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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 November 2019: 3rd Week

GE T&D India Ltd(NSE: GET&D) (Share Price: Rs.175): Avoid

Valuation: Over-Valued stock with TTM PE of 80x.

Reasons to Avoid: GE T&D reported weak set of numbers for Q2FY20 on the back of lower opening order backlog (HVDC nearing completion), weak fresh order inflow, intense pricing pressure and delays by customers due to liquidity stress. Sales declined 17% YoY to Rs 820 cr, with EBITDA declining by 96% YoY to Rs 3.9 cr. Company reported net adjusted loss of Rs 20.5 cr during the quarter against PAT of Rs 39.6 cr in Q2FY19. Order inflow during Q2FY20 was down 5% YoY. The Bangladesh HVDC project has been put on hold in order to ascertain measures to further reduce the project cost. With ongoing liquidity crisis, company raised debt during the quarter, indicating higher interest cost in the near to medium term. Also, management emphasized that the repayment of the debt would be gradual. Hence, we expected higher interest cost in the subsequent quarter.

Financial: In Q2 result, Net revenue stood at Rs 820 cr in Q2FY20 vs Rs 994 cr in Q2FY19. Net Loss of Rs 81 cr in Q2FY20 Vs Rs 51 cr profit Q2FY19. EBITDA at Rs 3.9 cr in Q2FY20 vs Rs 92 cr in Q2FY19 down 96%..

Bajaj Electricals Ltd(NSE: BAJAJELEC) (Share Price: Rs.325): Avoid

Valuation: Over-Valued stock with TTM PE of 45x.

Reasons to Avoid:Bajaj Electricals (BEL) Q2 revenue declined 32% YoY led by E&P segment wherein revenue declined 59% YoY while consumer durable (CD) revenue grew albeit at a slow pace of 9% YoY owing to sluggish demand in Q2FY20. The EBITDA margin declined 280 bps YoY at 2.2% (lowest since FY15) mainly due to losses from E&P segment. Though the company managed to reduce debt by Rs 127 cr, the interest charges were at 94% YoY at Rs 45 cr in Q2FY20. Debt level for FY20E is likely to be Rs 1450 cr. The management has reiterated that the revenue from E&P segment would reduce by 51% in FY20 due to focus on reducing exposure in the power distribution segment (50% of total orderbook of Rs 1800 cr). Whereas, CD segment would continuously grow at double digit (at CAGR of 13% FY19-21E). The lumpiness of EPC business has dented the overall profitability of BEL with high debt level. We believe the poor performance of the EPC business and higher interest cost would overshadow the profitability of CD business.

Financial: In Q2 result, Net revenue stood at Rs 1092 cr in Q2FY20 vs Rs 1598 cr in Q2FY19. Net Loss of Rs 33 cr in Q2FY20 Vs Rs 34 cr profit Q2FY19. EBITDA at Rs 23.8 cr in Q2FY20 vs Rs 80 cr in Q2FY19 down 70%.

Magma Fincorp Ltd(NSE: MAGMA) (Share Price: Rs.41): Avoid

Valuation: Under-Valued stock with TTM P/BV of 0.5x.

Reasons to Avoid: Post the IL&FS saga, raising fresh capital at competitive rates continuously would remain a tedious task for mid & small NBFCs. Dried debt market has led to increase in dependence on banks, securitisation. Therefore, we have seen rise in incremental cost of borrowing to 10-10.5% which effects has seen in limiting disbursement growth. A decline in margins coupled with higher opex & credit cost has been a drag on profitability in the past few quarters. Going ahead, continuous pressure on yields & rising borrowing cost are seen denting margins. NIM has already witnessed a sharp fall of 160 bps in the last year. Near term pressure on asset quality and lower PCR (calculated) at 35.7% is seen keeping credit cost elevated. Stringent liquidity conditions across industry coupled with pressure on growth, margins, opex & provisioning have been a spoilsport in recent quarters. Given the prevailing tough environment, near term business prospects remains bleak. Therefore, growth in balance sheet & earnings is seen remaining subdued.

Financial: In FY19 result , Net interest income stood at Rs 13,336 Cr in FY19 up 9% YoY. Pre-Provision Profit at Rs 7,075 cr up 8% YoY. NPA stood at 3.1% in FY19 down 140bps YoY. ROA remain at 1.9% up 20bps YoY.

Share Market Tips For November 2019: 2nd Week

V-Mart Retail Ltd (NSE: VMART) (Share Price: Rs.1726): Avoid

Valuation: Over-Valued stock with TTM PE of 78x.

Reasons to Avoid: V-Mart Retail (VMART) reported below-expected revenue growth of 20% YoY to Rs 300 cr in Q2FY20, with SSSg of 1% (volumes 8%). Despite better gross margins YoY, the company had an operating loss of Rs 7.9 cr (adjusted for Ind-AS 116) due to higher other expenses and employee cost. Store addition inflated employee cost whereas other expenditure increased due to higher A&P and logistic costs. Lower discounting during end-of-season sales and better fashion sales aided gross margins. Management retained guidance of 25% area addition in FY20 but pared its EBITDA margin forecast to 8% from 9%. Management indicated that the Diwali season was average and is hopeful of better demand in the remainder of Q3 led by winter sales and wedding season demand. Guidance of adding 25% more area in FY20 was retained.

Financial: In Q2 result, Net revenue stood at Rs 314 cr in Q2FY20 vs Rs 262 cr in Q2FY19. Net Loss of Rs 18 cr in Q2FY20 Vs Rs 4 cr Q2FY19. EBITDA at Rs 11 cr in Q2FY20 vs Rs 1.4 cr Loss in Q2FY19.

Havells India Ltd(NSE: HAVELLS) (Share Price: Rs.720): Avoid

Valuation: Over-Valued stock with TTM PE of 59x.

Reasons to Avoid:HAVL Q2FY20 revenue grew by modest 2% YoY, led by consumer durables segment & Cable which grew by 20% & 7% YoY. Lighting & fixtures and Switch gears de-grew by 2% & 6% YoY. EBITDA declined by 11% YoY and margins declined by 150bps YoY to 10.5%. This was largely on account of lower revenue growth, higher cost and weak product mix. Margin compression was seen in Lighting & fixtures, which saw dip in 200bps and ECD witnessed 220bps decline in margin. Weak construction sector demand on account of tighter liquidity situation in the sector and slowdown in industrial segment impacted these segments. Revenue from Lloyd business declined by 30% YoY on account of weak demand in Air conditioner and decline in LED TV sales on account of higher competition. While management reiterated their strategy of penetration into existing product categories through retail expansion and re-positioning of Lloyd brand. However, we believe that near term demand headwinds is likely to persist as construction sector continue to face slowdown, while HAVL 48% of business being largely related construction activities.

Financial: In Q2 result, Net revenue stood at Rs 2230 cr in Q2FY20 vs Rs 2191 cr in Q2FY19. Net Profit of Rs 181 cr in Q2FY20 Vs Rs 179 cr Q2FY19 up 1.5%. EBITDA at Rs 234 cr in Q2FY20 vs Rs 263 cr in Q2FY19 down 11%. EBITDA Margins down by 150bps to 10.5% in Q2FY20 vs 12% in Q2FY19

Colgate Palmolive (India) Ltd(NSE: COLPAL) (Share Price: Rs.1600): Avoid

Valuation: Over-Valued stock with TTM PE of 54x.

Reasons to Avoid: Colgate reported disappointing numbers with just 4% equated volume growth despite 250bps increase in ad-spends. Although Colgate shall continue with higher ad-spends and trade promotions to gain lost market share, lack of a block buster product in the naturals/Ayurvedic segment makes it extremely difficult for it to gain lost market share. Eventhough Competition from Patanjali has come off a bit, aggression from Dabur and other players is sustained (Vicco launched new variants after a long time).We believe slowdown in category growth, poor visibility on market share gains and low growth in premium segment are near term headwinds. In Q2FY20 Net sales grew by 4.5% to Rs 1220 cr. Gross margins remained flat at 64.7%. EBIDTA declined by 2% Rs 323 cr, EBIDTA margins declined 200bps as ad-spends and staff costs increased by 250bps and 20bps respectively despite decline in other expenses by 90bps.

Financial: In Q2 result, Net revenue stood at Rs 1220 cr in Q2FY20 vs Rs 1168 cr in Q2FY19. Net Profit of Rs 244 cr in Q2FY20 Vs Rs 196 cr Q2FY19 up 25%. EBITDA at Rs 323 cr in Q2FY20 vs Rs 329 cr in Q2FY19 down 2%. EBITDA Margins down by 200bps to 26% in Q2FY20 vs 28% in Q2FY19.

Marico Ltd(NSE: MARICO) (Share Price: Rs.370): Avoid

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

Reasons to Avoid:Net Sales declined 0.4% to 1830 cr. Domestic volume growth at 1%. Gross margins expanded 560bps to 49.6%. EBITDA increased 15.8% to Rs 353 cr. EBITDA Margins expanded by 270bps to 19.3% led by gross margin expansion despite increase in staff costs, other expenses and ad-spends by 70bps, 100bps and 120bps respectively. We believe MRCO shall increase adpro and take more price cuts to ward off competition in Parachute and develop new product segments. We retain our view that Saffola will find it extremely hard to gain back its Mojo, given high pricing in competitive market and declining consumer affinity for blended oils. Due to various growth headwinds in VAHO and Saffola are becoming structural in nature with reduction in trade promotions in tight liquidity conditions can back fire along with copra price decline benefits close to being peaked out (prices up 16% from the bottom in July19) and sharp sales decline in wholesale and Urban GT by 7% and 11% in 1H, contrary to industry trends. On segment-wise growth Parachute volumes declined 1%, Saffola volumes grew 1%. Saffola foods franchise grew 34%. Masala oats market share increased to 79%. VAHO volume was flat, Premium Hair Nourishment grew 7% while Male Grooming declined marginally. International sales increased by 9% in constant currency led by 15% CC growth in Bangladesh sales (46% of IBD).

Financial: In Q2 result, Net revenue stood at Rs 1837 cr in Q2FY20 vs Rs 1829 cr in Q2FY19. Net Profit of Rs 247 cr in Q2FY20 Vs Rs 212 cr Q2FY19 up 16%. EBITDA at Rs 353 cr in Q2FY20 vs Rs 304 cr in Q2FY19 up 16%. EBITDA Margins up by 200bps to 19% in Q2FY20 vs 17% in Q2FY19.

Share Market Tips For November 2019: 1st Week

Maruti Suzuki India Ltd(NSE: MARUTI) (Share Price: Rs.7585): Avoid

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

Reasons to Consider: Maruti Suzuki (MSIL) reported a muted Q2FY20 performance. Total operating income was at Rs 16,985 crore, down 24.3% YoY (ASP at Rs 4.76 lakh/unit, up 2.4% QoQ). In Q2FY20 volumes were at 3.4 lakh units, down 30.2% YoY. EBITDA margins at 9.5% (down 93 bps QoQ) were at a multiyear low, impacted by negative operating leverage. Consequent PAT was at Rs 1,359 crore (down 39.4% YoY), supported by higher other income and adoption of lower corporate tax rate. MSILs working capital position also deteriorated significantly. It has generated negative CFO in H1FY20. Company margin trajectory has taken a sharp dive from 15%+ in FY16-18 to 12.8% in FY19 and then further to 10.5% in Q1FY20 and 9.5% in Q2FY20. A steep fall in volumes and highly competitive pricing environment have weighed heavily on margins. The recent global correction in commodity prices, however, does provide some solace. We believe BS-VI rollout would have a lower cost impact on PV segment (especially petrol) and MSIL as the industry leader would drive volume growth from here. However, valuations are stretched at these levels compared to historical precedents for muted growth periods.

