After a splendid performance in Samvat 2079, our independent and talented research team brings you a new set, in time to light up your portfolio.
The real test of an investment decision is not in good but in bad times. The year gone by has been tumultuous to say the least, buffeted by lingering global macro uncertainties, an unrelenting war against inflation, and unprecedented geopolitical events. However, Indian markets sparkled, thanks to a smart recovery from the pandemic, though concerns remain about the sustainability of this recovery.
Amid these uncertainties, the research team’s 2079 Samvat portfolio of nine handpicked gems, exclusive to MC Pro subscribers, has delivered stellar returns, outperforming both the Nifty and the Nifty 500 by a wide margin. Using the same rigour and judgement, our research team has handpicked eight absolute gems for Samvat 2080 that are set to light up portfolios, even as your investments navigate the odds of yet another uncertain year. Here’s wishing you and your family a Happy Diwali in advance and a rewarding year of investing with MC Pro.
The Diwali picks:
Cyient DLM is a differentiated EMS (electronic manufacturing service) business focused on aerospace, defence, and industrial verticals. Historically, it has grown faster than the industry and is expected to maintain the momentum as the Indian EMS industry growth accelerates. Platform upgrades, sustainability requirements in aerospace, higher defence spending, and industrial digitisation are the key growth drivers.
The company has developed expertise helped by the long relationship with leaders in highly regulated industries, leading to entry barriers for competition. Rapid revenue growth and a low double-digit margin profile set Cyient DLM apart in the crowded Indian EMS landscape.
Interglobe Aviation (IndiGo), the largest player in the aviation industry, finds a place in our portfolio for the second consecutive year. Post the pandemic, demand has not only bounced back sharply but the overall pie is also increasing. The yield environment is expected to remain robust as the demand scenario should remain strong. This could partially negate the impact of the rise in oil prices. Another tailwind is the pick-up in demand on international routes.
Kotak Mahindra Bank has significantly underperformed its banking peers in the past year on account of the uncertainty regarding the change in the top leadership. With the appointment of a technology-focused veteran global banker, who will replace founder-promoter Uday Kotak, a key overhang has been removed. The bank has seen a steady uptick in growth and asset quality has been pristine. However, deposits are facing a challenging situation and there has been a slight moderation in interest margin. The valuation has corrected to historic lows. The promoter’s significant skin in the game, with a 26 percent stake, the group’s presence across financial services, and the potential value unlocking from the subsidiaries all make the bank a good long-term play.
SAMHI Hotels, the third-largest hotel asset owner in India, will be a key beneficiary of the current industry up-cycle. The growth in industry demand is expected to be almost double the supply growth over the next few years, leading to improved pricing growth as well as profitability for hoteliers. SAMHI has growth visibility over the next few years, given the room addition and renovation plans as well as better pricing owing to the favourable demand-supply dynamics. The strengthening of the balance sheet owing to the debt repayment post the IPO and healthy growth prospects should lead to the re-rating of valuation multiples and reduce the valuation gap with peers.
Wood coatings manufacturer Sirca Paints India has been exhibiting impressive performance for the past several quarters. In FY24, the company is looking to ramp up domestic production of the Italian PU products, which were previously imported from the parent company. In addition, Sirca has started in-house manufacturing of resins, which will contribute to better margins and add to the supply-chain resilience. We remain optimistic about the business as the management expects the current growth rate to continue and is targeting a Rs 400-crore (from Rs 268 crore in FY23) top line in the next couple of years.
SJS Enterprises is a design-to-delivery aesthetics solutions provider serving the automotive and the consumer appliance industries. With strong clientele and long-standing relationships, the company enjoys a somewhat protected market. A key driver for the company is the increasing demand for premium vehicles. Automakers are focusing on enhancing the aesthetics of their vehicles to cater to this demand. Premium aesthetic products offer higher realisations and profit margins compared to traditional products as is evident from its financials. Further, SJS has revealed its growth strategy through strategic acquisitions that offer substantial synergies.
Star Health is the largest retail health insurance company with a market share of 33 percent as of Sept’23. It enjoys relatively better profitability over other general insurers as the retail health business has the lowest claims/loss ratios in comparison to group and government policies. Star Health is a safe proxy to play the expanding healthcare theme as there is no listed mono-line peer in the health insurance space. Moreover, Star Health has an early-mover advantage, enjoys significant regulatory arbitrage (regulation permits higher expense limits for standalone health insurers compared to multiline insurers), and has built an unrivalled agency network.
Tata Power‘s business restructuring and focus on renewable energy are yielding results. The company is reporting good numbers, thanks to the improving contribution from the traditional generation business and the higher growth in solar as well as new capacity addition. The solar EPC business is sitting on an order book of around Rs 17,600 crore, providing healthy revenue visibility. The renewable energy portfolio, about 38 percent of total capacity, has a strong project pipeline of about 2500 MW of new projects. It is rapidly scaling up businesses in segments such as rooftop solar, solar pumps, and EV charging which improves its overall earnings outlook.