Rs 2,862 cr vs Rs 1,961 cr YoY. NIM remain at 3.1% YoY.

RITES Ltd (NSE: RITES) (Share Price: Rs.306): Potential Buy

Valuation: Fairly-Valued stock with TTM PE of 14x.

Reasons to consider: RITES Limited is a wholly owned Government Company, a Miniratna enterprise. It is a leading player in the transport consultancy and engineering sector in India with diversified services and geographical reach. In Q4 company has posted robust number PAT rises 70% to Rs 132 cr YoY and revenue rises 30% to Rs 714 cr YoY. It also has good dividend yield. It provides services to traditional railways, rail projects of power companies, metro rail projects, ports, and highways. Rites is also involved in leasing railway locomotives to domestic non�railway customers and exports locos. In the past three years Rites has also been nominated by the Indian Railways to undertake turnkey execution of railway projects in new line laying, doubling and gauge conversion.

Drivers: Rites has developed specialized expertise over the years in providing consultancy services across major market segments in the transport infrastructure sector including railways, urban transport, roads and highways, ports, inland waterways, airports and ropeways. Rites has maintained a strong balance sheet over the years with virtually no debt as on March 2018. The company has also enjoyed healthy operating cashflows. Operating cashflows between FY15- FY18 has grown at a CAGR of 15% where Rites continues to be a debt free and asset light company and where its growth in revenue and profitability has been consistent over the last few years. Rites has also reported average RoE of 17-18% during the past 3 years, thus showing strong commitment on delivering shareholders return. Hence going ahead we expect that Rites has the capability to sustain the robust financials performance given its strong order book and asset light model. The management has also clearly stated that consultancy business will continue to grow and will help it sustain EBIDTA margins of 37-38% going ahead also, RITES should benefit from growing railways capex, new metro projects, development of airports in tier 2 and 3 cities, and infrastructure investments in countries where India’s EXIM Bank has provided funding. we believe that Rites is supported by a competent management team and promoters, and is well positioned to ride the next wave in the Infrastructure sector and believe that Rites is well positioned for long term sustainable growth.

Financial: Total revenue Rs 714 cr in Q4FY19 vs Rs 549 cr in Q4FY18 up 30%. PAT at Rs. 132 cr in Q4FY19 vs Rs 83 cr in Q4FY18 up 59%. Ebitda stands at Rs 215 cr in Q4FY19 up 56.5% vs Rs. 137 cr in Q4FY18.

Welspun Corp Ltd (NSE: WELCORP) (Share Price: Rs.145 ): Potential Buy

Valuation: Fairly-Valued stock with negative earnings .

Reasons to consider: Welspun Corp (WCL) is a leading global manufacturer of large diameter pipes with an installed capacity of 2.4 Mn tonnes. With the execution and addition of the latest order of 180KT, the company order book at the start of FY20 now stands at 1.66 MT (in terms of revenue Rs141 bn), to be executed over next 15-18 months. WCL has entered into an agreement to sell PCMD division and 43MW power plant, at a consideration of Rs9.4 bn, this will make balance sheet further cleaner, post the completion of the transaction which will complete by the end of Dec’19. With the cleaner balance sheet and completion of capex cycle, Free Cash Flow is expected to improve backed by strong operational performance. The only key risk to the company is steel price volatility which can impact performance and Low crude price which can defer investments in oil and gas industry.

Drivers: Given its strong manufacturing and execution capabilities, strong order backlog coupled with robust bids in the pipeline (2.3 MT), we believe, WCL is better placed compared to its peers, to take advantage of renewed pipe demand globally and in the domestic market. Going ahead, since a large part of revenues is expected to come from the US which should support margins. Backed by improvement in operating performance and decline in interest outgo (focus is on reducing debt). Management indicated that huge business potential exists in Saudi region, as most of the desalination plants are far from demand area. Management sees strong demand in both, Oil & Gas and Water sectors, driven by Saudi Aramco and SWCC respectively. The current order book in Saudi currently stands at 800KT, which is the 3x installed capacity, which provides huge revenue visibility. Management also indicated that local players will get 10% price preference in addition to the protection.

Financial: Total revenue Rs 2,756 cr in Q4FY19 vs Rs 1,658 cr in Q4FY18 up 66%. Net loss at Rs. 148 cr in Q4FY19 vs Rs 7.6 cr in Q4FY18. Ebitda stands at Rs 41 cr in Q4FY19 down 73.5% vs Rs. 158 cr in Q4FY18.

Share Market Tips For June 2019: 4th Week

Parag Milk Foods Ltd (NSE: PARAGMILK) (Share Price: Rs.257 ): Potential Buy

Valuation:Fairly-Valued stock with TTM PE of 17x.

Reasons to Consider: Net Sales rose by a robust 30% YoY to Rs 660 crore. Revenue from VAPs (Value Added Products) rose 25% driven by a slew of new product launches and 75% growth in SMP (Skimmed Milk Powder) sales as company reduced inventory during the quarter. The recent acquisition of Danone's plant in Sonepat, Haryana contributed Rs 12 crore to top line in this quarter. The contribution of Health& Nutrition Products (part of VAPs) increased to 3.5% of revenue as compared to 2.5% in FY'18. In April'19 Company has taken price hike of 1%. EBITDAM (excluding other income) dropped by a substantial 419 bps YoY as Marketing & Logistics spend towards improving reach and range witnessed marked increase. There has been a marked improvement on the working capital front, with NWC days down to 68 in FY19 from 72 in FY18. It has developed a portfolio of dairy products under its kitty which includes four flagship brands Gowardhan, Go, Topp Up & Pride of Cows.