Financial: In Q2 result, Net revenue stood at Rs 16,985 cr in Q2FY20 vs Rs 22,433 cr in Q2FY19. Net profit at Rs 1,359 cr in Q2FY20 Vs Rs 2,240 cr Q2FY19 down 39.4%. EBITDA down 54% at Rs 1,606 cr in Q2FY20 vs Rs 3,431 cr in Q2FY19.

SKF India Ltd (NSE: SKFINDIA) (Share Price: Rs.2190): Avoid

Valuation: Over-Valued stock with TTM PE of 33x.

Reasons to Consider: SKF reported a revenue decline of 2.5% YoY to Rs 747.2 crore. EBITDA margins came in at 12.7% down 330 bps YoY. Gross margins declined 720 bps YoY likely due to higher share of traded goods (increased contribution from industrial segment). Other expenses de-grew 17.2% YoY aiding margins. PAT came in at Rs 84.6 crore, up 0.4% YoY on account of corporate tax rate cut. While, exports for the quarter grew 84% YoY while the share of the same was at 14% of total revenues. In other words, rise in exports was a counter move to utilise capacity and arrest revenue decline in the domestic market and cover fixed overheads. Gross margins and EBITDA margins were at multi quarter lows at 36.3% and 12.3%, respectively. Also, the management admitted that trading margins have further reduced on account of competitiveness and overall economic scenario. Going ahead, even with a modest recovery in the auto segment (higher margin area) margins would take time to reach peak levels seen in FY18-19. br>

Financial: In Q2 result, Net revenue stood at Rs 747.2 cr in Q2FY20 vs Rs 766 cr in Q2FY19. Net profit at Rs 84.6 cr in Q2FY20 Vs Rs 84.3 cr Q2FY19 up 0.4%. EBITDA down 22% at Rs 95 cr in Q2FY20 vs Rs 122.7 cr in Q2FY19. EBITDA Margins in Q2FY20 at 12.7% down 330bps from 16% in Q2FY19.

Larsen & Toubro Ltd(NSE: LT) (Share Price: Rs.1460): Potential Buy

Valuation: Fairly-Valued stock with TTM PE of 21x.

Reasons to Consider: L&Ts adjusted standalone revenues (ex- E&A business) for the quarter grew 7.3% YoY to Rs 18,751 crore. On a consolidated basis, revenues from continuing operations (excluding E&A business) grew 15.2% to Rs 35,328 crore on a YoY basis. On a standalone basis, infrastructure & heavy engineering segment revenues grew 11.5% to Rs 15,998 crore and 29.7% to Rs 706 crore YoY, respectively. L&T registered strong order inflows worth Rs 48,292 crore at the group level, up 20% YoY while the order backlog was at Rs 303,222 crore, up 8% YoY. Standalone EBITDA margins came in stable at 8.3%, on a YoY basis reflecting the stage of execution and job mix. Consolidated PAT came in at Rs 2527 crore, up 13% YoY while recurring PAT was up 24% YoY. Net working capital remains stable at 23%, sequentially but for H1FY20 it deteriorated 300 bps, YoY.

Key Drivers: L&T registered strong order inflows worth Rs 48,292 crore up 20% YoY at the group level, predominantly led by international orders (worth Rs 16,675 crore) while cumulative order inflows for H1FY20 were at Rs 86,992 crore, up 16% YoY. Key drivers for order inflows were infrastructure ( Rs 15,565 crore) and hydrocarbon segments ( Rs 14,824 crore) and power ( Rs 4,614 crore). Company order backlog was at Rs 303,222 crore, up 8% YoY with international orders constituting 22%. The expected strong bid pipeline of Rs 5.2 lakh crore is expected to ensure 10-12% order inflow growth in FY20E. It has maintained its revenue guidance of 12-15% for FY20E. L&T generated net cash flow from operations (CFO) of Rs 1390 crore bringing down negative CFO to Rs 2420 crore for H1FY20. Company has consistently been delivering in terms of bagging orders, strong order execution, though with some temporary concerns on working capital management owing to tight liquidity scenario. Given the strong backlog, L&T is well placed to deliver 12.6% revenue CAGR (Ex-E&A business) and 15.7% PAT CAGR on a standalone basis over FY19-21E which is likely to improve return ratios.

Financial: Total revenue Rs 18,751 cr in Q2FY20 vs Rs 18,648 cr in Q2FY19. PAT at Rs 1983 cr in Q2FY20 vs Rs 1366 cr in Q2FY19 up 45%. Ebitda stands at Rs 1553 cr in Q2FY20 down 6% vs Rs 1659 cr in Q2FY19. EBITDA Margins in Q2FY20 at 8.3% down 60bps from 8.9% in Q2FY19.

Supreme Industries Ltd(NSE: SUPREMEIND) (Share Price: Rs.1130): Potential Buy

Valuation: Over-Valued stock with TTM PE of 38x.

Reasons to Consider:Supreme is one of the largest plastic processor in India with manufacturing capacity of 6 lakhs tonnes. It has four business division namely Plastic piping division, Industrial products, Packaging products and consumer furniture segments. It is one of the largest PVC pipe and consumer furniture companies with organized market share of 14% and 26% respectively. Further, Supremes plastic piping division (contributes 58% in topline) grew at CAGR of 15% during FY11-19 (against Industry growth of 12%) led by sustained demand of pipes from housing and agriculture sectors. The domestic piping industry would continue to grow at 12%-13% in the wake of various government initiatives to boost construction of affordable housing, establishing sewerage & drainage systems and drinking water system (Nal se Jal) in the next 5 years. With segment revenue CAGR of 14%, we believe, Supreme would continuously outpace the industry growth due to its market leadership position .The management has guided that inventory losses are limited to Q1FY20 and gross margin would return to its normal level from Q2FY20. We believe Supreme would be able to maintain operating margin between 14% and 15%, owing to stability in raw material prices and rising proportion of value added products.

Key Drivers:The recent tax cut by the government from 33% to 25.2% will likely to boost earnings of Supreme by 11% each for FY20E & FY21E. We believe a tax cut would help generating strong cash flow for company going forward. We believe, companys revenue, earning to grow at a CAGR of 13% and 21% respectively in FY19-21E led by strong volume traction in the piping segment and rising contribution of value added products in the topline (increased from 24% in FY12 to 35% in FY19). Despite capital intensive business, company D/E remained low at 0.2x due to efficient working capital management (10% sales) and continue generation of free cashflow (average Rs 200 crore annually in the last 8 years). This has resulted in average RoE and RoCE of 26% and 30% respectively in the last 8 years.

Financial: Total revenue Rs 1437 cr in Q1FY20 vs Rs 1346 cr in Q1FY19. PAT at Rs 136 cr in Q1FY20 vs Rs 87 cr in Q1FY19 down 40%. Ebitda stands at Rs 167 cr in Q1FY20 down 10% vs Rs. 186 cr in Q1FY19. EBITDA Margins in Q1FY20 at 12% down 200bps from 14% in Q1FY19.

Share Market Tips For October 2019: 3rd Week

SBI Life Insurance Company Ltd(NSE: SBILIFE) (Share Price: Rs.925): Potential Buy

Valuation: Over-Valued stock with TTM PE of 74x.

Reasons to Consider: SBI Life Insurance reported robust growth in premium at 36% YoY to Rs 16,940 cr in H1FY20, led by strong growth in new business premium (NBP) at 40% YoY and steady renewals at Rs 9120 cr, up 33% YoY. Within NBP, traction in individual business remained healthy at 30% YoY in H1FY20 to Rs 4850 cr. Protection business (individual + group) witnessed robust traction of 59% YoY to Rs 930 cr in H1FY20, leading to share of protection at 12%. AUM growth remained at 23% YoY to Rs 1,54,760 cr. Share of business from bancassurance continues to stay robust with improving branch productivity, growth in individual protection policies. Led by a strong distribution franchise, increasing share of active branches, rise in business per branch and growing digital footprint would augur well for higher penetration.

Key Drivers: Despite slower premium accretion in industry, SBI Life Insurance continued with its robust growth trajectory. Improving persistency, high margin protection business and a tab on cost are seen working in favour of improving VNB margin to 17.2% in FY21E. However, strong distribution would remain the key catalyst. Company focus on annuity business, wherein margins are similar to non-par products, enables it to change the business mix to keep growth momentum intact. In addition, rise in protection business, currently contributing 12% of NBP, is seen driving premium accretion, margins and subsequently earnings.

Financial: Total revenue seen at Rs 12,745 cr in Q2FY20 vs 7,638 cr in Q2FY19. PAT seen at Rs 130 cr in Q2FY20 vs Rs 250.5 cr in Q2FY19 down 48.7%. NPI stands at Rs 10,112 cr in Q2FY20 up 32% vs Rs. 7,662 cr in Q2FY20.

IndusInd Bank Ltd (NSE: INDUSINDBK) (Share Price: Rs.1368): Potential Buy

Valuation: Over-Valued stock with TTM P/BV of 3.55x.

Reasons to Consider: IndusInd Banks operational performance continued to remain steady, led by healthy NII growth & other income growth of 32% & 31% YoY to Rs 2910 cr & Rs 1727 cr, respectively. Margins improved marginally by 5 bps to 4.10% largely attributable to a decline in cost of funds. Provision for the quarter were at Rs 738 crore, up 71% QoQ. Accordingly, PAT came in at Rs 1384 crore, up 50%. However, benefits due to corporate tax cut were utilised to create floating provision of Rs 355 crore and shore up PCR. Owing to the slowdown, IndusInd Banks credit growth witnessed moderation as growth was at 21% YoY. On a sequential basis, consumer finance book grew 3.5% while growth in corporate book remained flat. Further, the management guided at credit growth of 20-25% for FY20E. The banks focus continue on garnering retail deposits, which grew 28% YoY. In contrast, subdued CASA growth led to 160 bps fall in CASA ratio to 41.5%. Overall GNPA rise was contained at 4% QoQ. The ratio increased 4 bps QoQ to 2.19%. Accelerated provision of Rs 355 crore helped to increase PCR by 630 bps QoQ to 50%. Hence, net NPA reduced 11 bps QoQ to 1.12%. The rise in GNPAs for MFI book, up 33 bps QoQ to 0.94%, was impacted by floods.

Key Drivers:There was overall moderation in credit growth. However, de-growth within the corporate book due to repayment, slowdown in auto & subdued microfinance growth due to flood in multiple states impacted growth. The management has said that exposure to recently added stressed assets (including three groups in media, diversified and housing finance sector) was at 1.1% of total advances (1.67% earlier). The same exposure is anticipated to pare down to 0.8% by October 2019 through repayments. Further, exposure to Indiabulls Housing is at 27 bps and Indiabulls Real Estate at 45 bps. Accordingly, there is comfort of exposure to stressed accounts (media, diversified and housing finance) being contained around 2% of loan book (Rs 4000 crore) which could be managed. And, hence given the recent stock price correction in the bank gives the comfort at current levels considering all negatives has been priced-in.

