Monthly Stock Portfolio -May 2023

*Note: We are continuing ICICI Bank, Maruti Suzuki, Reliance, SBI and Ultratech Cement from last month i.e. April 2023.

Bharat Electronics Ltd.:

Bharat Electronics Limited (BEL) is a one of the leading public sector enterprise under the administrative control of the Department of Defence Production, Ministry of Defence. It manufactures and supplies wide range of electronic equipments and systems to defence sector and non-defence market. The company is a key player in the Indian Defence market and has a growing presence in the civilian and export segments. It exports products to Europe, Asia, Africa, North America, and the Middle East regions and has 6 overseas offices and 9 manufacturing units across India. The company has strong aggregate order book value of Rs. 52,795 cr. (3.1 times of Trailing Twelve months Revenue) as of October 1, 2022 with an execution period of nearly 4 years, out of which Rs. 25,000-30,000 cr. is for naval business. The TTM EPS of the company is Rs.3.77; it is currently delivering the ROCE & ROE of 23.55% and 20.17% respectively.

ICICI Bank Ltd:

ICICI Bank is the second largest private bank of India and has a leading position in other financial services businesses through its subsidiaries. The bank offers a wide range of banking and financial services including commercial banking and treasury operations to large set of customers viz. large and mid-corporates, MSME, agriculture and retail businesses. The bank is working with a widespread network of over 5,718 branches and 13,186 ATMs across country. The bank has delivered robust performance in March quarter of FY23. On consolidated front, the bank has reported 27.6% YoY growth in the Net Profit to Rs.9,853 cr. and 12.1% growth on QoQ basis. Net Interest Income increased 38.9% yearly and 7% quarterly to Rs 19,959 cr. Net Interest Margin grew to 4.90% in Q4FY23 from 4.65% in Q3FY23. Asset quality of the bank further improved in the quarter with Gross NPA to 2.81% and Net NPA to 0.48%.

Indian Hotels Ltd:

Indian Hotels Company Limited (IHCL) and its subsidiaries, collectively known as Taj Group, is one of Asia’s largest and finest group of hotels. Incorporated by the founder of the Tata group, Jamshedji Tata. The company has a portfolio of 240 hotels globally in its portfolio, including presence in India, North America, UK, Africa, Middle East, Malaysia, Sri Lanka, Maldives, Bhutan, and Nepal. IHCL has posted strong performance in Q4FY2023 with revenues and PAT growing in strong double digits compared to pre-covid level led by increased occupancy. Operating margins of the company is strong at 34.7%; company’s ARR also increased by over 36% compared to Q4FY20. Hotel Industry’s business fundamentals have improved recently with increase in room demand.  Strong recovery in the travel industry would further help IHCL in posting better performance in the medium term.

Maruti Suzuki Ltd:

Maruti Suzuki India Limited (MSIL) is the market leader in the domestic passenger vehicle (PV) space, with a market share of around 41.3%. The company has popular models such as Alto, WagonR, Swift, Brezza, Baleno, and Ertiga, among others. They are the market leader in each sub-segment – cars (63.5%), UV (18.3%), and vans (94.4%). Despite the chip shortage continuing to impact production activity, MSIL reported its highest-ever sales in a financial year, with wholesales of 19,66,164 units in 2022-23, up 19% from 16,52,653 units in the previous year. Aided by the robust demand for its new launches, company is undertaking incremental capital expenditures to add 1 million units of production capacity. The order book of the company remains strong with 4.1 lakh units also it has set a goal of surpassing industry growth by regaining 50% of the market share that it previously held.

 Persistent Systems Ltd.:

Persistent Systems Limited is an information technology services company which provides a wide range of IT services, including software development, data management, digital transformation, cloud computing, and analytics. The company serves clients across various industries, such as healthcare, banking and finance, manufacturing, retail, and telecommunications. It has developed a range of solutions that enable healthcare organizations to manage patient data more efficiently, improve clinical outcomes, and reduce costs. Persistent Systems reported broadly in-lined results in Q4FY23 results with revenue increase of 3.9% QoQ and Net profit increase of 5.7% QoQ. EBIT Margins of the company remained flat compared to previous quarter, however the management of the company expects margin improvement by 200-300 bps over next 2-3 years. The demand trend looks promising for the company on the back of healthy strong order book and strong deal pipeline.