Key Drivers: There has been a substantial expansion of the company's distribution network with retail reach increasing to 3.8 lac outlets currently compared to 2.5 lac outlets at FY'18 end. In FY'19, company has incurred a capital expenditure to the tune of Rs 80 crore and has guided for Rs 60-65 crore each for FY'20 and FY21. Debt on BS has reduced by Rs 50 crore to 215 crore over the last 12 months. It has launched the premium liquid milk under 'Pride of Cow' brand in Delhi, NCR region which was till now available in only 3 cities ( Mumbai, Pune & Surat ). Going forward, aggressive expansion of distribution network & inorganic growth is expected to aid revenue growth (acquisition of Danone India's dairy plant at Sonepat, Haryana in FY'18). The overall return profile will also likely improve as capex requirement will largely pertain to maintenance over the next two years.

Financial: Total revenue Rs 660 cr in Q4FY19 vs Rs 509 cr in Q4FY18 up 30%. PAT at Rs. 28.5 cr in Q4FY19 vs Rs 22 cr in Q4FY18 up 29%. Ebitda stands at Rs.46 cr in Q4FY19 down 13% vs Rs. 52.5 cr in Q4FY18.

Apollo Tyres Ltd (NSE: APOLLOTYRE) (Share Price: Rs.202): Potential Buy

Valuation: Fairly-Valued stock with TTM PE of 17x.

Reasons to consider: Apollo Tyres (ATL) posted a weak set of numbers for Q4FY19. Consolidated revenues came in at Rs 4,274 crore, up 6.0% YoY (Asia Pacific Middle East and Africa i.e. APMEA up 7.9% YoY, Europe flat YoY). Domestically ATL realises 60% sales from replacement market, with sizeable 30% exposure to the OEM market and the remainder 10% from exports. However, strong volume growth registered by OEMs in the past few years would percolate into a ready aftermarket base over the medium term going forward. We feel the replacement market would continue providing steady volume support in the ancillary space including at ATL. Further, H2FY20E may also see some revival in the OEM segment ahead of the new emission standards rollout from April 2020. In this quarter it has written off fully IL&FS deposit exposure which has again dented its profitability.

Key Drivers: ATL is witnessing strong demand in truck replacement segment which accounts for 70% of demand in Indian operations. Replacement growth is more than offsetting the slowdown in OEM demand. ATL has guided for double-digit growth in the standalone business for FY2020. The European operations are also set to report healthy double-digit growth in the next 1-2 years as ATL enters new geographies with the rampup in its Hungary plant’s capacity. The OEM segment would be an additional growth driver with ATL targeting 20% of revenues from OEM’s in the next 2-3 years. For Q4FY19 steady raw material prices which realised 4% QoQ improvement in raw material cost largely on the back of softer natural rubber prices, which declined from Rs 126/kg to Rs 120/kg and Brent crude prices currently hovering at US$ 60-65/barrel will help in margins improvement and profitability. It would take 5% price hike in Europe truck/bus radial segment in June as a product positioning exercise. It has also maintained healthy Debt:Equity of 0.3x

Financial: Total revenue Rs 4274 cr in Q4FY19 vs Rs 4031 cr in Q4FY18 up 6%. PAT at Rs. 84 cr in Q4FY19 vs Rs 250 cr in Q4FY18 down 66%. Ebitda stands at Rs 425 cr in Q4FY19 down 17% vs Rs. 515 cr in Q4FY18.

Share Market Tips For June 2019: 3rd Week

India Cements Ltd (NSE: INDIACEM) (Share Price: Rs.95 ): Avoid

Valuation:Over-Valued stock with TTM PE of 40x.

Reasons to Avoid: India Cement reported a mixed set of Q4FY19 numbers where revenues grew 11.9% YoY to Rs 1564 crore led by 7.8% YoY growth in volumes to 3.33 MT. Realisations were at Rs 4,700/t, up 3.8% YoY . Topline includes Rs 20.25 crore pertaining to subsidy receivable from Rajasthan government (sanctioned to Trinetra Cement that has been merged with India Cement). Thus, with no capacity expected to be added in the coming two years, India Cement would have low headroom for growth. Its realisations growth, EBITDA margin growth on a sequential basis vs. peers for the quarter was also on the lower side. Further, RoCE for FY19 was at 4.5%, which is again lower than peer companies Ramco Cements (8%), Sagar Cement (6.4%). If any additional capex is announced that would put further pressure on return ratios and with high debt levels it would also continue to stress on the balance sheet.

Financial: On the financial front in Q4FY19 Net Sales was Rs 1,564 crore vs Rs. 1,397 crore in Q4FY18 up 11.9%. Net profit at Rs. 44 crore in Q4FY19 vs Rs. 35 crore in Q4FY18 up 24% Whereas, EBITDA stands at Rs. 192 crore in March 2019 up 21% from Rs. 158 crore in March 2018.

Fortis Healthcare Ltd (NSE: FORTIS) (Share Price: Rs.130): Avoid

Valuation: Over-Valued stock with negative earnings.

Reasons to Avoid: Company has been in news from last year due to its corporate governance issue and Northern TK Venture Pte Ltd became the promoter of Fortis Healthcare with 31.17 percent stake (as of March 2019). Northern TK together with IHH Healthcare Berhad and Parkway Pantai Ltd had made an open offer to the equity shareholders of Fortis Healthcare to acquire up to 19.70 crore shares, representing 26 percent of the expanded voting share capital in December, but that is still stuck in the Supreme Court after a contempt plea filed by Japanese pharma company Daiichi Sankyo against the Singh brothers, who were former promoters of Fortis. Sebi has also in an ad interim ex-parte order of October 17, 2018, had directed that FHL take necessary steps to recover Rs 403 crore along with interest from the Singh brothers and various promoter companies within three months.

