Samvat 2078: Affle India, LIC Housing Finance, Rossari Biotech among Samco's top picks
5 min read 04 Nov 2021, 04:55 PM ISTMetropolis Healthcare Ltd, Asian Paints, ICICI Lombard General Insurance Company, CAMS, Dabur, Rossari Biotech, HDFC Bank, Affle India, Relaxo, LIC Housing Finance are among Samco Securities top picks for Samvat 2078
PremiumIn Samvat 2077, while Nifty delivered about 40% return while the midcap and smallcap indices outperformed, delivering 70% and 80% returns respectively.
“Markets have seen an ever-increasing base of investors and shows resilience despite macro and short-term challenges and we believe that it will continue to offer plentiful investment opportunities," Samco Securities said in a note and has recommended 10 stocks for Samvat 2078. The portfolio includes a mix of large and quality midcap stocks.
“Investors can invest in these 10 recommended stocks keeping their liquidity and risk-taking ability in mind," the brokerage said.
Samvat 2078: Here are the 10 stocks Samco has recommended and what it says in the report:
Metropolis Healthcare Ltd
“Metropolis could be on track to post robust double-digit growth over the next two years driven by a change in demographics, a rise in precautionary testing, and the government’s healthcare push. With an ROE of 30% and ROCE of 36%, one of the highest among peers and minimal leverage as evidenced by its debt-equity ratio of 0.16, the company boasts of a robust balance sheet. Rising contribution from the margin-accretive B2C segment, planned network expansions over the next 3 years, higher sales and patient volumes as compared to competitors, and cost optimization practices make this a great prospect for investors to hold in the long term."
Asian Paints
“The company has been a consistent wealth creator for its stakeholders for over 5 years now with an average ROE of 28% and ROCE of 39%. The gross margins of the company have taken a hit in the most recent quarter primarily due to rising crude and chemical prices. However, the company remains confident to take price increase in its products and to maintain its EBITDA margins in the 18-20% range. With the shift in the sector from unorganized to organized players expected to propel its medium to long-term growth, we remain positive on the paint-maker due to its strong portfolio mix coupled with a robust distribution channel."
ICICI Lombard General Insurance Company
“The insurer has not only delivered good profit growth of 23.75% CAGR over the last 5 years but has also maintained a healthy dividend payout of 21.33%. Its gross direct premium income grew at a CAGR of 11.7% for the past 13 years. The moat of the company is comprised of its strong brand, qualified management, and healthy returns, which makes it a keeper in an investor’s portfolio."
CAMS
“Computer Age Management Services (CAMS) operates in a highly regulated Registrar and Transfer Agent (RTA) industry. It is a market leader with a market share of 70-72% of total Mutual Fund AUM in a duopoly RTA market. CAMS has maintained its leadership position since 2005-06 and has outperformed MF Industry’s AUM growth by 3% from Mar-14 to Mar-20. It has a strong and consistent financial track record of compounding sales and profit growth by 8% and 13% respectively over the last 10 years. India has one of the lowest MF penetrations globally with an AUM-GDP ratio of 12% vs a world average of 65%, this itself offers long-term growth potential for the overall MF and RTA industry. Being a fundamentally strong company, CAMS has a huge potential to grow in India's underpenetrated Mutual Fund Industry."
Dabur
“The world is now recognizing the importance of Ayurveda which is increasing the inclination of a wider audience towards natural products. In the wake of the pandemic, the demand for Ayurvedic Healthcare products witnessed a surge, and Dabur, with its strong lineage and market positioning, strong Research & Development capabilities, and healthy financial metrics, is a clear beneficiary. All these factors coupled with its comparatively lower beta, make Dabur an attractive investment bet. "
Rossari Biotech
“Rossari Biotech is a specialty chemical maker which caters to home, personal care, textile specialty chemicals, and animal health & nutrition segments. With a portfolio of 3,500+products, the company’s revenue stream is well-diversified and well-equipped to bear the brunt of a downfall in any segment. The largest textile specialty chemical maker is expected to close FY22 with at least a 50% jump in both the topline and bottom-line driven by rising demand for its offerings and a substantial price hike that will ease the pressure on margins. Given an almost debt-free balance sheet, a healthy track record of ROCE and ROE, and robust profitability, the company’s growth outlook remains solid."
HDFC Bank
“Through increasing investments in technology, the bank has also recently kicked off Project Future Ready to enable it to develop future growth engines and to improve its offerings and delivery of services. The lifting of the ban on credit card issuance will also aid its retail ambition. With strong earnings visibility, improving loan mix, stable asset quality, HDFC bank remains one of the resilient stocks in this sector and an attractive investment opportunity."
Affle India
“Affle is a leading ad-tech company that helps enterprises drive user acquisitions, engagements, and transactions through relevant mobile advertising. It is the only listed stock in this space in India. Over the past 4 years, the company has delivered robust financial performance visible in its 45% CAGR in revenue from operations, 42% CAGR in EBITDA, 35% CAGR in operating cash flows. The management of the company indicates the operating margin to be sustainable and expects to deliver at least 25-30% revenue CAGR in the next 5 years."
Relaxo Footwears Ltd
“The company has grown its revenue and profits at a CAGR of ~9.3% and ~25% respectively for the last five years and is maintaining healthy ROE and ROCE of 21% and 27% respectively. The immense growth potential, strong balance sheet, and efficient working capital cycles make RFL a strong investment addition."
LIC Housing Finance
“After a difficult phase during the first and second waves of COVID-19, India's second-largest pure-play mortgage lender, LIC Housing Finance Ltd (LICHFL), is ready to rebound. Improving the real estate sector is generating higher disbursements, which will likely translate into gradual improvement in collections, bode well for LICHFL in the medium to long term."
