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Ashok Leyland Ltd

Outlook & Valuation:

The domestic CV industry is poised for healthy growth led by increased government spending on infrastructure, mining and pick-up in economic activity. We believe ALL stands to benefit from the upcycle in the CV industry given its strong position in the M&HCV and LCV segment. Further, the proposed implementation of CV scrappage policy is likely to create an additional demand of ~1 lakh vehicles. To reduce the earnings volatility, the company has sharpened its focus on increasing its revenue share from LCVs, spares, exports and defence. We believe that ALL’s strong brand presence in the CV segment and its focus on diversifying to less cyclical businesses makes it one of our preferred picks in the sector. We recommend a Buy on the stock with a target price of Rs 105.

Bharti Airtel Ltd

Outlook & Valuation:​​​​​​​

Bharti Airtel is well placed to benefit from increased traction received in digital services which we believe is likely to continue going forward. After a steady addition of customers, Bharti can continue to gain market share in the mobile services business. The uncertainty over AGR dues is also behind us as Supreme Court has allowed 10 years payment window for telecom operators. In our view, the tariff hike would continue from here on, to reduce the financial stress on telecom companies which would benefit Bharti Airtel due to its strong customer base and a healthy addition of 4G customers. Further, strong cash flow generation would also help in deleveraging the balance sheet. We recommend a Buy on the stock with a target price of Rs. 709.

Crompton Greaves Consumer Electrical Ltd

Outlook & Valuation:​​​​​​​

We expect CGCE to continue to strengthen its market share in the ECD segment both from unorganized as well as other players. Its strong product portfolio, new innovative product launches, strong brand presence would enable the company to achieve a higher market share in the ECD segment. Further, strong focus on cost optimization measures, increased revenue from the premium portfolio, and signs of margins bottoming out in the lighting segment augur well for margin improvement. Hence, CGCE’s strong product portfolio, market leadership in key segments coupled with healthy dividend payout ratio (33-36%), lean working capital cycle, strong cash flow generation and robust return ratios make it one of our preferred picks in the sector. We recommend a Buy on the stock with a target price of Rs. 370.

ICICI 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. At present 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 would prefer investing in large private banking space with ICICI bank as our preferred pick. The bank has a strong brand name, healthy capital and liquidity position, stable asset quality, a large customer base and improved corporate governance under new management. We have initiated a Buy on the stock with a target price of Rs 552.

Kansai Nerolac Paints Ltd

Outlook & Valuation:​​​​​​​

Indian paint sector is expected to grow in double-digit driven by government initiatives for housing, rising disposable income, increase in rural spending, and reduction in repainting cycle and pickup in auto demand. Further with a reduction in GST to 18% from 28% has helped organised players to gain market share. In the near term, due to Covid as well as the slowdown in Auto, KNPL performance is expected to be muted in FY21. Nonetheless, going forward, the company has plans to grow in both decorative as well as industrial space and gain market share driven by innovative products, focus on non-auto segments, increase distribution network and expand in newer areas that are technology-intensive. Moreover, its recent foray into adhesives and construction chemicals segment would aid benefits in the coming quarters. Besides, benign raw material prices would augur well for the expansion of margin for the company. We initiate a Buy on the stock with a target price of Rs 615.

Larsen & Toubro Ltd

Outlook & Valuation:​​​​​​​

L&T intends to use a major portion of the net cash inflows (~Rs 11,000cr) from the sale of its electrical and automation business to service part of its debt and to grow technology and financial services businesses. Further, improvement in cash collections as the economy rebounds and monetization of non-core assets is likely to strengthen its cash reserves in the coming years. L&T’s strong execution capabilities enable the engineering conglomerate to command a premium over its peers. Thus, L&T by virtue of its market leadership is likely to be the key beneficiaries of the infrastructure spend by the government. We believe L&T’s diversified business portfolio and sound balance sheet make it one of the best long-term bets in the infrastructure space. We recommend a Buy on L&T valuing it on SOTP basis (standalone business and subsidiaries) with a target price of Rs 1,181 per share.

Nippon Life India Asset Management Ltd

Outlook & Valuation:​​​​​​​

We continue to remain constructive on the Indian mutual fund industry given its low penetration level as compared to major economies (11% AUM to GDP ratio v/s world average of 62%), increase in the financialization of savings and continuous strengthening of SIP flows. Further, NAM’s consistent increase in equity assets, industry-leading retail assets and strong presence in B-30 cities augur well for the growth prospects of the company. The consistent increase in monthly SIP book (Rs. 6.2 bn) would ensure longevity and regular inflows providing stable growth. We recommend a Buy on the stock with a target price of Rs. 348.

Sudarshan Chemical Industries Ltd

Outlook & Valuation:​​​​​​​

SCI is well place to capitalize on opportunities in the global as well as Indian pigment sector driven by positive industry growth trend, a wide range of products, cost competitiveness and strong technical capabilities. In H1FY21 the growth was impacted due to the Covid-19 pandemic, however the demand has started picking up but the pace is gradual and would normalize by FY21. Further from a long-term perspective, we remain positive on the company’s growth given its strong products, focus on pigments segment, expansion opportunity and strong financial track record. Besides, it would see improvement in margins driven by a change in product mix (focus towards high margin products) and stable raw material prices. We have initiated a Buy on the stock with a target price of Rs 583.

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