Monthly Stock Recommendation – December 2022

 

Consider the prices as on 6^th  December 2022 at 10 am

Asian Paints Ltd.:

Asian Paints Ltd. is the leading company in the paints sector in India with 80 years’ experience with presence in 15 countries across the world. The company manufactures a range of decorative and industrial paints. It also offers wall coverings, water proofing, adhesives and other services under its product portfolio. Company has started new range of hand, Surface and space sanitizers and disinfectants and also recently launched range of Furniture, Furnishings and Lighting Products under ‘Home Décor’ category. It is continuously showing double digit volume growth in Decorative Business in India from Q1FY22 to Q2FY23. Company has shown around 20% growth in the revenue from past 20 yrs. Asian Paints continues to grow because of its purchasing power; in spite of new entrants in the market, it still has over 50% market share in the Domestic Paints industry. Operating profit margin of the company would improve in the further quarters due to the decrease of raw materials price and ease in inflation.

Infosys Ltd:

Infosys Ltd. is engaged to provide consulting, technology, outsourcing and next-generation digital services, to enable clients to execute strategies for their digital transformation. Its key services include application development, product co-development and system implementation/system engineering. The company shown growth across verticals; Sequential currency growth stood at 4% and large deals remain strong at $2.7 billion in the September quarter, growth of 28% YoY. Net Profit of Infosys grew 12.3% QoQ and Ebit margin grew by 150 bps QoQ at 21.5% for the same quarter. The company has increased revenue guidance to 15-16% from 14-16% for FY23.

ITC Ltd:

ITC Ltd. is one of India’s foremost multi-business enterprise with diversified portfolio of businesses spanning in FMCG, Paperboards & Packaging, Agri Business, Hotels and Information Technology. It has been the top player in the cigarettes market and one of the leading FMCG brand in India. The company delivered robust performance across all segments in the September 2022 quarter. Revenue of the company increased 25% to Rs 16,930 crore in the Q2FY23 and Net profit also rose to 24.4% (YoY) to Rs 4,620 crore in the quarter ended September, 2022. The company’s cigarette business grew by 23.3% to Rs 6954 crore during the quarter, while FMCG-others business, which includes packaged food and personal care products, grew 21% to Rs 4,885 crore; the segment’s EBITDA Sustained at 9.5%. ITC reported a healthy performance across segments. The Cigarettes business is gaining market share and is going to maintain volumes because of stable tax policies. Also foreign portfolio investors have been increasing their positions in ITC for the last four consequent quarters.

LTI Mindtree Ltd:

LTI Mindtree Ltd. has become the fifth largest IT services company by market capitalization after the merger of Larsen & Toubro InfoTech Ltd. and Mindtree Ltd. The Company offers extensive range of IT services like application development, maintenance and outsourcing, enterprise solutions, infrastructure management services, testing, digital solutions and platform-based solutions to the clients in diverse industries. Total number of clients of the company are over 750 and its Key partners includes Adobe, AWS, Cisco, Google, Microsoft, IBM and Oracle. The combined entity offers high growth potential in the BFSI, Hi-tech and Retail segment and better margin due to increased operational efficiency. The combined entity           has Revenue of more than Rs.15,000 Cr in H1. Management of the company is confident enough to chase larger deals in further quarters and has also improved the guidance for FY23.

Maruti Suzuki Ltd:

Maruti Suzuki India Ltd. is a subsidiary of Suzuki Motor Corporation, Japan. It is India’s top automobile manufacturer in the country with market share of 42% in the passenger car market. The principal activities of the Company are manufacturing, purchase and sale of motor vehicles, components and spare parts. The other activities of the Company comprise facilitation of pre-owned car sales, fleet management and car financing. The company delivered significant financial performance in the September quarter due to ease in semiconductor shortages and decline in commodity prices. Total revenue of the company rose to 28,546 crore up 48% YoY and Net profit also increase hugely by 334% to 2,113 crore for Q2FY23. In November 2022, total sales of the company increased by 14% yearly but exports declined by 7.7% YoY due to world economy slowdown. Maruti’s plan to launch more vehicles in the CNG variant and focus on the SUVs would further drive the growth in the coming period.