Financial: Its annouces Q2 result where, Net interest income stood at Rs 2910 Cr in Q2FY20. Net advances grew by 20% YoY to Rs 1,97,113 cr. CASA de-grown by 220bps to 41.5% YoY. Net profit at Rs 1383 cr up 50% YoY. NIM remain at 4.18% up 26bps YoY.

Share Market Tips For October 2019: 2nd Week

Lupin Ltd (NSE: LUPIN) (Share Price: Rs.695): Avoid

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

Reasons to Avoid: Company has announced it got USFDA WL (Warning Letter) (issued in September CY19) post classifying the plant in OAI (Official Action Indicated) status in December CY18. The status meant that the plant is considered to be in an unacceptable state of compliance with regard to current good manufacturing practice (cGMP). The plant status and WL were part of the FDAs facility classification letter post 90-day of its visit of the plant. LPC also received OAI status on its Somerset (New Jersey) facility in December CY18 and has to address deficiencies. There are three key areas observed by USFDA for specific violations which are 1) Failure to thoroughly investigate unexplained discrepancy in OOS (Out Of Specification) assay result. Failure to implement CAPA (corrective actions and preventive actions). 2) Failure to establish adequate validation procedure for uniform production and process control and 3) Failure to ensure cleaning process (sanitization and sterilization) of manufacturing instruments to prevent malfunction and contamination. USFDAs special mention of repeat observations in multiple sites such as Goa and Indore has implied that LPC has to follow similar corrective actions in other plants. This will result in wide expansion of work across geographies and require significant time to achieve resolutions on multiple plants, as similar as we observed in manufacturing issues of IPCA with USFDA. Clearly, the pending work will increase overhead in FY20E and 21E and hence its results cut in earnings estimates.

Financial: In Q1 result, Net revenue stood at Rs 4335 cr in Q1FY20 vs Rs 3774 cr in Q1FY19. Net profit at Rs 303 cr in Q1FY20 Vs Rs 203 cr Q1FY19 up 49.5%. EBITDA up 64% at Rs 527 cr in Q1FY20 vs Rs 860 cr in Q1FY19.

Aurobindo Pharma Ltd (NSE: AUROPHARMA) (Share Price: Rs.445): Avoid

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

Reasons to Consider: Company has announced it got Form 483 WL (Warning letter) for Unit 7 (oral formulation unit). The unit was inspected from 19-27 Sep and received 7 observations. The inspectors were Tamil Arasu, Jogy George and Emmanuel J Ramos. 483s cites quality issues which could delay new product approvals which could be a near-term overhang on stock until EIR is received. Unit 7 is an important plant as it accounts for US$300mn in current US sales and 8% of the total FY21 sales. It has 20 pending approvals (15% of total pending files). This should hurt near- term growth outlook and effects on company earnings. Out of 7 warning observation 1 & 5 are key as these are related to lack of scientifically sound process to identify root cause for OOS results, quality control, inadequate data files. These would require more check, review of the quality/process control, training/documentation & new SOPs in few cases.

**Note: Earlier, US FDA has inspected the Unit 7 in June17 and was issued zero observations.

Financial: In Q1 result, Net revenue stood at Rs 5444 cr in Q1FY20 vs Rs 4250 cr in Q1FY19. Net profit at Rs 635 cr in Q1FY20 Vs Rs 455 cr Q1FY19 up 39.5%. EBITDA up 54% at Rs 1162 cr in Q1FY20 vs Rs 755 cr in Q1FY1

KNR Constructions Ltd (NSE: KNRCON) (Share Price: Rs.226): Potential Buy

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

Reasons to Consider: KNR Constructions (KNR) is a leading road focused EPC player with over two decades of experience and a reputation for completing projects on time/ahead of schedule. With a strong orderbook of Rs 6,519 crore (including the recently won HAM project and Karnataka State Highways Improvement Project (KSHIP) HAM project), implying order book-to-bill ratio of 3.2x (on TTM basis). The OB consists of Rs 5,544.6 crore from roads division and Rs 972.8 crore from irrigation. On new orders front, it won Mallanna Sagar irrigation project worth Rs 850 crore in September, 2019. KNR is targeting another HAM order worth Rs 1,000-1,500 crore in FY20E. Company enjoyed better EBITDA margins than its peers due to : 1) large fleet of own equipment and quarrying mine, 2) lower subcontracting expenses (9% in FY19) and 3) receipt of early completion bonuses/escalation claims. Going ahead, we expect EBITDA margin to remain in between 17-17.5% (higher band of guidance of 17-18%) in FY20E, FY21E, respectively, on the back of higher revenue contribution from high margin irrigation projects, lower level of subcontracting expenses and receipts of some portion claims from various authorities worth Rs 545 crore (Rs 53 crore already received in July, 2019).

Key Drivers: KNR has its focus on monetising its BOT/HAM projects. KNR is one of the few companies in the sector that managed to close a deal for four under construction HAM projects with Cube Highways at significant higher valuation (1.8x P/BV). With the deal, it eventually converted its HAM projects to EPC. Beside this, it is looking to monetise its Kerala BOT project by FY20E. The freed up capital could be used as growth capital for future bidding. Considering strong execution, best in class WC (Working Capital), healthy balance sheet and strong return ratios, we expects company to outperform its peers and grow revenue 18% CAGR FY19-21E.

Financial: Total revenue seen at Rs 530 cr in Q1FY20 vs 592 cr in Q1FY19. PAT seen at Rs 45.2 cr in Q1FY20 vs Rs 72.2 cr in Q1FY19 down 35%. Ebitda stands at Rs 116 cr in Q1FY20 down 15% vs Rs. 135 cr in Q1FY19.

Share Market Tips For October 2019: 1st Week

Mahindra Logistics Ltd (NSE: MAHLOG) (Share Price: Rs.354): Potential Buy

Valuation: Over-Valued stock with TTM PE of 30x.

Reasons to Consider: MLL is looking to focus on consumer (including e-commerce) and pharma industries to enhance the market share of non-auto business. It expects good traction in business from e-commerce players in the near term due to the ensuing festive season. On the auto front, it expects a pick-up in revenues driven by festive season and incremental sales of BS IV vehicles. Also, the company is focusing on auto component sector and has added new clients in the sector. It has also continue its investments in technology as the same enables it to provide higher value addition to clients through customised solutions. Moreover, the company has remained asset light in technology adoption as most technological products used by it are on the subscription model.

Key Drivers: Increased revenue share from the non-Mahindra business (especially FMCG, e-commerce) would enable higher warehousing revenues, providing better gross margins and translating into enhanced profitability for the company. Company has realised that rising importance of services like inbound and outbound would enable 3PL players to get a higher wallet share of the clients business with increased client dependency. Also its in-factory logistics business is gaining traction as it has added three more clients and the company is looking at capacity management as a new focus area. It also expects the reforms announced by the Government of India and lower tax rates to boost manufacturing in India, which would lead to higher movement of raw materials and finished goods in the country thereby providing enhanced scope for 3PL players like MLL.

Financial: Total revenue seen down 2.6% at Rs 855 cr in Q1FY20. PAT seen at Rs 18.6 cr in Q1FY20 vs Rs 23.6 cr in Q1FY19 down 21.3%. Ebitda stands at Rs 44.2 cr in Q1FY20 up 10.9% vs Rs. 39.89 cr in Q1FY19.

Aegis Logistics Ltd(NSE: AEGIS) (Share Price: Rs.174): Potential Buy

Valuation: Over-Valued stock with TTM PE of 26x.

Reasons to Consider: Company has posted robust numbers in Q1FY20, its consolidated revenue up by 92% to Rs 1955 cr and Ebitda was up 24% to Rs 108 cr YoY. While PAT has grown 10% to Rs 57 cr YoY. Aegis has posted revenue CAGR of 9.4% during FY15-19 period which was mainly driven by gas terminal division and better than expected performance by its new LPG terminal division at haldia. Successful implementation of PMUY scheme in rural areas has increased LPG demand and with upcoming capacity additions in gas terminal division as mentioned earlier (total throughput LPG capacity post expansion would be 92m MT existing capacity of 50m MT) and GOI strong push for cleaner fuels and the commitment to 100% LPG penetration would continue to boost demand for LPG. We expect from here on revenue to grow in double digit CAGR and EBITDA will also grow in between 15-17% in next two-three years.

Key Drivers: On the capacity utilization and expansion front, mumbai terminal functioning at full capacity and commissioning of additional capacities at Mangalore, Kandla and Haldia, liquid division witnessed topline uptick of 8.6% YoY. With in view of increasing demand for LPG, aegis has envisaged a plan of setting up a new gas terminal division with a capacity of 45,000 MT - 2 fully refrigerated tanks of 22,500 MT each at Kandla, which is in progress and is expected to be completed by H1FY21, involving capex of Rs 350 crs. It has also approved brownfield capacity expansion for LPG at Pipavav port by 3800 MT by adding 2 new spheres over and above the existing 18,300 MT and setting up of LPG railway gantry and the expansion is expected to be completed by next fiscal and would be funded by internal accruals. On the Liquid terminal division company has plans to set up an additional liquid terminal with storage capacity of 40,000 KL (current capacity 100,000 KL) at Kandla port involving a capex of Rs 25 crs, slated to be completed in H2FY20. Another expansion of 20,000 KL of bulk liquid storage beyond the existing 51,000 KL at Kochi port with capex of Rs 15 crs is expected to be completed by Q4FY20. It has also approved setting up of an additional storage capacity of 50,000 KL (existing capacity of 25,000 KL) at Mangalore port costing Rs 35 crs, which is scheduled to be completed next fiscal.

Financial: Total revenue seen up 92% at Rs 1955 cr in Q1FY20. PAT seen at Rs 57 cr in Q1FY20 vs Rs 51.5 cr in Q1FY19 up 10%. Ebitda stands at Rs 108 cr in Q1FY20 up 23.5% vs Rs. 87.6 cr in Q1FY19

Share Market Tips For September 2019: 4th Week

Atul Ltd (NSE: ATUL) (Share Price: Rs.3950): Potential Buy

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

Reasons to Consider: In Q1FY19 company has posted a good number propelled by high operating margins in both LSC (Life Science Chemical) and POC ( Performance and other Chemical) businesses, overall OPMs rose by a staggering 16.5% to 23.1% YoY. EBIT margins of LSC segment jumped from 13.8% to 20.1%, while that of POC advanced from 13.5% to 20% in Q1FY19, resulting in operating profit growth of some 59%. Revenues rose by 14% to Rs 1041 cr when compared to Rs 913 cr in the same period a year ago. Despite modest fall in other income and timid rise in depreciation expense, PAT surged by a massive 81% to Rs 148 cr YoY. Prices of some chemicals rose sharply last fiscal not least due to stricter implementation of environmental norms in China which resulted in shortages. The trade war between China and the USA barely help matters for led to a slowdown in the global economy. By some estimates, the Indian specialty chemical industry is expected to grow by 12-13% over the next five years driven by growth in end-user industries.

