In the short term, all eyes on RBI’s monitory policy, but a bounceback is expected this week, says Sumit Bilgaiyan of Equity99
Sumit Bilgaiyan
The picture has completely changed in the past four weeks. A month ago, everyone was talking about 12,200 levels on the Nifty, but September has emerged as the worst month for the market after February 2016.
Investors lost almost Rs 15 lakh crore of wealth in just one month. Midcaps and smallcaps plunged to new 52-week lows in the biggest monthly drop since 2008. In this turmoil, the Nifty crashed 7 percent from its peak. However, look at the broader scenario, the BSE Midcap and Smallcap indices is down 19.5 percent and 28.5 percent, respectively. The NSE Midcap 100 and NSE Smallcap 100 indices plunged 21.5 percent and 37 percent, respectively, from their January highs.
Most stocks listed on exchanges are available 40-60 percent below their January high. We had seen a mega rally in midcap and smallcap stocks in the last 5 years, but now after the steep sell-off from recent peaks, no one wants to buy midcap and smallcap stocks.
Many stocks are available below their reasonable valuations, but no one is interested.
The list of negative news are long: IL&FS crisis, Yes Bank controversy, higher crude oil prices, weakening rupee, global trade war, etc. One thing is sure that investors have lost faith in the market after losing their capital in the last 9 months.
Investors will get best opportunity after the Q2 earnings to reshuffle and average out their portfolios. In the short term, all eyes on RBI’s monitory policy, but a bounceback is expected this week.
This week we bet on three L&T’s subsidiaries.
The firm posted better-than-expected performance across all fronts during Q1FY2019. Revenue growth was driven by broad base which led to constant currency revenue growth of 5.1 percent QoQ and 22.9 percent YoY while USD revenue increased by 3.5 percent QoQ and 23.4 percent YoY.
It reported EBITDA margin to 19.4 percent, an improvement of 170bps on QoQ basis. Net profit during the quarter increased 24.8 percent QoQ to Rs.361.3 crore. Company has registered double-digit sequential growth in BFS and High-Tech & Media space.
The management is optimistic of remaining in the industry’s top quadrant in terms of revenue growth in FY19 similar to FY18 led by recent deal wins, higher large accounts mining and higher digital revenue mix (Digital is now 34% of its revenues) and growth. It is trading at a P/E ratio of 27.3x. It has paid 2150% dividend for FY18. We are recommending a buy for medium to long term.
During Q1FY19, the firm had more than doubled its net profit while its revenue increased by 40%. On a sequential basis, revenue and net profit increased by 9.2% and 24%, respectively. In US dollar terms, revenue stood at $169 million; growth of 5.6% QoQ in constant currency, 32% YoY. EBITDA margin improved 170 bps at 17% from 15.3% in previous year quarter.
The company has won five multi-million dollar deals across process industry, telecom & hi-tech, industrial products and transportation. We believe LTTS is well set to tap the shift in ER&D spending from products to software and services, and a rising preference for third-party players. It is trading at a P/E ratio of 29.05x. It has paid 800% dividend for FY18. We are recommending a buy for medium to long term.
The company reported excellent results for Q1FY19, NII has improved by 48.2% YoY to Rs.1528 crore while PAT increased by 71.3% to Rs.538 crore as against Rs.314 crore. The overall loan book of the company is up by 24% YoY to Rs.86571 crore in Q1FY19. Company has shown 76% growth in rural finance, 48% growth in housing finance and 7% growth in wholesale finance.
Its AUM in MF business increased by 60% to Rs.71118 crore in Q1FY19. At CMP, the stock is trading at P/E of just 15.4x. In March 2018, company has allotted the preferential shares to L&T, of 107.81 million equity shares at Rs 185.51 per share and raised Rs 1,000 crore through QIP at the price of Rs.158.6. It is available much below above prices and looks strong buy candidate for investors. We are recommending a Buy for medium to long term investment prospective.
Disclaimer: The author is Founder of Equity99. The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.