Piramal Pharma Ltd:

Piramal Pharma Ltd. (PPL) is a pharmaceuticals company of the well-known Piramal Group. The Company manufactures and develops a wide range of pharmaceutical solutions through end-to-end manufacturing capabilities across 15 global facilities and a global distribution network in over 100 countries. Business segments of the company includes Contract Development and Manufacturing Organization (CDMO), Complex hospitals generics, India Consumer healthcare and Ophthalmology. Some of the brands of the company in consumer healthcare includes Saridon, Lacto Calamine, Polycrol and Tetmosol. The company showed the Revenue of Rs.1720 Cr., up 9% in September quarter of FY23. Post covid the demand of their CDMO Services has gone up globally due to the China plus one strategy. In the complex hospitals generics segment, PPL gets advantage of less competitors from other Indian Pharma players. Management of the company remains positive for its future performance and expects 20% EBITDA margin in the next 3-5 years.

Redington India Ltd.:

Redington India Ltd. is a leading supply chain solutions provider in the world providing solutions to all categories of Information Technology, Telecom, Cloud, Lifestyle and Solar segment. The key business verticals of the company are Distribution, Services, Logistics Services and Emerging Businesses. It is a completely professionally managed company with no promoters and has expansive network of over 290+ brands association and 43,000+ channel partners and is serving to 38 emerging markets. The company has shown strong financial performance over the years with Revenue CAGR of 6.8% and PAT CAGR of 35.1% from FY20 to FY22. The company is expanding into new emerging geographies and also diversifying into solar and cloud service business. Redington is also enhancing presence in the logistics business in India and the Gulf which will further support the growth of 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 September quarter results. Consolidated revenue of the bank rose 15.7% YoY to Rs.84,463 Cr crore compared to 73,029 crore in the previous year same quarter while Net Profit of the bank increased hugely by 66% YoY at  Rs.14,752 Cr. Assset quality of the bank has improved in Q2FY23 with GNPA ratio of 3.52% down by 39 bps QoQ and Net NPA of 0.8% compared to 1% in June quarter. Healthy loan growth momentum of the bank is expected to sustain led by retail and corporate loan growth.

Tata Chemicals Ltd:

Tata Chemicals Ltd. is one of the largest manufacturer of soda ash and sodium bicarbonate for diverse industries, such as glass, detergents, silicates, textiles, food, pharmaceuticals, animal feed, mining and chemical processing. The September quarter result of the company showed significant growth. It reported 40% increase in its consolidated net sales for the quarter ended September 2022 to Rs 4,239 crore compared to corresponding previous year period because of robust soda ash demand. Net profit of the company was up 184% to Rs 629 crore YoY; Specialty products sales grew 27% YoY for the same quarter. Tata Chemicals continues to perform financially well despite of challenging global environment. Ongoing global shortage for soda ash shortage globally will further improve realisations through heightened pricing.

Tata Steel Ltd.:

Tata Steel Ltd. is one of the world’s largest steel companies with a global annual crude steel production capacity of 34 million tonnes per annum (MnTPA). The company has manufacturing units in 26 countries across globe and has presence in 50 countries. It has a strong portfolio of 11 retail brands. Tata Steel didn’t show good numbers in the September quarter due to moderate realization and high energy prices especially in Europe. However, recent decrease in coking coal prices and rise in infrastructure activity would continue to drive the demand in India. Company had recently announced the merger with 7 of its group companies which will benefit the company in increased operational efficiency, better facility utilization, working capital efficiency, better cash flow management, Scalability and Enhanced logistics over the long term.

Ultratech Cement Ltd:

Ultratech Cement Limited is the leading cement company of the country which comes under the Aditya Birla Group. The company is engaged in the manufacture and sale of cement and cement related products. It is the largest cement manufacturer of grey cement, ready mix concrete and white cement in India with consolidated capacity of grey cement of 121.25 million tonnes per annum. On consolidated front, Ultratech reported 15.6% yearly growth in the Net Revenue to Rs.13,893 Cr while Net Profit decreased by 42% because of rising power & fuel cost and logistics cost, stood at Rs.759 Cr for the quarter ended September 2022. The company has announced robust expansion plan of 22.6 million tonnes per annum and expects capacity of 153.85 mtpa by FY25; post which expansion is planned to take capacity to ~200mtpa by FY30. Input cost for the cement companies have decreased recently which will further improve margin of the company.

 

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