Key Drivers: Shifting supply base to India emanating from stricter environmental norms in China and rapid growth in domestic consumption are factors that would drive the growth of Indian specialty chemical industries over the next few years and Atul limited will be the key beneficiaries in this space. Atul's ongoing capital projects of some Rs 500 cr spanning debottlenecking of existing capacities, erecting new capacities of existing products, safety, and environmental protection has the potential to generate additional sales of some Rs 1000 cr. Specifically, plans are afoot to establish capacities of cosmetic ingredients, commercialize new pigments, enhance product portfolio of textile chemicals, expand resins, formulations and specialty intermediates and increase CRAMS business with strategic customers. Market share expansion opportunities would be tapped in resins, dyes & pigments, besides others. Due to recently announced corporate tax rate cut by GOI, post-tax earnings are estimated to increase by 38.5% this fiscal before moderating to 15.5% next fiscal. Little stymied by buoyancy in earnings, return on capital would discernibly ascend over the next couple of years - ROE estimated to rise to 20.4% by FY21 from 18% in FY19.

Financial: Total revenue Rs 1041 cr in Q1FY20 vs Rs 913 cr in Q1FY19. PAT at Rs 148 cr in Q1FY20 vs Rs 82 cr in Q1FY19 up 81%. Ebitda stands at Rs 250 cr in Q1FY20 up 60% vs Rs. 166 cr in Q1FY19. EBITDA Margins in Q1FY20 at 23% up 700bps from 16% in Q1FY19.

NOCIL Ltd (NSE: NOCIL) (Share Price: Rs.112): Potential Buy

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

Reasons to Consider: NOCIL has positioned itself as the market leader in the domestic rubber chemicals industry with a 40% share and has been successfully operating in the business for over 4 decades. In the global market, it has a 5% share and is strengthening its grip in the industry with its wide range of products and superior technical know-how and competency. The rubber chemicals industry derives 65% of its demand directly from the tyre industry. Rubber chemicals constitute 4-5% of the total volume in the manufacturing of tyres. The global tyre production is expected to grow at a CAGR of 3.9% over FY18-23E, with the domestic production likely to increase at a faster rate with a CAGR of 8.5% over the same period. Due to this growth in the tyre industry, the demand for domestic rubber chemicals is expected to grow at a CAGR of 5.6% over FY18-23E, benefitting NOCIL due to its global presence and wide product range. NOCILs Revenue/EBITDA/PAT grew at a CAGR of 10%/27%/34% over FY15-19 and its EBITDA/PAT margins have grown from 15.8%/7.9% in FY15 to 28.1%/15.2% in FY19 respectively. This was driven by an increase in capacity utilization, improvement in operational efficiencies & better product mix and imposition of anti-dumping duty by the govt. In FY18 on the back of its robust earnings growth and generation of positive cash flows, NOCIL was able to clear its entire debt (from Rs. 131 cr in FY14) and currently is a debt-free company.

Key Drivers: NOCIL, at the start of FY19, announced to expand its capacity from 55,000 MT to 1,10,000 MT to capitalize on the healthy end-user demand. The expansion plan is to be completed in two phases, the first already completed and commenced production the second phase is set to be commissioned in H2FY20. This expanded capacity will enable NOCIL to cater to the increasing demand in domestic market and expand its global base with an asset turn of 2x that would aid revenues growth over the next 2-3 years with help of governments push for infrastructure and imposition of Anti Dumping Duty (ADD) on radial tyres for trucks and buses from China. According to the management, Indian tyre companies have remained committed to a CAPEX of Rs 15000-18000 cr over the next few years in the wake of this expected rise in demand. The global tyre industry has also planned $10 bn towards expansion plans. Given this rise in demand for tyres and rubber chemicals being an irreplaceable part of the manufacturing process, demand for these chemicals is also expected to grow steadily with NOCIL sweetly positioned to gain further share in the industry.

Financial: Total revenue seen down 14.36% at Rs 230 cr in Q1FY20. PAT seen at Rs 33 cr in Q1FY20 vs Rs 51 cr in Q1FY19 down 35%. Ebitda stands at Rs 59 cr in Q1FY20 down 28.4% vs Rs. 83 cr in Q1FY19. EBITDA Margins in Q1FY20 at 25% down 500bps from 30% in Q1FY19.

APL Apollo Tubes Ltd(NSE: APLAPOLLO) (Share Price: Rs.1380): Potential Buy

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

Reasons to Consider: APL has the ability to grow at a faster rate than its peers due to its strong reach. It has a distribution network of 790 distributors and 50,000 retailers spread across India. Apart from being a lowest cost producer, APL has been in the forefront to introduce new products and adopt new technologies. Over FY12-19, APL has grown its volumes at CAGR of 21% driven by higher demand as well as market share gains. APLs ROCE has averaged 21% over FY12-FY19 which is far superior compared to its peers. Although APLs market share has increased from 12% in FY15 to 18% in FY19, however, market share of small and unorganized players is still high at 40%. We believe APL will continue to outperform the industry growth and we forecast its volumes to grow at a CAGR of 20% to 1.9 mn tonnes over FY19-21E. Furthermore, APL added capacities aggressively (organic as well as through acquisitions) and has managed to ensure offtake, thus proving its execution skills.

Key Drivers: During April 2019, APL acquired Shankara Building Productss (Taurus Value Steel) 200 kt Hyderabad unit for Rs700 mn. The unit has line to produce high-margin GI and GP pipes. The company has order book from Shankara ensuring assured offtakes and quick turn-around. With recent acquisitions, APL has capacities in place to grow volumes at a healthy rate for the coming three years. The capex from FY21 would be only towards maintenance activities. Hence, we expect strong free cash flows from FY21. Further, its return ratios and credit profile is also likely to witness strong improvement.

Financial: Total revenue seen up 23.56% at Rs 2072 cr in Q1FY20. PAT seen at Rs 52 cr in Q1FY20 vs Rs 47 cr in Q1FY19 up 10%. Ebitda stands at Rs 130 cr in Q1FY20 up 15.25% vs Rs. 112.5 cr in Q1FY19. EBITDA Margins in Q1FY20 remain stable at 6% YoY.

Share Market Tips For September 2019: 3rd Week

Sundaram Finance Ltd (NSE: SUNDARMFIN) (Share Price: Rs.1580): Potential Buy

Valuation: Fairly-Valued stock with TTM P/BV of 2.2x.

Reasons to Consider: Sundaram Finance (SUF) clocked in steady AUM growth of 16/3% YoY/QoQ largely in-line with expectations. Margins were stable despite the higher cost of funds being offset by improved yields. Asset quality saw slight deterioration, largely seasonal in nature. Higher provisioning continued at Rs 46 cr. PAT came in at Rs 157.5cr, up 12% YoY. Disbursement for the quarter grew by 8% YoY led by CV segment while car disbursements lagged. Borrowings stood at Rs 28,586cr (including securitization). Debentures, securitization, CP, deposit and bank borrowings stood at 41/19/5/12/23% respectively. Whereas, calculated cost of borrowings increased to 8.66% (from 7.60% QoQ). We expect the cost of funds to be controlled as liquidity improves for NBFCs and better rating profile of SUF.

Key Drivers: SUFs conservative approach to build healthy and profitable vehicle finance book has resulted in consistent performance. Subsidiaries have also been reporting decent numbers, even in a tough macro environment. The overall slowdown in the auto sector could be an overhang on the stock for the next couple of quarters. We expect 15% growth in AUM over FY19-FY21E. We also believe stable asset quality to support superior ROA over FY19-FY21E.

Financial: Its announces Q1 result where, Net interest income stood at Rs 923 cr in Q1FY20 vs Rs 753 cr in Q1FY19. Net advances grew by 25% YoY to Rs 27,271 cr. Net profit up 12% to Rs 158 cr Vs Rs 141 cr YoY. Gross NPA at 2.2% in Q1FY20 vs 1.7% in Q1FY19 and Net NPA at 1.6% in Q1FY20 vs 1.1% in Q1FY19.

Tata Chemicals Ltd (NSE: TATACHEM) (Share Price: Rs.590): Avoid

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

Reasons to Avoid: Company posted Q1FY20 revenue which rose 5.6% Rs. 2,897cr YoY, primarily led by revenue growth in Consumer products (+13.0% to Rs. 495cr) and Specialty products segment (+8.9% to Rs. 634cr). Basic chemistry products revenue witnessed a muted growth of 1.3 % YoY to Rs. 1,946, impacted by lower production of soda ash in Mithapur. By geography, strong performance in US (+10.5% YoY to Rs. 845cr), Africa (+32.3% to Rs. 123cr) and India business (+4.2% to Rs. 1,031cr) offsets weak performance in UK region (-10.8% to Rs. 307cr). EBITDA margins surged 256bps YoY to 20.4% primarily with improved margins for BCP with better realizations for Soda ash and lower costs. The company has completed committed investment and commissioning of a new facility at Nellore. Taking into account the companys expansionary plans and restructuring of the business, going forward we expect earnings to grow at 10.6% CAGR over FY19-21E. However, execution risk and uncertainty around demand will be key concerns and that will put pressure on the earnings as well as on margins in the coming quarters.

Financial: In Q1 result, Net revenue stood at Rs 2897 cr in Q1FY20 vs Rs 2744 cr in Q1FY19. Net profit at Rs 248 cr in Q1FY20 Vs Rs 206 cr Q1FY19 up 16.4%. EBITDA up 20.7% at Rs 592 cr in Q1FY20 vs Rs 491 cr in Q1FY19. EBITDA Margins up 256bps to 20.4% in Q1FY20 vs 17.9% in Q1FY19.

Share Market Tips For September 2019: 2nd Week

Glenmark Pharma Ltd (NSE: GLENMARK) (Share Price: Rs.369): Avoid

Valuation: Under-Valued stock with TTM PE of 13x.

Reasons to Avoid: Company posted its Q1FY20 results where its revenue grew 7.3% YoY to Rs. 2,323cr driven mainly by India operations which contributed Rs. 752cr (+13.4%) YoY, while US contributed Rs.731cr (+3.9%) YoY and Latin America Rs.811cr (-16.9%) YoY showed weakness. EBITDA stood at Rs 342cr (-1.5%) YoY, while EBITDA margin came in at 14.7% (-130bps) YoY which is impacted by higher costs and lower US sales. India operations primarily comprises of formulation business with market share of 2.2% and its consumer care business which booked strong growth of 27.0% to Rs.56cr in Q1FY20. Sales in US is primarily driven by generics & specialty business. Despite the decline of US generic drug Mupirocin cream, impacted by reimbursement pressures, the company witnessed flat growth in Q1FY20 in its generic business. Specialty business in US driven by dermatology products generated sales far below companys expectations while Ryaltris is currently under review with USFDA. Glenmark life sciences, which primarily includes manufacturing and marketing of API products across all major markets globally, generated sales of Rs. 231cr, up 9.8% YoY, driven by India and LatAm.

Financial: In Q1 result, Net revenue stood at Rs 2323 cr in Q1FY20 vs Rs 2166 cr in Q1FY19. Net profit at Rs 109 cr in Q1FY20 Vs Rs 233 cr Q1FY19 down 53.1%. EBITDA down 2% at Rs 342 cr in Q1FY20 vs Rs 347 cr in Q1FY19. EBITDA Margins down 130bps to 14.7% in Q1FY20 vs 16% in QFY19.

