New Year Stock Recommendation 2020 - Elite Wealth
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New Year Stock Recommendation 2020
Market Outlook Dear Investor, Happy New Year, The year 2019 was like a roller coaster ride for the equity market but at the end, Nifty manages to close above the psychological level of 12,000 mark, supported by select large-cap names that remained at the centre of investors' interest. Private Banks, financial services and select energy (Oil & Gas) names gained while metals, pharma, auto, media, and PSU banks were among the major losers in 2019. Nifty Media index plunged 31 per cent, Nifty PSU Bank 19 per cent, Nifty Metal index 15 per cent and Nifty Auto 11 per cent. The US-China trade war, gloomy macroeconomic environment, and corporate tax rate cuts were the factors that kept investors busy throughout the year. Looking-ahead, the scenario looks more constructive and can expect sector rotation in the New Year. Due to surprise corporate tax cuts and ongoing implementation of reform agenda to upgrade infrastructure, raise productivity and improve governance market looks positive. We expect modest growth, comfortable inflation, accommodative policy, and highest single-digit profit growth in FY20 and 18-20% growth in FY21. With a gradual recovery in the economy, we may see a shift in focus from large cap to large mid-cap stocks as they are trading at attractive valuations. In the last few months, Automobile and metal sectors have shown some signs of improvement. We expect the next year to be a year of recovery in the Indian economy. This recovery will drive earnings growth, and lower provisioning by banks (private and PSU both would boost earning. After the Corporate rate cut companies has shown this impact on the bottom line but still on PBT growth is missing. The current scenario for 2020 is relatively favourable and expects some major announcements in the upcoming budget. We are positive on the Pharma sector, Cement, Chemical, infrastructure and Metals. www.elitewealth.in
New Year Stock Recommendation 2020 Company Recommendation CMP (Rs) Target (Rs) Upside (%) Time Horizon JSW Steel Buy 266 350 24% 9-12 Months Glenmark Pharma Buy 347 455 24% 9-12 Months Havells India Ltd Buy 643 790 19% 9-12 Months M&M Buy 529 675 22% 9-12 Months Aarti Ind. Buy 826 960 14% 9-12 Months Container Corp. Buy 570 700 19% 9-12 Months ICICI Prudential Buy 488 645 24% 9-12 Months Vindhya Telelinks Buy 950 1320 28% 9-12 Months Indraprastha Med. Buy 40 70 43% 9-12 Months Pidilite Ind. Buy 1384 1650 16% 9-12 Months www.elitewealth.in
New Year Stock Picks-2019 ( Performance )
Company Recommendation CMP* (Rs.) Target (Rs.) 52 week high Upside (%) Time Horizon Target Status
Almost
ITC Buy 278 320 310 10% 9-12 Months Achieved
Almost
Federal Bank Buy 92 120/130 110 16% 9-12 Months Achieved
ICICI Bank Buy 359 420/450 549 35% 9-12 Months Hit
Reliance Industries Buy 1123 1300/1350 1617.8 31% 9-12 Months Hit
Almost
Tata Elxsi Buy 1019 1300 1293 21% 9-12 Months Achieved
Gain more than
TCS Buy 1993 2400 2296 13% 9-12 Months 10%
Siemens Buy 979 1150/1200 1716 43% 9-12 Months Hit
Gain more than
Escorts Buy 676 950 833 19% 9-12 Months 15%
Almost
Ashok Leyland Accumulate (90-100) 105 130 123 15% 9-12 Months Achieved
* Releasing Date
www.elitewealth.in
JSW Steel Ltd.
CMP: Rs.266 Target: Rs.350
JSW Steel is the largest domestic steel producer with an installed capacity of 18 million
tonne per annum (mtpa). The Company is a part of the O.P. Jindal Group, manufactures
iron and steel products. The company’s products include hot-rolled steel strips,
sheets/plates, mild steel (MS) cold-rolled coils/sheets, MS galvanised
plain/corrugated/colour-coated coils/sheet, steel billet, bars and rods.