Financial: On the financial front in Q4FY19 Net Sales was Rs 1184 crore vs Rs. 1086 crore in Q4FY18 up 9%. Net profit at Rs. 135 crore in Q4FY19 vs Net loss of Rs. 914 crore in Q4FY18. Whereas, EBITDA stands at Rs. 125 crore in Mar 2019 vs Rs 31 crore in Mar 2018.

Graphite India Ltd (NSE: GRAPHITE) (Share Price: Rs. 365): Avoid

Valuation: Under-Valued stock with TTM PE of 2.5x.

Reasons to Avoid: Graphite India reported subdued results wherein topline, EBITDA and PAT came in below analyst estimate. The performance during the quarter was impacted by higher-than-expected operating costs (especially needle coke) and lower than expected volumes. The company reported a consolidated topline of Rs 1693 crore (up 28% YoY, down 9% QoQ) Consolidated EBITDA for the quarter was at Rs 934 crore (up 24% YoY, down 20% QoQ). Graphite electrodes are used in the EAF route of steel-making. Recently, the slowing down of the Chinese economy together with oversupply of Chinese steel has resulted in an ongoing correction of steel prices. This has had an adverse effect on graphite electrodes realisation. Graphite electrode prices have softened due to a combination of factors like weak global steel prices, increased Chinese imports into India and select trade restriction placed by the US. Needle coke is a key raw material used in manufacture of UHP grade graphite electrodes. As needle coke is scarce in supply, its prices are on a sustained uptrend. In a scenario of softening graphite electrode prices, an uptick in needle coke costs is likely to impact the margin profile of Graphite India. As company has shown strong margin performance in past, Going forward its unlikely to show the same performance in margins and EBITDA level due to decline on back of a steep rise in price of key raw material (needle coke) and the fall witnessed in price of graphite electrodes in both UHP grade (on account of recent weakness in steel prices) and HP grade (on account of removal of anti-dumping duty from China) electrodes.

Financial: On the financial front in Q4FY19 Net Sales was Rs 1693 crore vs Rs. 1323 crore in Q4FY18 up 28%. Net profit at Rs. 562 crore in Q4FY19 vs Rs. 540 crore in Q4FY18 up 4% Whereas, EBITDA stands at Rs. 934 crore in March 2019 up 23.5% from Rs. 756 crore in March 2018.

Share Market Tips For June 2019: 2nd Week

Coromandel International Ltd (NSE: COROMANDEL) (Share Price: Rs.422 ): Potential Buy

Valuation:Fairly-Valued stock with TTM PE of 17x.

Reasons to Consider: Coromandel International Ltd reported Q4 FY19 net sales at Rs 2638 crore up 9% YoY. EBITDA reported by the company stood at Rs 259 crore up 40% YoY. EBITDA margin during the quarter was 9.8% as against 7.7% YoY. Sales were largely in line with analyst the bio-pesticides business reported a sales of Rs 167 crore in FY19. Bio-pesticides garner better margins than the conventional crop protection products and it is expected that volume growth could be in double digits. The management has guided for a better FY20 in terms of EBITDA/ton realizations to the tune of Rs 3,000-3,200/ton. We believe that key drivers will be backward integration (Phosphoric acid) and expansion (crop protection) which will drive earning from FY19-21E. In Q4FY19, subsidy: non-subsidy revenues break up was 80:20 (compared to 79:21 in Q4FY18) whereas, In Q4FY19, subsidy: non-subsidy EBITDA break up was 73:27 (compared to 65:35 inQ4FY18).

Key Drivers: Brownfield expansion of Phosphoric Acid plant at Vizag will increase backward integration of raw material by additional 20-25% to a total of 45-50% of requirement. Phos acid spreads are elevated led by, stable rock prices (input costs) on abundant supplies, while strong phosphates demand (& relatively low Chinese exports) has led to acid prices moving to $728/MT. We believe current spreads could remain elevated in the medium term and help for strong profitability and could offset the threat of margin erosion. The new capacity is expected to go live in October 2019. Specialty nutrients division sells micronutrients (Sulfur, Zinc, Boron, etc) and Water soluble fertilizers majorly through the retail and the trade segment. The segment is unregulated with free pricing CRIN has a 30% market share in organic fertilizers which includes compost and bio fertilizers. To propel volume in the segment, the company is partnering with city administration (like Visakhapatnam) for processing of waste into organic manure. The unit focuses on oil cakes, phosgold (compost + rock phosphate), molasses and other by-products. The Organic Bio-Agro Resources Dhan (GOBAR-DHAN) scheme also helped in spreading awareness.

Financial: Total revenue Rs 2639 cr in Q4FY19 vs Rs 2412 cr in Q4FY18 up 9%. PAT at Rs. 110 cr in Q4FY19 vs Rs 90 cr in Q4FY18 up 23%. Ebitda stands at Rs.259 cr in Q4FY19 up 40% vs Rs. 185 cr in Q4FY18.

Dabur India Ltd (NSE: DABUR) (Share Price: Rs.410 ): Potential Buy

Valuation:Over-Valued stock with TTM PE of 50x.