Coal India Ltd (NSE: COALINDIA) (Share Price: Rs.195): Potential Buy

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

Reasons to Consider: FY19 turned out to be a standout year for Coal India with its EBITDA increasing 48% YoY led by higher realizations. In Q1FY20 revenue grew only 2.8% YoY to Rs. 23,223cr, primarily impacted by lower revenue from e-auction which dropped 11.8% YoY to Rs 4,106 cr. Declines in E-Auction revenue were mainly attributable to lower realized prices of Rs 2,155/t (-10.2%) and weaker sales volume during the quarter (-1.8%) YoY to 19.1mt. Meanwhile, FSA revenue rose 4.3% YoY to Rs 17,855 cr helped by improved realizations (4.3%) YoY to Rs 1,370/t while sales volume remained flat YoY at 130.3mt. Washed coal (non-coking) segment revenue also increased by 42.2% YoY to Rs 633 cr as realized prices improved 28.0% YoY to Rs. 2,465/t and sales volumes grew 11.3% to 2.6mt. Overall coal sales for the quarter remained flat at 153.2mt. Gross profit margin improved by 275bps to 88.0% for Q1FY20 on the back of a decline in losses from changes of finished/WIP goods. Resultantly, EBITDA also rose 15.4% YoY to Rs 6,612 cr and EBITDA margin expanded 310bps to 28.5%. Higher employee benefits expenses (3.1% ) YoY to Rs 9,896 cr partially offset profitability in Q1FY20. PAT increased 22.3% YoY to Rs 4,630 cr.

Key Drivers: The companys board approved the proposal to purchase 40 rakes for Rs 700 cr on 1st Aug-19. One rake can carry 1.4mt of coal in a year. This is a significant step considering that the company is expecting the demand for rakes to increase to 400/day in next few years (from 236/day in FY19). Management targets to produce 660mt of coal in FY20 vs 600mt produced in FY19. The companys ability to hike FSA prices and increase evacuation charges is a reflection of its dominant position in the industry, in our view. Moreover, even after the price hike, FSA prices are 30-40% lower than the e-auction rates. This indicates that there is still significant pricing power left with the company. Company is also attractively trading at 3x FY20 EV/EBITDA and additionally offers a dividend yield of 7%.

Financial: Total revenue Rs 23,223 cr in Q1FY20 vs Rs 22,598 cr in Q1FY19 up 2.8%. PAT at Rs. 4630 cr in Q1FY20 vs Rs 3786 cr in Q1FY19 up 22.3%. Ebitda stands at Rs 6612 cr in Q1FY20 up 15.8% vs Rs. 5732 cr in Q1FY19. EBITDA Margins in Q1FY20 at 28.5% up 310bps from 25.4% in Q1FY19.

Gabriel India Ltd (NSE: GABRIEL) (Share Price: Rs.109): Potential Buy

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

Reasons to Consider: Gabriel India reported muted numbers for Q1FY20 due to across the board slowdown in auto industry where total revenues came in at Rs 517 cr up (0.5%) YoY, EBIDTA came in at Rs 43 cr down (15%) YoY with EBIDTA margin at 8.3% (contraction of 157 bps) YoY due to negative operating leverage. The slowdown in the auto segment is seen across the board, be it 2/3W, PV or CVs. Given the scenario, Gabriel registering a 16% growth in 2W/3W segment on a YoY basis (2W/3W industry declined by 11-12%) is an incredible performance in this segment. They were able to achieve this by getting a larger share of business from OEM players. However, PV segment de- grew by 26% due to discontinuation of Maruti Omni and Gabriel not getting business for New WagonR model.

Key Drivers: The company has bagged the account of new Alto which is expected to start rolling out in Q3FY20 with revenues coming in FY21. Company has a good pipeline for PV segment and has got accounts of new platforms of M&M, Peugeot, VW, and Tata Motors. Tata Tiago platform to start contributing from Q3FY20 onwards. Gabriel has planned to CAPEX of Rs 70 cr for FY20 (earlier 85 Cr) and is looking at ways to optimize the same. The capex would be utilized to develop new 2W fork plant with an expected outlay of Rs 45 cr at Sanand to cater to the new HMSI orders and rest for maintenance and R&D (reduced by 15 Cr). The 2W fork plant capacity would be available in FY20, thus helping the company increase its volume from HMSI in the coming quarter and the proportion of 2W in the overall portfolio would also likely to increase by FY20. Gabriel has won the tender for development models of Train 18 & Train 20- the high-speed trains indigenously developed in India. FY19 witnessed almost 80% growth in its revenues from Railways and the company expects 25% growth in FY20. The opportunity size of Railways business for Gabriel is quite high as the number of shock absorbers per coach has increased in the new models launched by Indian railways. Apart from that company got a breakthrough with Daf (Dutch truck manufacturing company) and VW of Russia. Both these accounts are key breakthroughs to enter these regions. The first prototype of Daf is being sent in the month of August itself. This has the potential to open up entire European markets.

Financial: Total revenue Rs 517 cr in Q1FY20 vs Rs 515 cr in Q1FY19. PAT at Rs 22.1 cr in Q1FY20 vs Rs 26.7 cr in Q1FY19 down 17%. Ebitda stands at Rs 43 cr in Q1FY20 down 15% vs Rs. 51 cr in Q1FY19. EBITDA Margins in Q1FY20 at 8.3% down 157bps from 9.9% in Q1FY19.

Bosch Ltd (NSE: BOSCHLTD) (Share Price: Rs.13960): Avoid

Valuation: Over-Valued stock with TTM PE of 29x.

Reasons to Avoid: Bosch reported disappointing its Q1FY20 results. Revenues came in at Rs 2779 cr down (13.5%) YoY with automotive segment revenues down 13.5% YoY and non-automotive segment down 13.1% YoY. EBITDA margins at 17.4% were down 218 bps YoY. While other expenses and employee costs as a percentage of sales both increased sequentially, gross margins were unchanged. Consequent reported PAT was at Rs 280 cr, down 35.0% YoY. Profitability was also impacted by an exceptional item to the tune of Rs 82.1 cr related to costs incurred for restructuring, reskilling and redeployment initiatives undertaken by the company. Bosch has established leadership in diesel technology (starter motors, common rail systems), with market share in gasoline fuel injection systems lower courtesy its late entry into that space. With BS-VI rollout, lower capacity diesel engines are expected to migrate to gasoline given the prohibitive price increase in the former would further exacerbate existing cost difference between the two technologies. While diesel is seen remaining the dominant fuel choice among UVs, larger engine capacity passenger cars, tractors, and the CV space, boschs addressable market is still expected to shrink. Further, management commentary on the current auto space slowdown is far from encouraging, with bosch viewing it as a structural one rather than a transient phase.

Financial: In Q1 result, Net revenue stood at Rs 2779 cr in Q1FY20 vs Rs 3212 cr in Q1FY19. Net profit at Rs 280 cr in Q1FY20 Vs Rs 431 cr Q1FY19 down 35%. EBITDA down 23% at Rs 483 cr in Q1FY20 vs Rs 628 cr in Q1FY19. EBITDA Margins down 218bps to 17.4% in Q1FY20 vs 19.6% in Q1FY19.

Share Market Tips For September 2019: 1st Week

Dish TV India Ltd (NSE: DISHTV) (Share Price: Rs.20): Avoid

Valuation: Fairly-Valued stock with negative earnings.

Reasons to Avoid: : It has posted Q1FY20 consolidated result where revenue fell 44.1% YoY to Rs. 926cr primarily due to netting of programming cost this quarter under the new tariff regime. On comparable basis, revenue was down 7.7% YoY to Rs. 1,528cr. Subscription revenue accounted for 89.2% of total revenue. Company recorded 209k net subscriber additions in Q1FY20, with net subscriber base reaching 23.9mn at quarter end. EBITDA declined 3.7% YoY to Rs. 536cr owing to higher selling commission, service payout and overall marketing costs. Adjusted PAT loss of Rs. 32cr (vs. Rs. 28cr profit in Q1FY19) was further impacted by higher taxes. ARPU came in at Rs. 116 net of taxes based on new accounting (comparable ARPU at Rs. 199-200 vs Rs. 165-166 in Q4FY19). Churn rate stood at 0.95% for the quarter. Given weak quarter, uncertain outlook around new tariff regime and stiff competition from newly entrant Jio we expect further detoriation on financial will be seen in coming quarter.

Financial: In Q1 result, Net revenue stood at Rs 926 cr in Q1FY20 vs Rs 1656 cr in Q1FY19. Net loss at Rs 32 cr Vs profit of Rs 28 cr YoY. EBITDA down 5% at Rs 541 cr in Q1FY20 vs Rs 573 cr in Q1FY19.

Balkrishna Industries Ltd (NSE: BALKRISIND) (Share Price: Rs.720): Avoid

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

Reasons to Avoid: : Company posted it Q1FY20 results, revenues declined by 12.4%YoY to Rs 1193 cr on account of a 10% YoY decline in volumes to 51,304 MT and a 3% decline in realizations. The decline in volume can be attributed to deteriorating overseas volumes and in particular in the agricultural tyre segment. The management has guided for a volume growth of 3%-5% for FY20. Realizations declined during the quarter on account of pass through of raw material cost decline to customers and adverse forex rates. BIL faced a challenging macro environment on account of the global trade war which affected demand sentiment across regions. Further, a heatwave in Europe and ongoing US-China trade war affected the agriculture segment and hence the company faced decline in volume off -take in the Agriculture segment by more than 10% YoY. EBITDA declined by 25.1% YoY to Rs 260 cr & EBITDA margin declined by 380bps YoY to 22.4% on account of a 133bps decline in gross margins and 83bps/164bps increase in employee costs/branding expenses. PAT stood at Rs 170 cr, a decline of 23.6% YoY. BIL has shelved its USD100mn US capex plan due to bleak outlook. Management expects the weak demand scenario and pricing pressure to persist in FY20. However the growth guidance for FY20 has been maintained on account of pent up demand from channel.

Financial: In Q1 result, Net revenue stood at Rs 1193 cr in Q1FY20 vs Rs 1362 cr in Q1FY19. Net profit at Rs 176 cr in Q1FY20 Vs Rs 230 cr Q1FY19 down 23.6%. EBITDA down 25% at Rs 260 cr in Q1FY20 vs Rs 350 cr in Q1FY19.

Endurance Technologies Ltd (NSE: ENDURANCE) (Share Price: Rs.890): Avoid

Valuation: Over-Valued stock with TTM PE of 23x.

Reasons to Avoid: : The company recorded a modest 2.6% YoY growth in revenues, as the slowdown in the two-wheeler industry affected its top-line performance, missing Street estimates by 3.6%. 71.2% of the top-line was contributed by the Indian business with Bajaj Auto being the top contributor at 37.5%. Improvements in gross margin helped in expanding EBITDA margin by 340bps YoY to 18.2% in Q1FY20. Business with Hero MotoCorp grew 35.0% YoY, while Bajaj Auto and Yamaha tie-ups registered 6.0% YoY growth. Aftermarket sales, which includes both domestic and export sales, saw 11% YoY growth. Contraction in the European passenger vehicle market resulted in 3.1% YoY growth in European operations (28.8% of total sales). Given the contraction in the Indian two- and three-wheeler market, combined with the demand slowdown in the European car market, we expect the company to post muted revenue growth on account of the demand slowdown and inventory pileup in the Indian two- and three-wheeler markets and softness in the European passenger vehicle market.

