Diwali Samvat 2081 Recommendations

ITC Limited (CMP – Rs.482.3 Target – Rs. 570)

ITC is one of India’s foremost private sector companies and a diversified conglomerate with businesses spanning Fast Moving Consumer Goods, Hotels, Paperboards and Packaging, Agri Business and Information Technology.  ITC is the largest cigarette manufacturer and seller in the country.  ITC was ranked as India’s most admired company, according to a survey conducted by Fortune India, in association with Hay Group.

Key Takeaways:

• ITC is the leader in the organised domestic cigarette market with a market share of over 80% .It’s wide range of brands include Insignia, India Kings, Classic, Gold Flake, American Club. In Q2 FY25, FMCG Cigarettes revenue up 6.07% YoY basis.

• In Q2 FY25 company had revenue of Rs 20581 crores which was 16.7% than Q1FY24.Profit after tax(PAT) stood at Rs 4993 crores which 2% up from Q1 FY24.

• ITC FMCG segment products will always be in demand as these products are not seasonal, and their demand is expected to remain strong in the future, which is beneficial for the company.

• ITC agri business saw a major boost in Q2FY25, revenue from agri business was up by 47% YoY. ITC subsidiary Indivision has received EU  reach approval to manufacture Nicotine and derivatives products.  Trials for the product have been started and exports are expected to speed up in the near future.

• ITC hotel division also saw 16% growth Q2FY25 driven by strong performance in wedding and retail segments. Hotel segment is expected to perform even better in future as company had opened 30 hotels in last 30 months and 28 hotels are expected to be opened in next 24 months.

Larsen & Toubro (CMP – Rs.3,326.4 Target – Rs 4200)

Larsen & Toubro Ltd is a multinational conglomerate focused on delivering engineering, procurement, and construction (EPC) solutions across key sectors, including infrastructure, hydrocarbon, power, process industries, defense, information technology, and financial services, both in domestic and international markets. It operates in over 50 countries worldwide.

Key Takeaways:

• As of June 30, 2024, the L&T group’s consolidated order book reached ₹490,881 crore, reflecting a 19% year-on-year growth. During the quarter ending June 30, 2024, the order intake was ₹70,936 crore, marking an 8% year-on-year increase.

• L&T posted a 12% surge in its profit after tax (PAT) at ₹2,786 crore for the June quarter compared to ₹2,493 crore in the same quarter last year. Revenue from operations rose by 15% YoY to ₹55,120 crore, driven by strong execution in the projects and manufacturing (P&M) portfolio, supported by a substantial order book.

• The government’s emphasis on public capital expenditure and private investments will create numerous opportunities for infrastructure companies like L&T.

• L&T Semiconductor Technologies a fully-owned subsidiary of Larsen &Toubro and IBM have announced a collaboration to design advanced processors, emphasizing innovation, functionality, and performance. This partnership will help L&T to get further boost in the growing semiconductor sector.

• L&T retains the focus on profitable execution of its robust order book in the backdrop of a relatively stable environment. It is well positioned to exploit the emerging opportunities across the diversified business portfolio and limit exposure on non-core businesses.

Nippon Life Asset Management Limited (CMP – Rs.681.55 Target – Rs. 850)

Nippon Life India Asset Management specializes in managing mutual funds, including exchange-traded funds (ETFs), as well as offering managed accounts, portfolio management services, alternative investment funds, pension funds, offshore funds, and advisory services . It also manages offshore funds through its subsidiaries in Singapore & Mauritius and, also has representative office in Dubai thereby catering to investors across Asia, Middle East, UK, US, & Europe.

Key Takeaways:

• NLIAM India offers diverse product suite across mutual funds catering to investors at all levels of expertise, risk-return profiles, and investment horizons. The company offers one of the industry’s best passive product suites, with 41 passive schemes, including one of the largest ETF bouquets comprising 25 ETFs across equity, debt, and commodities.

• NIMF has geographical presence at 264 locations pan India and is amongst the highest in the industry. The company continues to have the largest base of 17.5 million unique investors. The company has one in three mutual fund investors invested with it.

• As on September 30, 2024, NAM India’s assets under management stood at Rs 6.54 trillion

• For the Q2FY25, NIMF’s average assets under management stood at Rs 5.49 trillion (USD 65.5 billion) – an increase of 57% YoY and 14% QoQ.

• Company also had revenue of Rs 571 crores in Q2FY25, which was 13% higher compared to Q2FY24. PAT in Q2FY25 stood at Rs 360 crores which 47.3% up from Q2FY24.

Reliance Industries Limited (CMP – 2655.7 Rs. Target – Rs.3300)Reliance Industries Limited (RIL) is an Indian multinational conglomerate based in Mumbai, India. Its diverse portfolio encompasses energy, petrochemicals, natural gas, retail, entertainment, telecommunications, mass media, and textiles. Reliance is the largest public company in India by market capitalization and revenue.

Key Takeaways:

• Reliance industries has reported 11.7% growth in its top line on YoY basis while its profit in the same quarter was Rs 15138 crores, down 5.5% YoY. The company robust growth in digital service and upstream business has helped to offset weak contribution by O2C business.

• Reliance JIO’s monthly ARPU grew by 7.4%YoY to Rs 195.10 while recent tariff hike’s full impact will come in next 2-3 quarters.