Reasons to Consider: For Q4FY2019, Domestic business grew slower by 5.9% with volume growth of 4.3% during the quarter. The international business reported growth of 1% in constant currency terms impacted by underperformance of MENA region and adverse currency movement. However, the company expects domestic business to grow faster than international business for the next two to three quarters. OTC category is expected to grow fastest in domestic business portfolio. Home and personal care, which contributes 50.5% to sales, posted 6.8% growth. Home care and Skin care segments grew by 16% and 11% respectively driven by strong growth in Odonil, Sanifresh, Gulabari and bleach portfolio. Odomos was impacted due to low incidence of mosquito-led diseases. Oral Care saw 8% revenue growth led by continued growth momentum in Red Toothpaste (17% growth) with Dabur increased its value market share by 45 bps while Meswak grew in low single-digits. Babool sales declined and the company plans to relaunch it in the coming quarter. The market share in juices increased by 540 bps YoY to 56% despite higher competitive intensity.

Key Drivers: The rural market constitutes 45% of the company’s sales vs 35% for the industry. Domestic FMCG sales growth moderated to 6% due to rural slowdown, liquidity crunch and prolonged winter, which impacted hair care and foods segments. We believe steady focus on expanding direct reach in rural areas would augment the volume growth in future. In rural, company has reach of 44,000 villages and is targeting to reach 51,000 villages out of 66,000 (total villages in country) by end of FY20. Dabur has guided for double-digit growth, driven by high single-digit volume growth with a focus on power brands and Low Unit Price products (LUPs) in FY20. Competitive intensity from Patanjali has subsided significantly resulting in high double digit growth of Dabur Red and Dabur Honey (that competes with Patanjali in the respective category) in H2FY19. We expect Dabur to generate revenue, PAT growth at low double digit CAGR, respectively, on the back of strong volume growth of 7% in FY19-21E.

Financial: Total revenue Rs 2128 cr in Q4FY19 vs Rs 2033 cr in Q4FY18 up 4.8%. PAT at Rs. 371 cr in Q4FY19 vs Rs 397 cr in Q4FY18 down 6.5%. Ebitda stands at Rs.457 cr in Q4FY19 down 5.8% vs Rs. 485 cr in Q4FY18.

Thermax Ltd(NSE: THERMAX) (Share Price: Rs.1126): Potential Buy

Valuation: Over-Valued stock with TTM PE of 48x.

Reasons to Consider: Thermax reported standalone revenues at Rs 1889.6 crore registering robust growth of 44.2% YoY while consolidated revenues grew 43.7% to Rs 2073.7 crore on a YoY basis. EBITDA came in at Rs 175.7 crore, up 17.2% while EBIDTA margins declined 215 bps to 9.3% on a YoY basis owing to more than expected increase in total operating expenses. PAT came in at Rs 112.9 crore, which grew 31.7% YoY while adjusted PAT grew 55.7% to Rs 133.5 crore. The consolidated order inflow for the quarter was at Rs 1157 crore (Rs 1599 crore in Q4FY18) on a YoY basis due to ongoing sluggishness in new investments in several sectors while standalone order inflow was at Rs 717 crore. Consolidated order book was at Rs 5370 crore, down 6.0% YoY.

Key Drivers: For Q4FY19, consolidated order inflows were at Rs 1157 crore, down 28% YoY owing to muted capex in several sectors. For FY19, order inflows comprise energy segment (RS 4476 crore), environment segment (Rs 741 crore) & chemicals segment (Rs 415 crore). For FY19, order inflows were dragged by a decline of 28% in international inflows while domestic order intake was up 1% YoY. Order book was at Rs 5370 crore, down 6.0% YoY. Going ahead, Thermax expects enquiries and order intakes in cement (waste heat recovery), food processing, Textiles, chemicals, paper, auto component OEMs, water treatment and FGD segments. For FY20, Thermax has guided for high single digit revenue growth, flat to marginal order inflow growth and margin to sustain at current level. Company guided Good order inquiries expected in Indonesia, Bangkok, Thailand, Egypt, Kenya, Turkey and few African markets. Also, opportunities exists in South East Asian markets for air cooling, air pollution control, water orders. Thermax holds 80% market share in cooling segment in India. With expected uptick in domestic order inflows and recovery in international order inflows through geographic diversification, order backlog is expected to improve further. Financial: Total revenue Rs 1889 cr in Q4FY19 vs Rs 1310 cr in Q4FY18 up 44%. PAT at Rs. 113 cr in Q4FY19 vs Rs 86 cr in Q4FY18 up 32%. Ebitda stands at Rs 176 cr in Q4FY19 up 17% vs Rs. 150 cr in Q4FY18.

Sagar Cements Ltd(NSE: SAGCEM) (Share Price: Rs.645): Potential Buy

Valuation: Over-Valued stock with TTM PE of 50x.

Reasons to Consider: Sagar Cements reported a mixed set of Q4FY19 numbers, beating analyst expectation on volume and thereby revenue forecast. However, operating margins were a negative surprise. Revenues for Q4FY19 witnessed 24.1% growth to Rs 358.8 crore led by 23.5% growth in volumes to 0.95 MT. Realisations were broadly in line growing 1.3% YoY to Rs 3875/t. EBITDA margin for the quarter was at 16.9%, expanding 373 bps YoY and EBITDA/t increased 30% YoY to Rs 650/t. EBITDA, however, came in at Rs 61.7 crore and company reported a net profit of Rs 18.7 crore. Over four years i.e. FY16-19, Sagar Cements registered volume growth of 21% CAGR led by strong demand in its major markets and capacity addition. This was led by AP, Telangana region witnessing 40% growth in the recent times which however, is expected to slow down given the high base. The capacity expansion in Madhya Pradesh and Odisha of 2.5 MT, which the company has undertaken would add to volumes only from FY22E as they are expected to be commissioned by March 2021.