Financial: In Q1 result, Net revenue stood at Rs 1909 cr in Q1FY20 vs Rs 1860 cr in Q1FY19. Net profit at Rs 166 cr in Q1FY20 Vs Rs 125 cr Q1FY19 up 32.6%. EBITDA up 26% at Rs 348 cr in Q1FY20 vs Rs 276 cr in Q1FY19. EBITDA Margins up 340bps to 18.2% in Q1FY20 vs 14.8% in QFY19.

Share Market Tips For August 2019: 5th Week

Steel Authority of India Ltd (NSE: SAIL) (Share Price: Rs.32): Avoid

Valuation: Under-Valued stock with TTM P/E of 10x

Reasons to Avoid: : SAIL posted Q1FY20 earnings which is better due to higher than expected realisations. However, disappointment continues on volumes and cost front in spite of increased capacity availability. Company used weak demand as shield for weakness in volumes against better performance posted by its peers despite facing capacity constraints. We do not expect material improvement in companys operational performance due to weak outlook on demand (affecting its scale benefit), aggravating competition intensity and sluggish prices. Owing to weak prices and sluggish demand, we may see EBITDA down by 11% for FY20E. Due to high dependence on steel prices and inefficient operations and trade war concerns we may see dip in earnings in coming quarter. In concall company highlighted the Net Plant Realisations (NPR) rose marginally in Q1FY20 by 1.3% Rs520 QoQ to Rs 40,828/t, Realisations fell by 9% or Rs3,600 in July over Q1FY20 average, Coking coal prices fell USD20-25/t benefit would be visible with a lag of a quarter, Techno-economic parameters deteriorated QoQ/YoY due to low production, Debt rose 7% QoQ/4% YoY to Rs485bn due to subdued collections.

Financial: In Q1 result, Net revenue stood at Rs 14,820 cr in Q1FY20 vs Rs 15,907 cr in Q1FY19. Net profit down 87.2% to Rs 68.8 cr Vs Rs 540.45 cr YoY. EBITDA down 34% at Rs 1764.78 cr in Q1FY20 vs Rs 2674.2 cr in Q1FY19. EBITDA margins are down 500bps at 11% in Q1FY20 vs 16% in Q1FY19.

Greenply Industries Ltd(NSE: GREENPLY) (Share Price: Rs.137): Potential Buy

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

Reasons to Consider: The topline grew 13.1% YoY to Rs 349.4 crore while the bottomline grew 81.7% YoY to Rs 21.0 crore in Q1FY20. Plywood sales volumes grew 4.1% YoY to 13.57 MSM (premium category contributed 64%) in Q1FY20 while realisations improved 3.3% YoY to Rs 222/sq mt. GILs own manufacturing facility is operating at 139% utilisation as of Q1FY20. With capacity constraints in place, it plans to achieve further growth via outsourcing. It has already entered into a JV (30% ownership) for premium-end products (11 MSM plant capacity) that is expected to commence production by Q3FY20E & could ensure revenue worth Rs 100- 115 crore at peak utilisation for GIL. It is also planning to enter another JV that will be utilised for production of Ecotec & film-faced plywood. GIL is looking at 6-7% overall volume growth & increase in realisation by 1-2% in FY20E. Overall, it expects 8-10% plywood division growth in FY20E.

Key Drivers: GIL currently has a 36,000 CBM (Cubic Metre) per annum capacity at Gabon, which it plans to increase to 96,000 CBM by October, 2019 at a capex of Rs 27 crore. Currently, out of total output from the 36,000 CBM plant at Gabon, GILs requirement is only 15-20%. Balance is sold to other customers (67% value comes from India, 14% from Spain, 2% from Vietnam, 13% from Indonesia and balance from Southeast Asia). However, once capacity increases to 96,000 CBM, GILs requirement will drop to 10% of output from Gabon. With South Asian markets now becoming net importers of face veneer from Gabon, GIL would focus more on increasing supply to South Asian & European markets. Overall, the management aims to clock Rs 215 crore revenue from the Gabon facility in FY20E. GIL moving towards an asset-light business model by targeting growth through outsourcing remains the silver lining for the company. However, with the domestic plywood business growing at a muted rate, GIL is expected to derive growth largely from exports business in Gabon, which should be watched, due to dynamics in the international market.

Financial: In Q1FY20 Net Revenue at Rs 349.5 cr Vs Rs. 308.9 cr in Q1FY19 up 13.1%. Net Profit at Rs. 21 crore in Q1FY20 up 81.7% from Rs. 11.6 crore in Q1FY19, whereas EBITDA stands at Rs. 41.1 crore in Q1FY20 vs Rs. 20.6 crore in Q1FY19 up 99.9%. EBITDA Margins up 511bps to 11.8% in Q1FY20 vs 6.7% in Q1FY19.

Share Market Tips For August 2019: 4th Week

HEG Ltd (NSE: HEG) (Share Price: Rs.915): Avoid

Valuation: Under-Valued stock with TTM P/E of 2x

Reasons to Avoid: : HEG reported a subdued performance for Q1FY20 wherein topline, PAT came in lower than estimates. For Q1FY20, HEG reported capacity utilisation of 85% (80% in Q4FY19, 82% in Q1FY19). However, during the quarter, the company did build in some finished graphite electrodes inventory. Hence, sales volumes are lower than production volume. Going forward, the company has guided for capacity utilisation level of 75% for FY20E. HEG reported a topline of Rs 816.5 crore (down 39.4% QoQ, up 48.6% YoY. EBITDA for the quarter was at Rs 347.8 crore (down 55.9% QoQ, 70.7% YoY). The company reported PAT of Rs 234.4 crore, down 55.3% QoQ, 69.6% YoY. Graphite electrodes are used in the EAF route of steelmaking. Global steel demand has been negatively impacted by a weakening global economy. In the current muted demand scenario, excess production of graphite electrodes in China due to relatively slow ramp up of EAF capacities has led to cheaper graphite electrode exports to other countries (from China). Furthermore, the muted trend in steel prices witnessed domestically and globally does not augur well for the graphite electrode market. Cumulatively, all above factors have put downward pressure on graphite electrode prices. 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 HEG. Apart from that there was news on HEG management fat pay remuneration in FY19 where the CEO took home salary of 121 cr more than 180% rise compare to previous fiscal and the ratio of compensation to median remuneration was 4045:1 due to this the question was also raised on company corporate governance issue.

Financial: In Q1 result, Net revenue stood at Rs 816.5 cr in Q1FY20 vs Rs 1587.4 cr in Q1FY19. Net profit down 69% to Rs 234.4 cr Vs Rs 770.4 cr YoY. EBITDA down 70% at Rs 347.8 cr in Q1FY20 vs Rs 1188 cr in Q1FY19. EBITDA margins are down 3224bps at 42.6% in Q1FY20 vs 74.8% in Q1FY19.

Essel Propack Ltd (NSE: ESSELPACK) (Share Price: Rs.81): Avoid

Valuation:Under-Valued stock with TTM P/E of 13x

Reasons to Avoid: Essel Propack (EPL) reported flattish topline (down 9% QoQ) led by poor performance in AMESA and EAP regions (mainly India and China respectively). While India demand slowdown due to macro headwinds, the Chinese revenue slowdown was largely due to ongoing US-China trade issues. Despite significant rise in the contribution of non oral care to topline (up from 40.7% in Q1FY19 to 46.6% in Q1FY20) the EBITDA margin was under pressure mainly due to sharp decline in the profitability of the AMESA regions. We believe, the lumpiness of domestic business coupled with deteriorating EBITDA margin profile would weigh on valuations. While America & Europe (together contributes 42% to topline) regions reported revenue growth of 3% & 17% YoY respectively, the lower volume offtake in the AMESA and EAP regions hurt the overall topline growth. The company is aiming to increase revenue contribution from non-oral category (relatively high margin business) from 40.4% in FY17 to 50% in the next three years. However, we model EBITDA margin at 18.1%-18.5% for FY20E-21E considering the slow improvement in profitability of Amesa region.

Financial: In Q1 result, Net revenue stood at Rs 629.8 cr in Q1FY20 vs Rs 635.4 cr in Q1FY19. Net profit down 5% to Rs 40 cr Vs Rs 42 cr YoY. EBITDA down 2.7% at Rs 108.6 cr in Q1FY20 vs Rs 111.7 cr in Q1FY19. EBITDA margins are down 32bps at 17.2% in Q1FY20 vs 17.6% in Q1FY19.

Rupa and Company Ltd(NSE: RUPA) (Share Price: Rs.165): Avoid

Valuation: Under-Valued stock with TTM P/E of 14x

Reasons to Avoid: After de-growth in revenue in Q4FY19, even FY20 has begun on a subdued note for Rupa. Revenues for Q1FY20 grew marginally by 2.7% YoY to Rs 188.5 crore. Owing to negative operating leverage, EBITDA margins for the quarter declined by 20 bps YoY to 11.2%. The negative impact of higher employee expenses (up 25% YoY to Rs 12.9 crore) was partially negated by a decline in other expenses (down 1% YoY to Rs 42.8 crore). Absolute EBITDA remained constant YoY at Rs 21.1 crore. Increase in depreciation cost (up 27% YoY to Rs 4.1 crore) and interest expense (up 38% YoY to Rs 4.1 crore) further dented the profitability. The resultant PAT declined 9.8% YoY to Rs 9.3 crore. The competition in the Indian innerwear industry is intense and most innerwear players (excluding new entrant Aditya Birla Fashion) have registered a flattish revenue growth. Rupa in-spite of spending 7% of revenues on branding and investment and using celebrity endorsement has not been able to achieve acceleration in revenue growth for the past two years. In a bid to enhance the share in the growing premium menswear segment, the company undertook various licensing of international brands. However, due to intense competitive scenario (Van Heusen from ABFRL and CK in Arvind), the management has not been able to scale up its business as per expectations. The trade channel continued to face liquidity stress and the company had to support the channel partners with higher credit period which led to increased working capital cycle in FY19. The management is contemplating channel financing for its distributors which would reduce the stress on-trade channels. Also, the company is planning to move some part of its business from wholesaling to retailing. The management indicated that the transition in the business model could lead to lower revenue growth in the near term.

Financial: In Q1 result, Net revenue stood at Rs 188.5 cr in Q1FY20 vs Rs 183.5cr in Q1FY19. Net profit down 10% to Rs 9.3 cr Vs Rs 10.3 cr YoY. EBITDA up 1% at Rs 21.1 cr in Q1FY20 vs Rs 20.9 cr in Q1FY19. EBITDA margins are down 20 bps at 11.2% in Q1FY20 vs 11.4% in Q1FY19.

Share Market Tips For August 2019: 3rd Week

eClerx Services Ltd (NSE: ECLERX) (Share Price: Rs.556): Avoid

Valuation: Under-Valued stock with TTM P/E of 10x

Reasons to Avoid: eClerx reported a weak set of Q1 numbers on all fronts. The companys US$ revenues declined 0.6% QoQ to $50.9 million. Further, margins continued to decelerate significantly due to various cost pressures and wage hike. EBIT margins got dragged 480 bps QoQ to 13.8%. We believe the company is facing client specific issues that have impacted its growth in top 10 clients (declined 3.5% QoQ). Further, higher short-term projects (15-20% of revenues), pressure in legacy business and inability of cracking new deals to replace de-growth in legacy business are further hampering revenue growth. PAT margins have also decelerated from 26.6% in FY17 to 11.2% in Q1FY20. Margins are now in line with the margins of a few BPO companies. However, headwinds in terms of higher onshoring, pricing pressure and increase in minimum wages in Maharashtra will keep margins under pressure. In addition, higher attrition will also impact cost in the near term.