Key Takeaways:
• Company remains focused on capex projects (Rs. 48,715cr cumulative capex projected
over FY18-21E). All development projects are on track to commission as per the
schedule, including 5MTPA capacity expansion at Dolvi, capacity expansion at CRM-1
complex at Vijaynagar works and modernization-cum-capacity enhancement at
downstream facilities of JSW Steel Coated Products.
• The company expects to increase its supplies to the metro rail projects to about
1,50,000 metric tonnes as compared to its supplies averaging 1,00,000 metric tonnes
per year over last few years. The ongoing supplies as well as those already completed
during the current fiscal will boost JSW Steel's supplies to metro rail projects by more
than Rs 600 crore following successful completion of these deliveries.
Outlook :
JSW Steel become the leading steel company in India. In line with the Indian Government's
vision of increasing Indian steelmaking capacity to 300 MnT by 2031, JSW Steel envisions
increasing its domestic capacity in India to 45 MnT over the same time period. The
company expects steel demand to grow 5% in FY20 and should pick-up in H2FY20 on
account of measures announced by Government. In the current challenging scenario, the
declining trend seen in coking coal prices would act as a silver lining. This would aid steel
spreads (EBITDA/tonne) to inch higher from Q2FY20 levels. Hence, investors can buy this
stock at CMP Rs 266 for the target price of Rs.350 with time horizon of next 9-12 months.
www.elitewealth.in
Glenmark Pharmaceuticals Ltd.
CMP: Rs.347 Target: Rs.455
Glenmark Pharmaceuticals Ltd is a global innovative pharmaceutical company with
operations in more than 50 countries. Glenmark has a diverse pipeline with several
compounds in various stages of clinical development, primarily focused in the areas of
oncology, respiratory disease and dermatology. The Company has 17 manufacturing facilities
across US, India, Argentina, Czech Republic and Switzerland and 5 state-of-the-art R&D
centres in India and Switzerland.
Key Takeaways:
1.Glenmark generated around $250 million through 8 out-licensing deals to companies
including Merck, Eli Lilly, Sanofi and Forest Laboratories
2.Spin-off its innovation R&D business under a new company with an aim to explore
divestment of innovation subsidiary or licensing out its pipeline under development.
3.Glenmark had demerged its API division into a separate entity called Glenmark Life
Sciences. The intent was to raise money to repay debt(The company appointed Yasir Rawjee,
a former Mylan executive as Glenmark Life Sciences CEO). We expect the the sale of API
business to generate capital in the range of Rs 850-1,100 crore. (Expected to close in a few
months)
Outlook:
We expect strong performance from Glenmark. Glenmark went on to conduct clinical trials in
India for over two years. It received DCGI approval and launched under brand names ZIten
and Zita Plus, at a 55% lower price. Launched in April 2019, Glenmark’s remogliflozin is
making noteworthy progress, garnering the highest prescriptions in the SGLT-2 category for
the second month in a row. FY20 expansion to be about ₹ 8bn; FY21 will be lower. 1. Monroe
a large part of capex 2. 100 mn $ invested there 3. Opportunities from this asset include
some good injectable. RoW growth at 10–15% for FY20 . Debt reduction plan of ₹ 7–8bn
remains on course for FY20. R&D marginally lower in percentage of sales, flattish in absolute
terms. Hence, investors can buy this stock at CMP Rs 347 for the target price of Rs.445 with
time horizon of next 9-12 months
www.elitewealth.in
Havells India Ltd.
CMP: Rs.643 Target: Rs.790
Havells India Ltd (HAVL) is a leading player in electrical consumer goods in India. It is the
market leader in light‐duty power distribution products. Its offerings include electrical
products like circuit protection equipment (domestic and industrial switchgears), cables and
wires, and consumer durables like fans, CFLs, and lighting fixtures.
Key Takeaways:
1.Switchgear segment recorded a strong growth supported by export demand, various
governments’ electrification projects and slight demand recovery from residential projects.