Key Drivers: With the current pricing environment in the south improving, the management is also hinting at a shift in focus towards better realisations. Additionally, the company also expects savings 45 cr per year on account of Capitve power plant in Matampally and WHRMS. Along with better capacity utilisation and price hikes taken over February-May increasing price from Rs 245/bag in January to Rs 320/bag in May we expect EBITDA margins to gradually expand from 13.1% in FY19E to 15.2% by FY21E. With limited clinker based additions expected to come up in the southern region in relation to the strong traction of cement consumption backed by IHB segment, real estate and infrastructure spends, increasing presence in the east led by ramping up of the Vizag unit, we believe the company would be able to grow at a healthy pace. It has also Completed acquiring 65% stake in Satguru Cement and 100% stake in Jajpur cement. Financial: Total revenue Rs 366 cr in Q4FY19 vs Rs 295 cr in Q4FY18 up 24%. PAT at Rs. 18 cr in Q4FY19 vs Rs 4 cr in Q4FY18 up 300%. Ebitda stands at Rs.62 cr in Q4FY19 up 59% vs Rs. 38 cr in Q4FY18.

Share Market Tips For June 2019: 1stWeek

Nestle India Ltd(NSE: NESTLEIND) (Share Price: Rs.11400): Potential Buy

Valuation: Over-Valued stock with TTM PE of 68x.

Reasons to Consider: Net sales for the quarter increased 8.9% YoY to Rs 3,003 crore led by robust domestic volume growth driven by aggressive new launches last year. Operating profit increased 5.9% to Rs 737.7 crore while margins declined 71 bps to 24.6% on a high base. Volume growth in CY18 was 11.1% YoY, led by strong growth in confectionery business at 15% YoY, beverages at 11% YoY and prepared dishes at 14% YoY. Milk products posted a 4.8% YoY volume growth. Given aggressive A&P done by the company behind new launches, we expect lower double-digit volume growth whereas Kit Kat, Milkmaid and Nescafe have been relaunched while more brands are likely to be remodeled, pushing volume growth upwards. It has new offerings in below Rs 10 price point which will help in gaining market share. NIL has announced plans to launch organic food products in the ‘milk products & nutrition’ segment.

Key Drivers: The “out-of-home� (OOH) business registered volume and value growth in FY18, led by an increase in reach and distribution of KitKat, Maggi & Nescafe across key “out-of-home� channels, such as educational institutes, airlines, railways, offices, and food service channels like hotels and restaurants. Nescafe Classic, Maggi Coconut Milk Powder and Milk Maid performed well driven by new customer acquisitions and increased penetration through stronger customer engagement. NIL has launched 39 products in the past two years and it has launched 13 new products in FY18 which increased its ad spend up 44.4% YoY across all categories. NIL is targeting the youth segment, which has high disposable income, by leveraging the health and wellness platform as it complements their changing and upwardly lifestyle. It has plans to accelerate innovations centered on superior health, nutrition and wellness at appropriate price points which will drive the growth in the future. Financial: Total revenue Rs 3002 cr in Q4FY19 vs Rs 2757 cr in Q4FY18 up 9%. PAT at Rs. 465 cr in Q4FY19 vs Rs 424 cr in Q4FY18 up 9%. Ebitda stands at Rs.738 cr in Q4FY19 up 6% vs Rs. 697 cr in Q4FY18.

Share Market Tips For May 2019: 5th Week

Page Industries Ltd (NSE: PAGEIND) (Share Price: Rs.19750 ): Avoid

Valuation:Over-Valued stock with TTM PE of 56x.

Reasons to Avoid: Q4 results significantly below estimates profit declined 20.4 percent YoY. The slump in growth rate is concerning as it comes on a relatively weak base the extent of weakness in the company is very high compared to its peers. The licensee of Jockey International and Speedo in India reported profit at Rs 75 crore in March quarter against 94 crore in the same period last year. The management also attributed weak performance to a slowdown. For the year ended March 2019, inventory jumped 32 percent to Rs 750 crore and borrowing increased 45 percent to Rs 72 crore compared to the previous year.

Financial: In Q4FY19 Net Sales was flat at Rs 607.80 crore vs Rs. 608.4 crore in Q4FY18. Net Profit at Rs. 75 crore in Q4FY19 vs Rs. 94 crore in Q4FY18 down 20%. Whereas, EBITDA stands at Rs. 129 crore in Q4FY19 down 17% from Rs. 154 crore in Q4FY18.

Sun TV Network Ltd (NSE: SUNTV ) (Share Price: Rs.535 ): Avoid

Valuation: Fairly-Valued stock with TTM PE of 16x.

Reasons to Avoid: Company has announced its Q4 result which was weak on operating levels. Its profit slips 2% despite 24% increase in revenue. Muted advertising and subscription revenue growth impacted earnings. Advertisement and subscription growth impacted by the implementation of the New Tariff Order (NTO). Viewership market share of its flagship channel, SUN TV (Tamil), has remained subdued. Advertising revenue growth was flat in Q4FY19 against expectations of 5-7 percent growth. Efforts on forming a digital strategy are still ongoing and the company remains elusive in sharing any details. The delay on that front, along with rising competition with aggressive investments in regional content, remains a concern on the traditional business.