Financial: In Q1 result, Net revenue stood at Rs 354.7cr in Q1FY20 vs Rs 351.9 cr in Q1FY19. Net profit down 34% to Rs 39.8 cr Vs Rs 60.2 cr YoY. EBITDA down 15.6% at Rs 66.1 cr in Q1FY20 vs Rs 78.3 cr in Q1FY19. EBITDA margins are down 362bps at 18.6% in Q1FY20 vs 22.3% in Q1FY19.

Hindustan Petroleum Corporation Ltd (NSE: HINDPETRO) (Share Price: Rs.247): Avoid

Valuation:Under-Valued stock with TTM P/E of 8x

Reasons to Avoid: We expect HPCLs core business to remain weak due to pressure on GRMs and likely increase in competition in the profitable fuel retailing segment from private sector companies. In addition valuations would also be hampered by HPCL managements refusal to accept ONGC as promoter. Consolidated PAT came in at Rs 800 cr, down 56% YoY. The share of profits from its associates driven by its stakes in unlisted Bhatinda Refinery JV HMEL (48.99%) and MRPL (16.96%) was down from Rs 290 cr to Rs 100 cr. We expect the stock to remain weak despite the fact that it is at a 3 year low due to weak refining business outlook and the companys battle with the government questioning the promoter status of majority stake owner ONGC. In its Q1 company has reported the steep fall in GRMs to US$0.75/bbl which was way below analyst community estimate of US$ 4.65/bbl. Management stated on the GRM front that "The GRM were lower because of shutdown taken at our refineries".

Financial: In Q1 result, Net revenue stood at Rs 74,800 cr in Q1FY20 vs Rs 73,219 cr in Q1FY19. Net profit down 52% to Rs 811 cr Vs Rs 1719 cr YoY. GRMs are down 375bps at US$0.75% in Q1FY20 vs US$4.51% in Q4FY19.

JSW Steel Ltd (NSE: JSWSTEEL) (Share Price: Rs.220): Avoid

Valuation: Under-Valued stock with TTM P/E of 9x

Reasons to Avoid: JSW Steel reported a mixed set of Q1FY20 numbers wherein sales volume came in lower than analyst estimate while EBITDA/tonne came in higher than analyst estimate. On a standalone basis JSW Steel reported sales volume of 3.75 million tonnes (MT). The consolidated topline was at Rs 19,812 cr (down 3.4% YoY, 11.4% QoQ) broadly in line with estimate of Rs 19,983.7 cr. Standalone EBITDA/tonne was at Rs 9936/tonne (Rs 10,119/tonne in Q4FY19 and Rs 12,590/tonne in Q1FY19). Standalone EBITDA was at Rs 3726 cr. Consolidated EBITDA was at Rs 3716 cr, down 27.2% YoY, 16.3% QoQ. The muted performance from overseas subsidiaries adversely impacted consolidated operations wherein consolidated EBITDA came in lower than standalone EBITDA. Ensuing consolidated PAT was at Rs 1008 cr, down 56.9%. JSW has chalked out a significant capacity expansion plan wherein it plans to incur notable capex over the next two to three years, which would also increase its leverage. This does not augur well in the current scenario of ongoing trade conflicts and slowdown in China and will impact on its balance sheet and increase the debt level of the company. Currently, the debt/EBITDA is at 2.72x (vs 2.43x in March 2019). In its recent conference call management has indicated that steel demand reported growth YoY, but it has declined QoQ. Domestic steel demand was impacted due to slowdown in the auto sector, muted trend in investments and lower credit availability.

Financial: In Q1 result, Net revenue stood at Rs 19,812 cr in Q1FY20 vs Rs 20,519 cr in Q1FY19. Net profit down 56.9% to Rs 1008 cr Vs Rs 2339 cr YoY. EBITDA down 27% at Rs 3716 cr in Q1FY20 vs Rs 5105 cr in Q1FY19. EBITDA margins are down 612bps at 18.8% in Q1FY20 vs 24.9% in Q1FY19.

Share Market Tips For August 2019: 2nd Week

ITC Ltd (NSE: ITC) (Share Price: Rs.255): Potential Buy

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

Reasons to Consider: ITC has reported its Q1, where Net revenue increased 5.8% YoY to Rs 11,502.8 crore. Cigarette, FMCG, agri business, paperboard & hotels business witnessed growth of 6%, 6.6%, 14.6%, 12.7% & 15%, respectively. EBITDA grew 8.7% to Rs 4,565.7 crore supported by cigarette, FMCG, agri & paperboard segments. FMCG EBITDA increased from Rs 127.8 crore to Rs 180.7 crore driven by strong growth in the branded packaged food business and better product mix. Net profit grew 12.6% YoY to Rs 3,173.9 crore driven by higher operating profit and other income. After two quarters of cigarette margin decline, ITCs cigarette margins expanded 145 bps to 70.8% in Q1FY20 on the back of stable taxation regime and selective price hikes during the year which is seen as positive in coming quarter.

Key Drivers: During FY19, ITC strengthened its milk procurement network for Aashirvaad Svasti dairy products with a significant increase in daily milk collection. Aashirvaad Svasti portfolio was augmented by the introduction of pouch curd and paneer. The company has already ventured into fresh vegetables segment with potatoes, frozen peas in the NCR region and plans to scale up. During the quarter, the company launched Aashirvaad Nature's Super Foods, Bingo Starters on pan India level and more variants of Fabelle range of chocolates. ITC has a strong margin profile with EBITDA & PAT margin of 38.5% & 27.7%, respectively, as on FY19. Led by superior margins, the company has been able to generate operating cash flow of Rs 11,000 crore in FY19. While overall RoCE is at 30.8%, cash cow cigarettes business enjoys RoCE of 200%+ due to superior pricing power and low capital intensity. High cash generation has enabled the company to invest aggressively in other fast growing businesses and thereby diversify into non-stringent segments. We believe revenue and PAT growth to be seen as low double digit from FY19-21E.

Financial: In Q1FY20 Net Sales at Rs 11502 crore Vs Rs. 10874 crore in Q1FY19 up 5.8%. Net Profit at Rs. 3174 crore in Q1FY20 up 12.6% from Rs. 2818 crore in Q1FY19,whereas EBITDA stands at Rs. 4565 crore in Q1FY20 vs Rs. 4202 crore in Q1FY19 up 8.7%. EBITDA Margins where increased 105bps to 39.7% in Q1FY20 vs 38.6% in Q1FY19.

Kansai Nerolac Paints Ltd (NSE: KANSAINER) (Share Price: Rs.475): Potential Buy

Valuation: Over-Valued stock with TTM PE of 54x.

Reasons to Consider: KNL Q1FY20 aggregate performance was split between a strong decorative segment (with volume growth of 13% YoY) and weak industrial segment performance (volume de-growth of 5% YoY). We believe the company reported aggregate volume growth of 5% YoY during Q1FY20 with a marginal hike in realisation owing to a change in product mix. While this has helped maintain gross margin, the solid cut in other expenditure during the period helped in expansion in EBITDA margin by 100 bps YoY. Moderate topline growth coupled with expansion in EBITDA margin helped in PAT growth of 6% YoY at Rs 148 crore. We believe strong demand of decorative paint would help drive revenue growth for KNL while margin pressure would ease owing to passing on cost with a favourable product mix.

Key Drivers: The industrial paint remained a drag for KNL due to the unprecedented slowdown in the automotive segment. However, a shift in focus towards other industrial categories like coil coating and functional powder coating helped offset poor volume demand from the automotive industry. This, along with strong growth in the decorative segment (despite a higher base of 14% growth in Q1FY19) drive its performance in Q1FY20. Strong demand for decorative paint would be largely driven by demand remaining intact in tier II, tier III cities and a shorter repainting cycle. KNLs gross margin during the period remained flat despite pressure in the industrial paints category. We believe a price hike in the decorative segment (contributes 55% in topline) helped offset lower profitability from industrial segment. In addition to this, saving in other expenditure in Q1FY20 (down 100 bps YoY) helped drive EBITDA margin for KNL. While there was a slowdown in industrial paint demand, we believe margin pressure will ease, going forward, owing to a change in product mix and gradual price hike. Price hikes coupled with a favourable mix would lead to an expansion in EBITDA margin from FY19 onwards.

Financial: In Q1FY20 Net Sales at Rs 1463.3 crore Vs Rs. 1376 crore in Q1FY19 up 6.4%. Net Profit at Rs. 147 crore in Q1FY20 up 5.8% from Rs. 139.8 crore in Q1FY19, whereas EBITDA stands at Rs. 249 crore in Q1FY20 vs Rs. 220.5 crore in Q1FY19 up 13%. EBITDA Margins where increased 99bps to 17% in Q1FY20 vs 16% in Q1FY19.

Indian Oil Corporation Ltd(NSE: IOC) (Share Price: Rs.130): Avoid

Valuation:Under-Valued stock with TTM P/E of 9x

Reasons to Avoid: IOC reported its Q1 results where the profit came at Rs 3596 cr mainly on account of higher GRMs due to adjusted of inventory related gain and better-than-expected performance in the marketing segment. Reported GRMs were at US$4.7/bbl, the GRM adjusted for inventory related gain was US$2.27/bbl according to the company vs. Singapore GRM of US$3.5/bbl tracked by the company. The weak GRM was attributed to the 40% fall in MS spreads and 18% fall in HSD spreads to US$5.3/bbl and US$10.4/bbl, respectively. Revenues increased 3.9% QoQ to Rs 150135.2 crore on account of higher average oil prices. On account of inventory gains and better marketing segment performance, EBITDA was at Rs 8350 crore (down 23.2% QoQ). We remain cautious on IOC at the current juncture given the volatility in global GRMs and uncertainty on the companys ability to pass on costs to customers during high oil prices.

Financial: In Q4 result where, Net sales stood at Rs 1,50,135 cr in Q1FY20 vs Rs 1,49,747 cr in Q1FY19. Net profit down 47% to Rs 3596 cr Vs Rs 6831.1 cr YoY. EBITDA down 33.6% at Rs 8350 cr in Q1FY20 vs Rs 12575 cr in Q1FY19.

Share Market Tips For August 2019: 1st Week

Blue Dart Express Ltd (NSE: BLUEDART) (Share Price: Rs.2300): Avoid

Valuation:Over-Valued stock with TTM P/E of 70x

Reasons to Avoid: Blue Darts management continued to describe the business environment as volatile and challenging. The company continues to invest in building long term capabilities. This has negatively impacted profitability in the short-term. Revenue grew 7% YoY, buoyed by stable growth in the B2B segment, compared to the B2C segment, which remained challenging. Reported EBITDA margins contracted 41 bps YoY to 5.7% with absolute EBITDA remaining flat YoY to Rs 45 crore. The management is of the view that it takes 12-18 months for incremental assets to start delivering in a positive manner for the company.