Reliance Industries Ltd.:

Reliance Industries Limited (RIL) is India’s largest private sector conglomerate with diversified businesses including energy, petrochemicals, natural gas, telecommunication and retail. The company has evolved from the textile and polyester company to an integrated player across energy, metals, petrochemical, retail, telecommunication and entertainment. It majorly operates through following segments: Oil to Chemicals (O2C), Oil & Gas, Retail, Digital Services, Financial Services, and Others. Reliance Industries has beaten the broader estimated results in the March’23 quarter with 2% YoY increase in the revenue and 18% YoY increase in the Net profits. All businesses showed better performance other than oil to chemicals and financial services. The profitability outlook remains stable for O2C,  upstream and retail, while the Jio Financial Services listing (expected by October 23), commissioning of battery-PV gigafactories (in 1-2 years), and 5G deployment across country are some key positive triggers for the company.

State Bank of India Ltd:

State Bank of India Ltd. is India’s largest public sector bank operating from the last 40+ years with an extensive network of more than 21,000 branches, 55,000 ATMs in India and 232 international offices across 32 countries. It is a banking and financial services statutory body engaged in providing a wide range of products and services to individuals, commercial enterprises, large corporates, public bodies, and institutional customers. SBI has shown robust performance in the December 2022 quarter results. Net Interest Income of the bank rose by 24% YoY to Rs.84,463 Cr. while Net Profits of the bank increased hugely by 69% YoY at  Rs.14,205 Cr. Asset quality of the bank has also improved in Q3FY23 with GNPA ratio of 3.14% down by 38 bps QoQ and Net NPA of 0.77 compared to 0.80% in September quarter. Healthy loan growth momentum of the bank is expected to sustain led by retail and corporate loan growth.

Ultratech Cement Ltd:

UltraTech Cement Limited is the cement flagship company of the Aditya Birla Group and is the largest manufacturer of grey cement, ready mix concrete (RMC), and white cement in India. It is the third largest cement producer in the world, excluding China, and is the only cement company globally (outside of China) to have 100+ MTPA of cement manufacturing capacity in a single country. The company’s business operations span UAE, Bahrain, Sri Lanka, and India, and it reaches out to more than 1.6 million beneficiaries in over 500 villages in 16 states across India. In FY2022-23, UltraTech’s consolidated sales rose by 12.4% to 105.7 million tonnes, and its total sales volume in the domestic market crossed 100 MT for the financial year that ended on March 31, 2023

Varun Beverages Ltd:

Varun Beverages Limited (VBL), the second-largest PepsiCo franchisee globally (excluding the USA), produces a range of beverages, including carbonated soft drinks like Pepsi, Mountain Dew, Seven Up, and Mirinda, non-carbonated drinks such as Tropicana Slice and Tropicana Frutz, and bottled water under the Aquafina brand. The company’s presence in 27 states and 7 UT and its exclusive bottling rights for PepsiCo in Nepal, Sri Lanka, Morocco, Zambia, and Zimbabwe make it a significant contributor to PepsiCo’s beverage sales volume in India, accounting for nearly 90%. VBL’s performance in Q4CY22 was strong, with growth in volume and realization across regions and markets. This was due to the company’s distribution expansion, success in newly acquired territories, and the scaling up of the Sting energy drink. Despite inflation in raw materials, VBL was able to improve gross margins through early stockpiling of essential raw materials, selective price adjustments, discount rationalization, and improved realization, led by the higher visibility of the high-margin Sting product. Operating leverage benefits contributed to an improvement in EBITDA margins. VBL is well-positioned to benefit from the early onset of the summer season, which is expected to drive overall beverage sales across regions.

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