Financial: In Q4FY19 Net Sales was at Rs 889 crore vs Rs. 717 crore in Q4FY18 up 24%. Net Profit at Rs. 283 crore in Q4FY19 vs Rs. 290 crore in Q4FY18 down 2%. Whereas, EBITDA stands at Rs. 675 crore in Q4FY19 up 20% from Rs. 559 crore in Q4FY18.

Dish TV India Ltd (NSE: DISHTV ) (Share Price: Rs.32.50 ): Avoid

Valuation: Fairly-Valued stock with TTM PE of 22x.

Reasons to Avoid: Company reported a consolidated net loss of Rs 1,360 crore for the fourth quarter vs net profit of Rs 118 crore in a year-ago quarter. Dish TV's total expenses were at Rs 1,490.72 crore. Subscription revenue dropped by 5 per cent year on year, while operating revenue fell 8.7 per cent year on year. With, high promoter pledge (84% of promoters’ stake is pledged) is also a cause of concern as we have already seen recent carnage in the stock and the Jio entering in the D2H sector will also be an threat to the company and user are now shifting towards more on OTT platform that will also dent the ARPU's of the company going forward.

Financial: On the financial front in Q4FY19 Net Sales was Rs 1,398 crore vs Rs. 1532 crore in Q4FY18 down 8%. Net Loss at Rs. 1360 crore in Q4FY19 vs Net Profit of Rs. 118 crore in Q4FY18. Whereas, EBITDA stands at Rs. 424 crore in March 2019 up 3% from Rs. 414 crore in March 2018. The numbers has been un-comparable due to merger with videocon d2h.

Share Market Tips For May 2019: 4th Week

JSW Energy Ltd (NSE: JSWENERGY) (Share Price: Rs.67.60 ): Potential Buy

Valuation:Over-Valued stock with TTM PE of 18x.

Reasons to Consider: JSW Energy has posted surprisingly positive result in Q4 and logs Rs 6 cr profit as against Rs 483 cr loss in the year-ago. Company has also decided not to pursue the electric vehicle business because of the higher than anticipated uncertainties associated with it. Rather, it would maintain capital cushion for growth opportunities in power and other related businesses which street see as a positive for the company going forward. During the quarter the PLF(Plant Load Factor) was at 54% as against 51.9% in the corresponding quarter of the previous year.

Key Drivers: Company has continued de-risking the business with significant portion of open capacity tied-up with under short-term power supply contract in FY20 in which a) Vijayanagar plant secured PPA for 330 MW from Telangana state for period of 9M which begins from July 19, b) Open capacity at Ratnagiri plant nearly fully tied up in H1FY20 through short term contract, c) Commissioning of 36 MW thermal capacity at salboni and nandyal expected in Q1FY20 along with long term PPA tied up under group captive scheme. It is also focusing on strengthing the balance sheet in which during the quarter it has reduced the net debts of Rs 636 cr with net debt to equity ratio stood at 0.85x. Going forward the key to watch will be the PLF on various power plant and the tariff on merchant rates with the ability to sign the long-term PPA with Discoms. Financial: Company had reported a Revenue of Rs 2018 cr in Q4FY19 Vs Rs 1879 cr in Q4FY18 up 8%, posted Net Profit of Rs 6 cr in Q4FY19 vs Rs 483 cr loss in Q4FY18.

PHOENIX MILLS(NSE: PHOENIXLTD ) (Share Price: Rs.610 ): Potential Buy

Valuation: Fairly-Valued stock with TTM PE of 25x.

Reasons to Consider: Company has posted robust performance on revenue and profit front up 65 & 120% during the quarter despite slowdown in the real estate sector due to liquidity crunch. The Company is engaged in the development and operation of malls and other real estate properties. The company has an operational asset portfolio of eight operational retail assets aggregating 5.9 million square feet (MSF) and four operational commercial assets aggregating 1.16 million square feet.

Key Drivers: Focusing on completing its existing/upcoming projects by FY22/23 and de-leveraging its balance sheet will be a key driver for growth. Phoenix has two under construction assets at Pune, Chennai with GLA of 1.12 MSF and plans to develop commercial asset at PMC Hebbal with GLA of 0.65 msf. Phoenix Mills Ltd provides a unique way to play India’s real-estate & retail growth story. It will be the prefer bet in the real-estate sector due to its strong operational performance, scalability (through the CPPIB deal), robust cash generation and no issue in corporate governance. Financial: Total revenue Rs 723 cr in Q4FY19 vs Rs 436 cr in Q4FY18 up 65%. Net Profit at Rs. 228 cr in Q4FY19 vs Rs 104 cr in Q4FY18 up 120%. Ebitda stands at Rs.410 cr in Q4FY19 up 78% vs Rs. 230 cr in Q4FY18.

Share Market Tips For May 2019: 2nd Week

Indian Hotels Company Ltd (NSE: INDHOTEL) (Share Price: Rs.147 ): Potential Buy

Valuation:Over-Valued stock with TTM PE of 60x.

Reasons to Consider: Indian Hotels reported mixed bag numbers for the quarter. Consolidated revenues grew 8.8% YoY to Rs 1,244 crore. Average occupancy for Q4FY19 was at 74%, a 200 bps dip YoY led by the addition of new properties during the quarter. However, the financial year ended with an occupancy of 68% for the company, implying a 100 bps increase in occupancy rates. As demand has grown at a rate higher than supply, the industry saw RevPAR growth of 3.7%, simultaneously IHCL also seen a growth of 6 % YoY in domestic hotels while the same for international network grew 9.3% YoY in FY19. Also, IHCL’s international portfolio has shown signs of a turnaround, which will provide a cushion going forward.