Financial: It announced Q1 result where Net Revenue stood at Rs 786 cr in Q1FY20 vs Rs 733 cr in Q1FY19. Net profit down 79.2% to Rs 4.6 cr Vs Rs 22.1 cr YoY. EBITDA remains flat at Rs 44.6 cr in Q1FY20 vs Rs 44.5 cr in Q1FY19. EBITDA Margins down 41bps to 5.7% in Q1FY20 vs 6.1 in Q1FY19.

Vodafone Idea Ltd (NSE: IDEA) (Share Price: Rs.6.50): Avoid

Valuation: Under-Valued stock with TTM Negative Earnings

Reasons to Avoid:Vodafone Ideas Q1FY20 performance was weak on all counts. Revenues at Rs 11,270 crore witnessed a decline of 4.3% QoQ, with ARPU at Rs 108 (up 3.8% QoQ, the largely mathematical outcome of low/no paying customer exit), coupled with a net loss of 14.1 million (mn) customers. EBITDA came in at Rs 1240 crore, a fall of 28% QoQ and a margin of 11%, weak topline and higher access charge (up 6% QoQ). The exit of 14.1 mn customers was much more than market anticipation marked the fourth consecutive quarter of subscriber base decline.

Financial: It announced Q1 result where, Net Revenue stood at Rs 11270 cr in Q1FY20 vs Rs 5889 cr in Q1FY19. Net loss at Rs 4873 cr Vs profit of Rs 256.5 cr YoY. EBITDA remains at Rs 3650 cr in Q1FY20 vs Rs 659.4 cr in Q1FY19. ARPU of Rs 108 in Q1FY20 vs Rs 100 in Q1FY19

Castrol India Ltd (NSE: CASTROLIND) (Share Price: Rs.117.50): Avoid

Valuation:Fairly-Valued stock with TTM P/E of 16x

Reasons to Avoid:Castrol India reported its Q1FY20 numbers, which were below analyst estimates mainly on account of lower-than-expected volumes, which fell 2.8% YoY to 55.4 million liters, below analyst estimate of 56.6 million liters. Revenues increased 2.2% YoY to Rs 1039.4 crore below analyst estimate due to lower-than-expected realizations. Castrol witnessed an increase of 15% YoY in gross margins at Rs 101.1/litre due to better product mix. On account of higher other expenses, EBITDA/liter came in at Rs 51.3/litre (up 16.2% YoY). Hence, PAT was at Rs 182.7 crore. Although Castrol was successful in signing a strategic alliance with 3M for auto care products, its strategy to defend potential disruptions like higher drain interval, electric cars will be the key decider, going ahead. The focus on maintaining the balance between margins & volumes along with growth in the personal mobility segment will be a key factor directing the company ahead. However, due to lower auto sales, structural low volume growth in industry volumes would continue to remain a challenge for Castrol in times to come.

Financial: It announced Q1 result where Net Revenue stood at Rs 1039 cr vs Rs 1017 cr up 2.2% YoY. Net profit at Rs 182.7 cr Vs Rs 164 cr up 11.3% YoY. EBITDA remains at Rs 284 cr vs Rs 251 cr up 13% YoY. EBITDA Margins at 0.3% vs 24.7% down 2447bps YoY.

Share Market Tips For July 2019: 4 Week

Mindtree Ltd (NSE: MINDTREE) (Share Price: Rs.696): Avoid

Valuation: Under-Valued stock with TTM P/E of 16x

Reasons to Avoid: MindTree Ltd reported a weak set of Q1 performance. The company reported 0.8% QoQ growth in dollar revenues to $264.2 million. Margins declined from 15.0% in Q4FY19 to 10.0% in Q1FY20 mainly due to one-time special compensation (impacting margins by 260 bps), wage hike (190 bps), visa cost (30 bps) and currency (40 bps) partly offset by 150 bps benefit arising from implementation of IndAS-116. The risk of attrition due to changes in leadership and management, subdued margins in FY20E, currency headwind and rising cost remain key near term concerns. Rising attrition of 90 bps QoQ to 15.1% is also a key concern in the near term for the company.

Financial: Company announced its Q1 result where, Net Revenue stood at Rs 1834 cr in Q1FY20 vs Rs 1639 cr in Q1FY19. Net profit down 41.5% to Rs 92.7 cr Vs Rs 158.2 cr YoY. EBITDA drops 20% at Rs 184 cr in Q1FY20 vs Rs 231 cr in Q1FY19.

SKF India Ltd(NSE: SKFINDIA) (Share Price: Rs.1850): Avoid

Valuation: Fairly-Valued stock with TTM P/E of 27x

Reasons to Avoid: SKF India (SKF) reported weak Q1FY20 results, amid a slowdown in automotive segment. Revenues grew 2.9% YoY at Rs 776.8 crore due to subdued performance from the auto segment. EBITDA margins came in at 15.4%, an 8 bps increase YoY. Auto contributed 47% to the topline (including exports contribution of 9%). The automotive slowdown is expected to impact overall revenue growth for FY20E. Weakness in auto sales is expected to act as a spoil-sport on the performance of bearing companies like SKF. Being the largest bearings supplier (28% market share) with significant auto exposure (45-50% of sales), auto demand remains a key overhang for the stock and near term outlook remains weak seeing the auto monthly sales number.

Financial: Company announced its Q1 result where, Net Revenue stood at Rs 776 cr in Q1FY20 vs Rs 755 cr in Q1FY19. Net profit down 3.7% to Rs 77.9 cr Vs Rs 81 cr YoY. EBITDA up 3% at Rs 120 cr in Q1FY20 vs Rs 116 cr in Q1FY19.

Avenue Supermarts Ltd(NSE: DMART) (Share Price: Rs.1450): Avoid

Valuation: Over-Valued stock with TTM P/E of 87x

Reasons to Avoid: Dmart has posted stellar performance overall in Q1 but management has guided that this could be one-off quarter for better show due to various reason and commentary was weak on EBITDA margin front due to intensifying price competition, higher capex toward new stores and upcoming lease cost expansion. While DMarts cost-led strong competitive position remains unassailable presently, the pricing pressure from peers is estimated to reset the PAT CAGR to 28% over FY19-21. Although its strong compare to its peers but this is much below the 55% seen in FY15- 18, driven by a healthy 210bp margin improvement. Moreover, as the pace of PAT growth slowed to 12% in FY19 on the back of price-led margin pressure, the stock has corrected by 16% over the past year. Despite this, it is still richly valued at EV/EBITDA and P/E of 31x and 56x on FY21E basis. Apart from that recent guidelines by govt in budget to increase minimum public shareholding from 25% to 35% and as per SEBI guidelines, promoter has to reduce holding below 75% by March 2020 which will again put presurre on the stock in mid-term.

Financial: Company announced its Q1 result where, Net sales stood at Rs 5780 cr in Q1FY20 vs Rs 4559 cr in Q1FY19. Net profit up 33.7% to Rs 335 cr Vs Rs 250 cr YoY. EBITDA up 39% at Rs 607 cr in Q1FY20 vs Rs 437 cr in Q1FY19.

Banco Products (NSE: BANCOINDIA) (Share Price: Rs.100): Avoid

Valuation: Under-Valued stock with TTM P/E of 10x

Reasons to Avoid: In Q4FY19 revenue grew by strong 27.6%, mainly due to higher contribution from the European subsidiary (Constitutes 60% of revenue) growing at 55% YoY respectively. However domestic CV demand for the quarter registered a volume de-growth of 1.2%YoY due to lower government spending in road infrastructure, implementation of overloading ban and liquidity crunch. BPIL 40% revenue comes from standalone business which has grown by 32%YoY for the quarter. PAT de-grew by 12.3%YoY, supported by lower tax. We expect the domestic demand scenario to remain subdued for trucks and cars in FY20. EBITDA margin for FY19 was at 11.2%. During the quarter BPIL consolidated margin witnessed significant decline by 740bps at 10.8%. This was largely do increase in operating cost. We expect EBITDA margin to remain under pressure owing to higher operating expenses and lower contribution from the gasket business.

Financial: Company announced its Q4 result where, Net sales stood at Rs 370 cr in Q4FY19 vs Rs 305 cr in Q4FY18. Net profit down 82% to Rs 4.8 cr Vs Rs 26.9 cr YoY. EBITDA down 27.5% at Rs 42.9 cr in Q4FY19 vs Rs 58 cr in Q4FY18.

Share Market Tips For July 2019: 3rd Week

GNA Axles Ltd (NSE: GNA) (Share Price: Rs.260): Potential Buy

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

Reasons to consider: Company has posted stellar Q1 performance despite the slowdown in auto sector which is driven by growth from export markets. Since the auto sector is facing slowdown in india due to this management has given its business outlook weak for short term, but subsiquently told it will be positive for long term. They are exploring new avenues for growth and diversification across geographies in future to mitigate the slowdown from one region. It has shown a very strong growth in revenues and healthy operating profit margin which is led by cost control measures taken by management and a fall in raw material prices.

Drivers: GNAs strategy to expand its footprint by targeting other geographies such as Australia and South America is expected to help de-risk the business from significant dependence on North America and Europe. In near term the new emission norms are expected to lead to pre-buying as BS VI compliant vehicles would be more expensive than the current vehicles which will be seen as positive in auto to push the growth and increase in sales of vehicle. To further fuel growth and diversify from CV and off-highway segments, GNA has started entering SUV and LCV axle shaft segments. The company has chalked out plans to set up a manufacturing facility with initial capacity of 600,000 units. It's focusing on acquiring customers from North America, Europe and India in that order. The commercial production of this facility is already commenced from March 2019.

Financial: In Q1FY20 Net Sales was Rs 258 crore Vs Rs. 213 crore in Q1FY19 up 21%. Net Profit at Rs. 18 crore in Q1FY20 up 30% from Rs. 14 crore in Q1FY19,whereas EBITDA stands at Rs. 41 crore in Q1FY20 vs Rs. 32 crore in Q1FY19 up 31%.

Yes Bank Ltd (NSE: YESBANK) (Share Price: Rs.86): Avoid

Valuation: Under-Valued stock with TTM P/BV of 0.77x

Reasons to Avoid: Yes Bank recognized Rs 6,230 cr of slippages with large part coming from the watchlist and partly from BB & below book (non watchlist) impacting overall asset quality sharply. The bank also saw its BB & below book loans assets increase on net basis to 9.4% from 8.3% in Q4FY19 which puts asset quality under high risk as these are extremely lumpy exposures along with that NII growth was weak at 2.8% on back of slower loan growth of 10% and interest reversals of Rs 223 cr. Weakness in NII led to NIMs dropping by 30bps QoQ to 2.8%. Bank slowed down its loan growth to 10% YoY and deposits growth to 6% YoY. Liabilities especially saw higher de-growth as CA franchise slowed on consolidation in corporate business, while SA balances saw shift towards TDs, bringing down CASA ratio to 30% from 33.1% in Q4FY20. On a lower growth momentum and a weaker RoA we remain sceptical on the stock.

Financial: Its annouces Q1 result where, Net interest income stood at Rs 2,278 cr in Q1FY20 vs Rs 2219 cr in Q1FY19. Net advances grew by 10% YoY to Rs 2,36,300 cr. Net profit down 92.5% to Rs 95.5 cr Vs Rs 1265.7 cr YoY. NIM drops 50 bps at 2.8% YoY.

Share Market Tips For July 2019: 2nd Week

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. KEIs 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, KEIs 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 companys 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.

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 nonrailway 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 Indias 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 Dec19. 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.