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Axis Bank Ltd.

Outlook & Valuation

The Covid-19 pandemic has impacted the banking sector as a whole however measures lend by RBI and government help it to pass through this difficult time. In Q2FY21, we witnessed many banking players (both private and public banks) posted better numbers on the back of improving asset quality, better collections and lower provision. In the coming quarters, with improving demand and the economy getting back on track, the banking sector would see good growth recovery. We believe Axis bank is well placed across its portfolio with a strong presence in retail as well as corporate segment, strong distribution branch network, also a prominent player in wealth management (operates under “Burgundy”) and a strong focus on digital platform augurs well for the growth of the bank. Improving assets quality and CASA ratio would benefit the bank going forward. On the valuation front, it trades at 1.6x P/BV FY23e which is at a discount to its peer group. We remain positive for the long term and have initiated a buy on the stock with a target price of Rs 721.

Coromandel International Ltd.

Outlook & Valuation

The Indian fertilizer sector is expected to grow at a CAGR of 10-12% by 2024, driven by government reforms for agri & fertilizer segment, healthy demand conditions, the introduction of new products and stable raw material prices. We believe Coromandel is well placed in the sector to capitalize on the opportunity driven by positive sector outlook, diversified product portfolio, good monsoon and favourable Kharif season. In terms of financials, it has shown consistent growth except during Q1FY21 due to Covid-19. Further, the company has a strong balance sheet and decent cash flow which will help in expanding capacity going ahead. We have initiated a Buy with a target price of Rs 978.

IRCTC

Outlook & Valuation

IRCTC has a unique business model with a presence across various businesses. Their monopoly in online ticket booking and catering services are strong moats of the company. Despite being one of the most heavily impacted companies due to COVID-19, we believe the long-term growth story remains intact. Moreover, its low fixed cost model, excellent free cash flow generation, strong return ratios and promising long-term growth prospects makes it one of our preferred investment pick. We initiate with a Buy rating on the stock with a target price of Rs. 1,755.

JK Lakshmi Cement Ltd.

Outlook & Valuation

The cement sector is gradually picking up pace in H2FY21 and is expected to revive by FY22 on the back of improved demand from the housing and infra sector, government support and re-opening of the economy. Further, JKLC is one of the strong players in north India. The focus and strategy of the management in the next 2-3 years will be to maximize sales, improve realizations by better product mix, enhance margin by cost optimization, expand capacity and lastly to reduce debt. We have a positive view on the company and thus we have initiated a buy on the stock with a target price of Rs 428.

Mahindra & Mahindra Ltd.

Outlook & Valuation

We continue to maintain our positive stance on M&M given its strong rural portfolio. The management has laid out a plan to strengthen M&M’s position through new product launches, redefine its UV positioning, capex optimization, and tough action on loss-making subsidiaries. We believe M&M’s strong focus on reducing losses of subsidiaries, cost optimization measures coupled with healthy growth prospects in its key businesses (Farm equipment & LCVs) would help the stock to re-rate further from current levels. We have raised our estimates for FY22E and FY23E and maintain a Buy on the stock with a revised target price of Rs. 889.

Manappuram Finance Ltd.

Outlook & Valuation

The pandemic has impacted growth momentum especially in its microfinance, vehicle finance and housing business, which we believe would pick up in FY22E. In terms of asset quality, despite a higher share of gold loans, we expect the asset quality to deteriorate in FY21E, given the stress in other businesses. Nonetheless, we like Manappuram given its large gold loan portfolio, strong funding position and the company’s focus on customer acquisition and increase penetration bodes well for the long-term growth prospects of the company. We initiate with a Buy rating on the stock with a target price of Rs. 205.

Natco Pharma Ltd.

Outlook & Valuation

Natco is a strong player in the specialty business which is a higher margin segment. Going forward, the company plans to launch 6-8 new products in domestic segments largely oncology, expanding in newer markets for formulations business. The company has a settlement agreement in place with Bayer for Sorafenib (Nexavar) and has 180-day exclusivity for the same. Besides, it has a decent financial and strong balance sheet, which is positive for the company’s growth. We have a positive view on the stock and thus have initiated a buy with a target price of Rs 1,135.

SBI Life Insurance Company Ltd.

Outlook & Valuation

The COVID-19 pandemic had impacted growth momentum for a bit however, we believe the long-term growth story remains intact for India’s life insurance industry on the back of favourable demographics, rising disposable income, growing urbanisation and increased awareness of insurance. Within the industry, SBI Life is one of our preferred picks given its huge untapped client base, wide distribution reach and industry-leading cost ratios. Further, increased focus on business through digital channels and a strong distribution platform should lead to consistent market share gains for the company. We initiate with a Buy rating on the stock with a target price of Rs. 1069.

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