2.Company has recorded a strong performance in the ECD segment led by fan segment and
new launches like water purifiers and personal grooming segments. Company has maintained
40%+ market share in the premium fan category.
3. Havells preparing for future with constant products expansion, deepening market reach &
brand reinforcement. India represents large untapped opportunity with lower penetration,
higher unorganized sector & growing electrification. 70% of Lloyd portfolio is RAC and is more
stable. The new plant will help consolidate the RAC positioning. In washing machines, the
company has lost some ground over the past two quarters, but management is optimistic
about coming period.
Outlook:
Havells is witnessing slow down since November 2018 led by shortage of capital impacting
SMES/traders etc. Distributors are keeping lower inventory, following conservative stance of
preserving cash. Management expects ramp up in infra and sustained consumer demand
which will lead to better growth vs H1 FY20 . Also, cost savings will help deliver better OPMs.
Industrial/infra demand impacted growth for cable and wires, switchgears while consumer
demand helped ECD growth. RAC sale in Q2 were flattish, while LED panels faced 25% price
disruption for the industry which may continue to impact in Q3 as well. Management is
focusing on cost control programmes, which coupled with improved demand should help H2
growth and OPM. Hence, investors can buy this stock at CMP Rs.643 for the target price of
Rs.790 with time horizon of next 9-12 months.
www.elitewealth.in
Mahindra & Mahindra
CMP: Rs.529 Target: Rs.675
Mahindra and Mahindra Limited is engaged in the manufacture of passenger cars, commercial
vehicles and tractors. It is India's 3rd largest passenger vehicle company and the 2nd largest
commercial vehicle company. Mahindra & Mahindra Limited (M&M) is the flagship company of the
Mahindra Group. The Mahindra Group has a leadership position in utility vehicles, information
technology, financial services and vacation ownership in India and is the world’s largest tractor
company, by volume.
Key Takeaways:
1. The demand scenario is expected to improve going forward led by good monsoon, higher
reservoir level, and good moisture content in soil which is likely to have a positive impact on Rabi
output.
2. The company will also launch product in electric vehicle named electric KUV in 4QFY20 followed
by C100 (last mile connectivity) to be launched in Q2FY21Q3FY21 and S201 electric SUV in
Q1FY22-Q2FY22.
3. The electric vehicle segment is expected to see continuing growth momentum going ahead. In
October, the company sold 2000 EVs out of which E-Alpha – 1300, Treo -600, E-Verito – 150
vehicles were sold.
4. The company has stopped the production of Jeeto PV as the vehicle cost would increase by 30-
33% due to new safety norms.
Outlook:
The overall passenger vehicle is expected to remain weak in FY20 and the management expects it
to decline to 5% in H2FY20 as against 23% in H1FY20. The management has reiterated the decline
in tractor industry growth outlook from 5% to 7-8% for FY20. The UV segment is expected to see a
positive growth in H2FY20 while the CV segment is expected witness a de-growth of 25%. M&M’s
market share grew in all segments it competes in. In tractors, market share grew 1.5% and ~0.6%
in the PV segment. Overall UV segment (at industry level) will post positive growth in H2FY20 due
to new launches. In SCV segment regained >50% market share, which had dipped in the past few
quarters. M&M’s market share grew 7.2% to 7.8% in the PV segment. Hence, investors can buy
this stock at CMP Rs.529 for the target price of Rs.675 with time horizon of next 9-12 months.
www.elitewealth.in
Aarti Industries
CMP: Rs.826 Target: Rs.960
Aarti industries manufactures organic and inorganic chemicals, active pharmaceutical
ingredients and surfactants. Aarti is the largest producer of benzene derivatives in India, and
a major player among global manufacturers, with a 25-40% global market share across
various products. It supplies to diverse end-user industries such as polymer additives,
pigments, dyes, paints, pharmaceuticals, agrochemicals, fertilizers, and fast-moving consumer
goods.
Key Takeaways:
1. India to benefit from China’s downturn, India is expected to benefit from this shift as there
are few other countries with requisite scale, technology, raw materials, and supportive
government policies to capture this opportunity.