Key Drivers: Asset light focus continues with leverage ratios to improve in the coming quarter with Indian hotel portfolio in FY18 comprised 32% of rooms under management contracts whereas it ended FY19 with 40% of rooms under management contracts. Revenues from management contracts for FY19 were at Rs 222 crore. Further, in FY20E, 1800-2000 new keys would be added, mostly via management contracts. Thus, we believe the asset-light nature of management contracts and their increasing share in the hotels' portfolio of IHCL, should enhance EBITDA levels, thereby leading to an improvement in net debt/EBITDA ratio. Considering the expected tailwinds in the hospitality sector as a whole fuelled by steady demand, lower supply addition and higher discretionary spends, IHCL being one of the leaders in the sector should be a key beneficiary of the turnaround. Additionally, the focus on cost rationalization is expected to drive margins further. Financial: Company had reported a Revenue of Rs 1244 cr in Q4FY19 Vs Rs 1144 cr in Q4FY18 up 8.8%, Net Profit up 62% to Rs 122.6 cr in Q4FY19 vs Rs 75.6 cr in Q4FY18, whereas EBITDA stands at Rs 284 cr in Q4FY19 vs Rs 245 cr in Q4FY18 up 16%.

Tata Chemicals Ltd (NSE: TATACHEM ) (Share Price: Rs.588 ): Potential Buy

Valuation: Over-Valued stock with TTM PE of 15x.

Reasons to Consider: Tata Chemical showed signs of revival across geographies, except Europe. EBITDA/MT increased 43% YoY to USD53.3 in North America (realization up 5% YoY to USD 226.3/MT) and 46% YoY to USD 56.1/MT in Africa (realization up 3% YoY to USD 255.3/MT). India business delivered 4% YoY growth in soda ash volumes and also improved realization, but profitability was dented by higher power and plant fixed cost. Europe was subdued with EBITDA/MT declining 65% YoY to GBP28.3 due to higher energy and plant fixed cost.

Key Drivers: TTCH’s standalone business witnessed a growth of 15.3% YoY to Rs 1060 Cr. The revenue from consumer products business increased by 18.8% YoY, mainly due to higher sales volume across categories and controlled marketing investments during the quarter. Its product (Tata Salt) continues to maintain a leadership position with a market share in excess of 25% along with the company has launched snacks products and detergent powder. The detergent powder is in the pilot stage in West Bengal and has been receiving a positive response. Domestic demand remains balanced with pockets of tightness witnessed in the market in the previous quarter. The near term plan is to attain a turnover of Rs 5000 cr in the consumer segment with Rs 450 cr contributed by salt, pulses, and spices. Company Nellore plant for nutraceuticals is in the final stage of commissioning. The plant will go through pilot production and the company is targeting commercial production by the end of Dec 19. The company has guided to get into three segments in Lithium-ion business viz. 1) manufacturing of batteries (cell), 2) recycling of batteries, and 3) chemical coating which goes into making batteries. The company has also hinted at getting into manufacturing battery pack at later stages. Financial: Company had reported a Revenue of Rs 2845 cr in Q4FY19 Vs Rs 2628 cr in Q4FY18 up 8.1%, Net Profit up 26% to Rs 450 cr in Q4FY19 vs Rs 356 cr in Q4FY18, whereas EBITDA stands at Rs 629 cr in Q4FY19 vs Rs 537 cr in Q4FY18 up 17%. EBITDA margins up 180 bps to 22.8% in Q4FY19 from 21% in Q4FY18.

Amara Raja Batteries Ltd(NSE: AMARAJABAT ) (Share Price: Rs.640 ): Avoid

Valuation: Fairly-Valued stock with TTM PE of 22x.

Reasons to Avoid: Amara Raja Batteries (ARBL) said in a statement in the month of April 19 that it has ended all agreements with its co-promoter entity and technology partner (Johnson Controls) with effect from April 1, 2019. Agreements include shareholder’s agreement, share subscription & investment agreement, technical assistance & licensing agreement and power frame technology license agreement. The end of an association with Johnson Control, however, raises concerns over the future innovation pipeline at ARBL, since existing business to run unchanged but future technology innovation pipeline looks uncertain for which we believe it will effect on the valuation multiple being commanded by the company.

Financial: On the financial front in Q3FY19 Net Sales was Rs 1694 crore vs Rs. 1554 crore in Q3FY18 up 9%. Net Profit at Rs. 131 crores in Q3FY19 vs Rs. 134 crore in Q3FY18 down 2.6%. Whereas, EBITDA stands at Rs. 253 crores in December 2018 up 4.6% from Rs. 242 crore in December 2017.

Marico Ltd (NSE: MARICO) (Share Price: Rs.364 ): Potential Buy

Valuation:Over-Valued stock with TTM PE of 42x.

Reasons to Consider: In Q4FY19, Marico witnessed a stable demand environment and healthy offtake on account of the competitive strength of its products. Rural growth stood ahead of urban growth. However, the same has to be keenly monitored in view of some sluggishness seen at the wholesale level at the end of March 2019. We believe volume growth of 8 percent has been aided by healthy growth in Parachute & Saffola backed by strong promotional activity, while value-added hair oil portfolio performance was muted during the quarter. The international business had a reasonable quarter, with Bangladesh and Vietnam performing well. Going forward (OPM) is expected to improve marginally due to easing input cost pressure (especially copra prices) and provides growth and margin visibility in the coming quarter.

