Share Market Tips For January 2019

Coal India (NSE: COALINDIA) (Share Price: Rs.240.55): Potential Buy

Valuation: Undervalued with TTM P/E of 13.20x

Reasons to consider: The company expects incremental revenue of around Rs. 6421 crore on account of upward revision of non-coking coal prices. Further, rising demand from the non - power sector and increasing e-auction prices will benefit the company in the coming quarters. In FY19, the company will supply 513 million tonnes of coal and 12 million tonnes through e-auction to the power sector.

Drivers: The demand for coal is estimated to be 900-1,000 MTPA by 2020 and 1,300-1,900 MTPA by 2030. Also, new mines might be required to meet the demand and achieve the targets set by Coal Vision 2030.

Financial: Coal India consolidated revenue for the second quarter ended September 30, 2018 came in at Rs. 24209.33 crore as compared to Rs. 19171.73 for the same period last fiscal, registering 26.3% you increase. EBITDA for the quarter rose by 221.7% yoy to Rs. 5925.5 crore with a corresponding margin expansion of 1487 bps. EBITDA margin for Q2FY19 stood at 24.5%. The net profit for the quarter came in at Rs. 3084.7 crore as against Rs. 370.43 crore in the same quarter last year, yoy increase of 732.7%. PAT margin during the period stood at 12.73%.

ICICI Bank Ltd. (NSE: ICICIBANK) (Share Price: Rs.365): Potential Buy

Valuation: Overvalued with TM PE of 68.28x. and PB of 2.31x.

Reasons to consider: The bank posted healthy numbers in Q2FY19. Robust fee growth (17% up YOY), sustain NIM. Asset quality improved- Gross non-performing assets (GNPA) eased to 8.54% in Q2FY19 over 8.81% in Q1FY19. Net NPA also improved to 3.65% from 4.19% during the period.

Drivers: The company posted better than expected numbers in Q2FY19. The bank posted uptick in growth, strong operational performance and sustain NIM. The pullback in asset quality and uptrend in coverage were inspiring.

Financial: In Q2FY19, Net interest income (NII), grew 12.41% YOY to Rs 6,417.6 crore with good loan growth of 12.8% YoY and margin improvement. NIM improves by 14bps QoQ. Domestic loan growth for the quarter was at 16% YoY. Deposits also registered a double-digit growth in Q2, growing 12% YoY to over Rs 5.58 lakh crore.

VIP Industries (NSE: VIPIND) (Share Price: Rs.512): Potential Buy (10 Steps To Pick The Best Stocks)

Valuation: Overvalued with TTM PE of 46.05x

Reasons to consider: VIP Industries is India's leading luggage brand with 55 % organized market share, leading player in terms of value in backpacks and making inroads into ladies handbags. Five years CAGR sales growth is at 12%. Debt free company.

Drivers: New segment is ladies handbag is next driver with $ 1 billion market to tap. Experienced team investing in brand and now own capacities (Bangladesh) should drive revenue over next five years.

Financial: In Q2FY19, revenue grew to Rs 402 crores vs Rs 309 crores in Q2FY18. The company recorded operating profit at Rs 53 crores vs Rs 43 crores in Q2FY18. PAT up by 37.5% YoY to Rs 33 crores.

Sun Pharmaceutical Industries Ltd. (NSE: SUNPHARMA) (Share Price: Rs.385): Avoid

Valuation: Overvalued with TTM PE of 37.8x.

Reasons to avoid: The company is battling over corporate governance issues. Also, recently its US subsidiary has started voluntarily recalling 13,918 cartons of Vecuronium Bromide Injection of 10 mg and 20 mg strengths from US market at hospital level, following the identification of "particulate matter identified as glass" in the product.

Financial: In Q2FY19, company reported revenue of Rs 6937 crores vs Rs 7224 crores in Q1FY19. Company reported loss of Rs 107 crores in PAT.

Capacite Infra projects Limited (NSE: CAPACITE) (Share Price: Rs.248.40): Potential Buy

Valuation: Undervalued with TTM P/E of 18.61x

Reasons to consider: The companys order book in Q2FY19 stood at Rs. 10,900 crore, which translates into book-to-bill of almost 6.8x, which gives revenue visibility for the next 6 to 7 years. During the first half of FY19, Capacite has received orders worth Rs. 1807 crore from the private sector, out of which 65 per cent are repeat orders from the existing clients. This proves the strength of Capacite's client relationship for the long term, which generates repeat orders from them. On the back of healthy order book and repeated orders, the company expects sales to grow at 25 per cent CAGR over next 2-3 years.

Drivers: Revival of the real estate sector, coupled with consolidation in the sector, which would further push up the order book. Apart from the strong order book, improving working capital cycle and healthy balance sheet will drive the stock further.