2. Depreciation of rupee in recent times is expected to aid the domestic industry’s export
competitiveness.
3. The share of downstream products increased to 75% from 70% in the corresponding
quarter last year. The segment continues to benefit from structural shift of chemicals
manufacturing to India.
4. EBIT decline was offset by rising share of value-added products to 75% from 70% in the
corresponding quarter last year.
Outlook:
Aarti industries manufactures organic and inorganic chemicals, active pharmaceutical
ingredients and surfactants. Last 3-4 years, Interest cost has reduced from 11-12% to 6-8%
possibly due to increase in low-cost export financing. Aarti industries is currently investing Rs.
20-25 billion over FY19-22E with major projects like NCB/Chlorination capacity expansion,
CRAMS contract to supply intermediate for US herbicide market. With the innovator
launching new herbicide in US/Brazil, Multiple minor downstream projects each with a capex
of Rs. 0.5 billion. In Q2FY20, Aarti industries revenue declined 22% YoY due to exclusion of
revenue from the HPC segment, sharp decline in key raw material prices and increase in
contribution from downstream products to 75% from 70% in Q2FY19.
www.elitewealth.in
Container Corporation of India Ltd.
CMP: Rs. 570 Target: 700
Container Corporation of India Limited (CONCOR) is engaged in transportation of
containers (rail and road), and handling of containers. The Company is also engaged in the
operation of logistics facilities, including dry ports, container freight stations and private
freight terminals.
Key Takeaways:
• Concor’s domestic business performed better than Exim business in Q2FY20 with
Exim revenues de-grew 7% to 1357 crore while domestic revenues grew 7% to 381
crore. Lower EXIM revenue is largely as no SEIS income has been recognized in
current quarter (as against Rs 99.63 crore in corresponding previous quarter) as no
notification has been issued by Govt. for the same.
• Company aims to consistently invest Rs. 1000 crore annually, which has helped the
company to shape up the business around and is expected to contribute meaningfully
in FY20.
• The government plans to sell its stake from 54.8 percent to 30.8 percent may provide
the required trigger to capture the huge growth opportunity presented by the DFC
(Dedicated freight Corridor) and could also lead to quick decision making of various
projects.
Outlook:
Container Corporation of India (CONCOR) is India's largest railway container freight
operator. Concor report muted volume growth in Q2 amid subdued economic scenario.
However, the company was able to report better margins owing to price hike taken in
April 2019. The management expects freight pricing on the DFC will be similar to the
current railway charges. Further, as the 25ton axle load wagons are operationalized,
company will gain market share from the domestic roadways segment, particularly on
the long haul routes. . Hence, investors can buy this stock at CMP Rs.570 for the target
price of Rs.700 with time horizon of next 9-12 months.
www.elitewealth.inICICI Prudential Life Insurance Company Ltd.
CMP: Rs. 488 Target: 645
ICICI Prudential Life Insurance Company provides life insurance, pensions and health
insurance to individuals and groups. Its segments include Par Life, Par Pension, Non
Par, Annuity Non Par, Health, Linked Life, Linked Pension, Linked Health and Linked
Group.
Key Takeaways :
• In H1FY20, value of new business of company grew 20.2% YoY to Rs. 709cr, and
margin improved 350bps YoY to 21.0%. VNB margin, which is the ratio of VNB to
the amount of new business underwritten in the period expanded to 21.0% from
17.5% in H1FY19
• The company has better diversification with contribution of protection business
increasing to 14.8% of overall APE in H1FY20 (vs. contribution of 9.3% in FY19).
• Interim dividend reduced to Rs. 0.8 for H1FY20 (vs. Rs. 1.6 for H1FY19), as the
company plans to invest in protection business.
• The company will continue to focus on annuity and protection business . Share of
ULIP in product mix declined sharply (-1,670bps YoY) as management focus shifted
towards protection.