• As on October,2024 Reliance JIO has the largest market share of wireless subscribers in India at 40.68% while Airtel stands at 32.8%.

• JioAirFibers rapid uptake has significantly accelerated the pace of home connections with approximately 2.8 million homes connected by JioAirFibre as on September,2024, doing this the company has become fastest growing fixed wireless access provider.

• Reliance retail reported profit of Rs 2935 crores which is up by almost 20% from last year same quarter, while revenue increased from Rs 66260 crores to Rs 66502 crores in same period ,the retail segment continue to increase its customer touchpoint and product offerings across physical and digital channel.

• The retail segment of Reliance is further sustaining strong growth through rapid store expansions .The company opened 1840 new stores in FY24. Reliance partnered with Israeli innerwear maker Delta Galil as part of its expansion in India’s apparel market, aiming to double its retail business within the next three to four years.

SKF India Ltd (CMP – Rs. 5095.1 Target – Rs.7000)

SKF India Ltd a leader in automotive and industrial engineered solutions, operating through five key technology platforms: bearings and units, seals, mechatronics, lubrication solutions, and services. The company focuses on enhancing friction reduction, energy efficiency, and equipment reliability through research-driven, customized solutions. With a significant presence in India, SKF has  six manufacturing facilities, and a network of over 300 distributors. Its operations are consolidated under two entities: SKF India Limited and SKF Engineering and Lubrication India Private Limited, reflecting its commitment to delivering sustainable solutions across various sectors.

Key Takeaways:

• The company offers a wide range of products, including bearings, seals, and lubrication systems,  customized bearings, and related products for e-powertrain, wheel-end, driveline, engine, suspension, and steering applications to manufacturers of EV, cars, light and heavy trucks, trailers, buses, and 2W.

• In Q1 FY25, the company reported a revenue of ₹1,206 crore, from ₹1,150 crore in Q1 FY24, representing a growth of 4.86%. The profit for the same period also rose to ₹159 crore, compared to ₹155 crore, marking a growth rate of 2.58%.

• SKF management is expected to double its revenue in the upcoming years by expanding in high growth sectors like EV parts and semiconductors. Management is also focused to contribute to the ‘ Make In India ‘ initiative by promoting localization to improve competitiveness.

Tata Consultancy Services ( CMP – Rs.4057.55 Target – Rs. 4700)

Tata Consultancy Services (TCS), the flagship company of the Tata Group, is an IT services, consulting, and business solutions provider that has been helping some of the world’s largest organizations with their transformation journeys for more than 50 years. TCS delivers a consulting-driven, cognitive-powered, integrated suite of business, technology, and engineering services and solutions. TCS has over 601,000 consultants in 54 countries.

Key Takeaways:

• IN Q2FY25 company recorded net sales of Rs 64259 crores which was 7% higher compared to Q2 FY24. PAT for Q2FY25 stood at Rs 11909 crores which was 5% higher compared to Q2FY24.

• The company’s reported TCV order book of US $8.6 billion for the quarter Q2FY2025. TCV of deals signed in North America stood at US $ 4.2 billion. BFSI TCV stood at US $2.9 billion, Consumer Business TCV stood at US$1.2 billion. AI -GEN AI TCV is doubling every quarter and also the pipeline is strong.

• The company is doing around 600 engagements in Q2 in AI and Gen AI when compared to 275 engagements in Q1FY2025. In Q2 around 86 engagements went into production in Q2 when compared to 8 in Q1

• Company management remains committed to long term EBIT margins in the range of 26-28.% for fy25 and beyond.

• The company management said it had hired 11,000 associates in first half of the year, and they are on track for upcoming hiring’s.

• Under the uncertain geopolitical situation, TCS biggest vertical, BFSI showed signs of recovery which can support in H2 of FY25

Varun Beverages Limited (CMP – Rs.611.2 Target – Rs. 725)

Varun Beverages Ltd has been a partner of PepsiCo since the 1990s and is a significant player in the beverage industry, being one of the largest PepsiCo franchisees globally. The company produces and distributes a diverse range of carbonated soft drinks, non-carbonated beverages, and packaged water, all under PepsiCo’s trademarks. VBL holds franchises for various PepsiCo products across 27 states and 7 union territories in India, accounting for approximately 90% of PepsiCo India’s beverage sales volume. Additionally, VBL has been granted franchises for regions including Nepal, Sri Lanka, Morocco, Zambia, and Zimbabwe.

Key Takeaways:

• Company reported revenue of Rs 4804.68 crores in Q3 FY24, which was 24% higher as compared with Q3FY23. PAT for Q2FY24 stood at Rs 619.61 crores which is 23.7% higher as compared with Q3 FY23.

• The company has further expanded their partnership with PepsiCo having entered into an exclusive snack franchising appointment to manufacture, distribute and sell “Simba Munchiez” in Zimbabwe by October 2025 and in Zambia by April 2026 which will further improve their performance.

• Gross margins improved by 22 bps to 55.5% from 55.3% during Q3 CY2024 as compared with Q2 FY24, primarily as they focus on reducing sugar content and light-weighting of packaging. EBITDA increased by 30.5% to Rs. 1151.2 crore and EBITDA margin improved by 117 bps to 24%% in Q3 CY2024, when compared with Q2 FY23 driven by operational efficiencies.