Key Drivers: Inline with its innovation strategy, Marico launched many new products during Q4FY2019. The company launched a new range of skincare products under the new brand, Kaya Youth Oz (comprising face cream, face wash, micellar water, and face wipes). In the food space, the company launched healthier versions of ready-to-cook poha and upma by including millets and quinoa. The company also launched organic food offerings under Coco Soul brand - coconut sugar, coconut chips, coconut peanut butter and coconut almond butter in selected markets. New launches remain at the core of the company’s growth strategy. We expect many more new launches in the value-added hair oil and food category which will be the key driver for the stock in the coming quarters. New launches will be well supported by adequate media and promotional spends. Financial: Company had reported a Revenue of Rs 1609 cr in Q4FY19 Vs Rs 1480 cr in Q4FY18 up 8%, Net Profit up 118% to Rs 401 cr in Q4FY19 vs Rs 183 cr in Q4FY18, whereas EBITDA stands at Rs 311 cr in Q4FY19 vs Rs 275 cr in Q4FY18 up 13%.

Share Market Tips For May 2019: 1st Week

Fortis Healthcare Ltd (NSE: FORTIS ) (Share Price: Rs.138): Avoid

Valuation: Over-Valued stock with negative earnings.

Reasons to avoid: Company has been in news from last year due to its corporate governance issue and its promoter stake sale to Malaysian group entity IHH healthcare where the SC has put this transaction on hold due to the petition filed by Japanese drugmaker Daiichi Sankyo alleging former promoters - brothers Malvinder and Shivinder Singh violated undertakings and court orders. Daiichi had sought a stay on the Fortis sale as the Singh brothers had not fulfilled their commitment to pay them as per the Delhi High Court’s orders. Bidding for cash-strapped Fortis kicked off earlier this year after its founders, brothers Malvinder and Shivinder Singh, lost their shareholding due to debt, and allegations that they had improperly taken funds from the company. On financial front also the company has posted a quarterly loss as against profit in the previous quarter and EBITDA was also declined 14% during the quarter.

Financial: On the financial front in Q3FY19 Net Sales was Rs 1103 crore vs Rs. 1120 crore in Q3FY18 down 1.55%. Net Loss at Rs. 197 crore in Q3FY19 vs Net Profit of Rs. 19 crore in Q3FY18. Whereas, EBITDA stands at Rs. 81 crore in December 2018 down 14% from Rs. 94 crore in December 2017.

HEG Ltd(NSE: HEG ) (Share Price: Rs.1761): Avoid

Valuation:Under-Valued stock with TTM PE of 8x..

Reasons to avoid: For Q4FY19, we expect blended realisations to decline QoQ on the back of a fall in graphite electrodes prices for both UHP grade electrodes as well as HP grade electrodes. For Q4FY19, we expect HEG to report capacity utilization of 80% compared (84% in Q4FY18 and 82% in Q3FY19). Due to the higher price of needle coke, it will impact raw material costs. Thus, the top line is expected to come down 14.5% QoQ and EBITDA also likely to come down, implying an EBITDA margin of around 48% due to higher raw material prices (73.6% in Q4FY18 and 62.6% in Q3FY19).

Financial: On the financial front in Q3FY19 Net Sales was Rs 1865 crore vs Rs. 843 crore in Q3FY18 up 120%. Net Profit at Rs. 867 crore in Q3FY19 vs Rs. 342 crore in Q3FY18 up 153%. Whereas, EBITDA stands at Rs. 1313 crore in December 2018 up 135% from Rs. 559 crore in December 2017.p>

Hero Motocorp Ltd (NSE: HEROMOTOCO ) (Share Price: Rs.2526): Potential Buy

Valuation:Fairly-Valued stock with TTM PE of 15x

Reasons to consider: Hero MotoCorp (Hero) has reported results for the Q4. Revenue at Rs. 7,885 crores declined by 8% yoy and net Profit down 25% to Rs 730 cr yoy. The drop in revenue can be attributed to a sharp 11% decline in volumes, while realization per vehicle rose by 3.5% yoy on account of price hikes taken by the company. Hero’s management has identified the reasons for falling market share and renewed its focus on the 150-200cc segment (where buyers are moving) and on the scooters (where Hero is late entrant). Since the auto industry has seen a slowdown in 1HFY20 but due to the good festive season, pre-buying ahead of the implementation of BSVI, a lower base, the expectation of near normal monsoon and further interest rate reduction would make 2HFY20 better.

Drivers: Hero has displayed great concepts in the premium segment (200cc & 250cc) and is expected to launch three new motorcycles (Xpulse200, Xpulse 200T and HX250R). On the operating performance front, commodity prices have stabilized from the last few quarters, focus on the premium motorcycles & scooters and higher realization post BS6 to aid further. We believe the EBITDA Margins have bottomed out and is ready to bounce back gradually in the coming years due to cost rationalization and a combination of multiple things, along with Hero’s strategy of taking price increase in small steps. However, for the next 1-2 quarters, the margins to hover around the current levels as the headwinds and tailwinds are neutralizing each other.

Financial: Company had reported a Revenue of Rs 7885 cr in Q4FY19 Vs Rs 8564 cr in Q4FY18 down 8%, Net Profit down 25% to Rs 730 cr in Q4FY19 vs Rs 967.5 cr in Q4FY18, whereas EBITDA stands at Rs 1069 cr in Q4FY19 vs Rs 1371 cr in Q4FY18 down 22%. EBITDA margins declined 240bps to 13.6% in Q4FY19 from 16% in Q4FY18.

 

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