Outlook:
The company has registered strong results with robust growth in new business despite
the market volatility. In Q2FY20, gross premium income rose 6.6% YoY, driven by the
increase in group level premium by 80.4% YoY. The company’s focus on premium
growth, while maintaining its solvency levels should be the key for the upcoming few
quarters. The company has been expanding partnerships and on-boarding a variety of
distributors, both conventional and nonconventional, to address growth. The company
remains committed to doubling VNB in next 3-4 years. Hence, investors can buy this
stock at CMP Rs.488 for the target price of Rs.645 with time horizon of next 9-12
months.
www.elitewealth.inVindhya Telelinks Ltd.
CMP: Rs. 950 Target: 1320
Vindhya Telelinks Limited is engaged in the business of manufacturing and sale of
telecommunication cables, other types of wires and cables, fiber reinforced plastic
(FRP) rods/glass rovings and connectorized cable products. The company caters to
reputed client base like BSNL, MTNL, Indian Railways, Defence (Indian Army), NTPC,
SAIL, Bharti Airtel, Tata Tele Service Limited, Reliance Infocom, and North Bihar Power
Distribution Company Limited among others.
Key Takeaways:
• India has emerged as a top data consuming subscriber base which is increasing
the requirements of optical fibre cables significantly, moreover universalization of
4G services and planned rollout of revolutionary new technologies such as 5G
and IoT also pushing the demand of optical fibre.
• Government has already announced its intention for auction of 5G. The 5G
technology requires five to six times in terms of volumes of optical fibre cables in
the telecom networks from the current volume of fibre cables laid in 4G
networks.
Outlook:
Vindhya Telelinks has emerged a leading manufacturer & supplier of Jelly Filled
Telecommunication Cables, as well as of Optical Fiber Telecommunication Cables. As
demand for 4G and then 5G grows, networks will become denser and deeper, making
fiberisation an imperative. The emergence of new technologies is set to multiply the
consumption of data, necessitating the need for installing more towers. Additionally,
100,000 telecom towers will be required in the immediate future to meet the
growing demand for data across the country which will lead to sustained demand for
optical fibre cables and related networks. Hence, investors can buy this stock at CMP
Rs.950 for the target price of Rs.1320 with time horizon of next 9-12 months.
www.elitewealth.inIndraprastha Medical Corporation ltd
CMP: Rs.40 Target: Rs.70
IMCL was incorporated as Joint Venture between Apollo Hospitals Enterprise Ltd. IMCL
has established position as the healthcare provider in Delhi NCR having 718 bedding
facility in Sarita Vihar. The company has good track record for successful and long
operation in Health-care segment. IMCL benefits from its association with the Apollo
Group through strong operational, financial and managerial linkages. The major
contributors to IMCL’s hospital revenues are the Oncology, Neurology, Cardiology,
General Medicine, and Transplant Hepatobiliary departments.
Key Takeaways:
The largest contributing specialty is Oncology, which accounted for 13% of total
revenue in 9M FY2019.
- The company is into Quality Health care and services.
- The average bedding in the main hospital per day increased 3.30% i.e 484 to 501
-Total outpatient volume (Repeat visit) increased by 2.15% from 431011 to 440556
-Kidney transplant increased from 377 to 577 (3.30%)
-Apollo annual health checkup increased from 33304 to 38111 (14.43%)
-Angiographies increase by 18.62% from 145 to 172
-MRI increased 16.5% 103089 to 12005
-Ultrasound increased 4.47% from 57880 to 60466.
Outlook:
IMCL has established position as the healthcare provider in Delhi NCR having 718
bedding facility in Sarita Vihar. The company has good track record for successful and
long operation in Health-care segment. Company has shown good financial position on
the account of debt reduction levels and Positive Operating ash flow.. Hence, investors
can buy this stock at CMP Rs.40 for the target price of Rs.70 with time horizon of next
9-12 months.
www.elitewealth.inPidilite Industries Ltd.
CMP: Rs. 1384 Target: 1650
Pidilite Industries Limited (PIL) is India’s dominant player in the adhesives & sealants
segment, with its flagship product ‘Fevicol’ and other legacy products (M-Seal, Dr. Fixit,
etc) that command 70% of domestic market share and contributes around 50% to its
topline. Its segments include Consumer & Bazaar Products, Industrial Products and
Others.