Financials: On the financial front, the strong execution of orders boosted Capacite Infras topline in Q2FY19 to Rs. 443.1 crore, representing 38 per cent growth over the corresponding quarter of last year. The companys EBITDA for the quarter surged almost 34.8 per cent yoy to Rs. 64.6 crore. However, EBITDA margin for the period contracted marginally by 29 bps yoy to 14.6 per cent. This was due to initial cost for new projects that the company started executing in the quarter. In line with the operational performance, it also reported stellar growth of around 31 per cent in net profit to Rs. 17.6 crore as compared to the same quarter of the previous fiscal, but the net profit margin for the quarter declined marginally by 30 bps yoy.

Subros (NSE: SUBROS) (Share Price: Rs.268): Potential Buy

Valuation: Fairly Valued with TTM P/E of 22.27.

Reasons to consider: Subros being the largest automotive AC systems company is placed very well considering the potential in PV sales growth. Subros is a major beneficiary of the government policy which has made use of air blowers compulsory in trucks and Subros has ~70 % market share in the truck segment & 40% share in PV segment. Further, the company expects to execute railway orders worth Rs. 17 crore in FY18 and Rs. 26 crore in FY19E.

Drivers: According to SIAM (Society for Indian Automobile manufacturers), the PV industry is expected to grow by 10.7% CAGR over FY18-21E. On the operational front, the company expects to gradually reduce the import content to 25% over the next 2-3 years to improve margins.

Financial: The company's standalone revenue for the quarter Q2FY19 came in at Rs. 564.03 crore as against Rs. 497.15 crore in the corresponding quarter last year, registering an increase of 13.5% YoY. The EBITDA for the quarter rose by 8.7% YoY to Rs. 59.31 crore as against Rs. 54.57 crore in the corresponding quarter last year, with a corresponding margin contraction of 46 bps. The EBITDA margin for the quarter stood at 10.5%. The contraction was led by higher staff cost and higher other expenses such as selling & distribution expenses like freight and packaging material .The PAT for the quarter came in at Rs. 23.81 crore as against Rs. 15.08 crore in the corresponding quarter last year, an increase of 58% YoY.

Nestle India Ltd. (NSE: NESTLEIND) (Share Price: Rs.11059): Avoid(10 Steps To Pick The Best Stocks)

Valuation: Overvalued with TTM PE of 67.99x.

Reasons to Avoid: Lead in Maggi case is again in talk which can impact stock in short run until dust settle down. As per reports lead in Maggi is below detectable limits which was reported on justices by court that as to why they should eat noodles if there is any lead.

Financial: In Q2FY18, company reported revenue of Rs 2939 crores vs Rs 2514 crores in Q2FY18. Operating profit stood at Rs 792 crores. Company recorded PAT of Rs 446 crores against Rs 343 crores in Q2FY18.

GM Breweries Ltd. (NSE: GMBREW) (Share Price: Rs.644): Avoid

Valuation: Undervalued with TTM PE of 14.10x.

Reasons to avoid: The company posted weak numbers in Q3FY19. The company's Q3 net profit declined by 25.1% at Rs 16.7 crore from the profit of Rs 22.3 crore reported in the same quarter last year. EBITDA margin compressed to 20% vs. 29%. Its total expenses for the quarter rose to Rs 425.5 crore, an increase from Rs 401 crore in the corresponding quarter last year. Also, states are expected to hike taxes on liquor -- one of the top three revenue sources -- as they need to plug the fiscal hole arising from bearing the burden of farm-loan repayments. Any rise in tax will impact alcohol demand as companies will have to pass the additional levy to consumers.

Financial: In QFY19, revenue up 6% YoY at Rs 124.6 crore versus Rs 117.9 crore. PAT down 25% YoY at Rs 16.71 crore. Earnings per share (EPS) of the company came in at Rs 9.14 against Rs 15.25 in the year-ago period.

Rites (NSE: RITES) (Share Price: Rs.260): Potential Buy

Valuation: The company is undervalued with TTM PE of 13.48x

Reasons to consider: RITES intend to increase scale of operations in railway infrastructure sector by taking up turnkey projects and expansion of services for metro and airport projects too. Further, it also plans to increase share of business in renewable energy generation and power procurement for Indian Railways, manufacturing of wagons and joining upcoming opportunities like station development. This could meaningfully improve its order book and thereby lead to increased revenues.

Financials: Revenue from operations has increased at a CAGR of 12% from Rs 10,12.68 cr in the FY15 to Rs 1663 cr in the FY18, and its PAT has increased from Rs 3,12.21 cr in FY15 to Rs 3,65 cr in the FY18.