Key Takeaways:
• The company reported consolidated revenue growth at 3% YoY , led by 14% growth
in revenue of industrial segments while C&B segment was impacted by slow volume
off take in Q2FY20. Industrial segment growth driven by pigment business which is
gaining traction both in India and export market. Also, as more than half of the
segment’s revenue is through exports the effect of slowdown in Indian economy is
minimal.
• Company foresees a steady growth in rural area as the value in the current quarter
increased in double digits and is also more than urban towns.
• Slowdown in construction related activities and interior decor related activities has
impacted company’s top line. Company expects pick up in these segments by next
fiscal year.
Outlook:
The Company is the market leader in adhesives & sealants. In Q2FY20 sales was up 2.8%
YoY to Rs. 1,807 cr. even as overall sales volume and mix merely grew by 1%. Gross
margin improved by 400 bps as cost of sales declined. In FY19, Pidilite derived 84% &
~16% of its turnover from Consumer & Bazaar products and Industrial Products
segment respectively. Although the stock is trading a high P/E but the product of the
company is unique with unbeatable competitors in the market. Hence, investors can
buy this stock at CMP Rs.1384 for the target of Rs.1650 with time horizon of next 9-12
months.
www.elitewealth.inDISCLAIMER
Disclosure in pursuance of Section 19 of SEBI (RA) Regulation 2014
Elite Wealth Advisors Limited does/does not do business with companies covered in its research reports. Investors should be aware that the Elite Wealth Advisors Limited
may/may not have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only information in making their investment
decision and must exercise their own judgment before making any investment decision.
For analyst certification and other important disclosures, see the Disclosure Appendix, or go to www.elitewealth.in. Analysts employed by Elite Wealth Advisors Limited
are registered/qualified as research analysts with SEBI in India.( SEBI Registration No.: INH100002300)
Disclosure Appendix
Analyst Certification (For Reports)
Israil Khan, Elite Wealth Advisors Limited, suhail@elitewealth.in
The analyst(s) certify that all of the views expressed in this report accurately reflect my/our personal views about the subject company or companies and its or their
securities. I/We also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this
report. Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Elite Wealth Advisors Limited.
As to each individual report referenced herein, the primary research analyst(s) named within the report individually certify, with respect to each security or issuer that the
analyst covered in the report, that:
(1) all of the views expressed in the report accurately reflect his or her personal views about any and all of the subject securities or issuers; and
(2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in the report.
For individual analyst certifications, please refer to the disclosure section at the end of the attached individual notes.
Research Excerpts
This note may include excerpts from previously published research. For access to the full reports, including analyst certification and important disclosures, investment
thesis, valuation methodology, and risks to rating and price targets, please visit www.elitewealth.in.Company-Specific Disclosures Important disclosures, including price
charts, are available and all Elite Wealth Advisors Limited covered companies by visiting https://www.elitewealth.in , or e-mailing research@elitestock.com with your
request. Elite Wealth Advisors Limited may screen companies based on Strategy, Technical, and Quantitative Research. For important disclosures for these companies,
please e-mail research@elitestock.com.Options related research:
If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure
documents. For a copy of the risk disclosure documents, please contact your Broker’s Representative or visit the OCC's website at https://www.elitewealth.in
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third-party aggregators. For all research reports available on a particular stock, please contact your respective broker’s sales person. Ownership and material conflicts of
interest Disclosure
Elite Wealth Advisors Limited policy prohibits its analysts, professionals reporting to analysts from owning securities of any company in the analyst's area of coverage.
Analyst compensation: Analysts are salary based permanent employees of Elite Wealth Advisors Limited. Analyst as officer or director: Elite Wealth Advisors Limited policy
prohibits its analysts, persons reporting to analysts from serving as an officer, director, advisory board member or employee of any company in the analyst's area of
coverage. Country Specific Disclosures India - For private circulation only, not for sale.
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