Super 7 Picks - March 2019

Super 7 Picks - March 2019

Techno Funda Report - March 2019

BP Equities Private Limited (www.bpwealth.com)

B P W E A L T H

5th March, 2019

Research Team [email protected]

022-61596406

Index

Company Recommendation Price (Rs) Entry Range (Rs) Target Price (Rs) Stop Loss (Rs) Page No.

Bank of India Buy 88 CMP-83 103 79 1

Bharat Forge Ltd Buy 517 505-490 588 468 2

Can Fin Homes Ltd Buy 277 CMP-265 340 249 3

Godrej Industries Ltd Buy 494 CMP-480 565 460 4

Grasim Industries Ltd Buy 792 CMP-760 920 720 5

Jet Airways (India) Ltd Buy 233 CMP-215 285 205 6

Jindal Steel & Power Limited Buy 161 153-147 184 138 7



B P W E A L T H

Performance Tracker

Performance Tracker September 2018

Sr. No. Company Recommendation Reco Price (Rs) Target Price (Rs) Status

1 Apollo Hospitals Buy 1140-1100 1300 Stoploss Triggered

2 Cummins Buy 750-730 860 Profit booked at 795

3 Grasim Buy 1068-1040 1190 Exit at 1022

4 MOIL Buy 184 220 Stoploss Triggered

5 Sun Pharmaceuticals Ind Ltd Buy 653-630 760 Exit at 623

6 Torrent Power Ltd Buy 255-245 305 Profit booked at 272

7 TVS Motor Buy 569-550 650 Profit booked at 599

Techno Funda Return For Sept, 2018 : -1.04% , Nifty Return For Sept, 2018 : -6.4%

Performance Tracker October 2018


1 ACC Buy 1530-1460 1680 Stoploss Triggered

2 Asian Paints Buy 1261 1400 Stoploss Triggered

3 Coal India Buy 279 310 Stoploss Triggered

4 Cummins India Buy 680-650 740 Target Achieved

5 ICICI Bank Buy 319-310 360 Exit at 319

6 ITC Buy 275 310 Profit booked at 290

7 NMDC Buy 111-107 132 Profit booked at 115

Techno Funda Return For Oct, 2018 : 0.41% , Nifty Return For Oct, 2018 : 0.80%



B P W E A L T H

Techno Funda Return For Nov, 2018 : 3.17% , Nifty Return For Nov, 2018 : 3.1%

Performance Tracker November 2018


1 ABB India Ltd Buy 1318-1280 1540 Profit booked at 1409

2 Ashok Leyland Buy 117.7-113 142 Stoploss Triggered

3 Cummins India Buy 768-740 910 Profit booked at 807

4 DLF Buy 165-160 200 Profit booked at 180

5 Federal Bank Buy 82.4-78 97 Profit booked at 85.3

6 Havells Buy 646-625 730 Profit booked at 697

7 VEDL Buy 208.9-201 258 Exit at 196

Performance Tracker January 2019


1 Bajaj Auto ltd Buy 2734 3100 Stoploss Triggered

2 Bharti Airtel ltd Buy 310-322 380 Exit at 312 3 Canara Bank Buy 272-283 324 Stoploss Triggered

4 Cummins India Ltd Buy 810-832 970 Exit at 796

5 Engineers India Ltd Buy 122-127 153 Stoploss Triggered

6 Indraprastha Gas Ltd Buy 269-278 320 Profit booked at 290

7 ONGC Ltd Buy 146 173 Exit at 142

Techno Funda Return For Dec, 2018 : 2.86% , Nifty Return For Dec, 2018 : -0.6%

Techno Funda Return For Jan, 2019 : -3.00% , Nifty Return For Jan, 2019 : 1.60%

Performance Tracker December 2018 Sr. No. Company Recommendation Reco Price (Rs) Target Price (Rs) Status

1 Apollo Hospitals Buy 1265-1220 1450 Stoploss Triggered 2 Century Textiles Buy 921-880 1030 Profit booked at 919

3 Federal Bank Buy 85.3-82 100 Profit booked at 94

4 Godrej Consumer Products Buy 730 845 Target Achieved

5 Lupin Buy 887-850 1050 Stoploss Triggered

6 Siemens Buy 951-920 1100 Profit booked at 1043 7 Torrent Power Buy 271-259 320 Stoploss Triggered

2nd Feb ,

Buy

Technical View (Weekly Chart)

BFSI

Technical View

After the sharp down move from 216 to 76 the stock is moving sideways for the past couple of

months. Recently the stock has formed Bullish reversal candlestick at the upsloping trend line which

is a bullish signal for short term trend, also the recent trough coincides with lower of the sideways

range the stock is moving for past few months which increases the reliability of the recent trough to

act as strong support for short term trend. RSI has also reversed from its oversold zone which is a

bullish signal for short term trend. We recommend to BUY BANKINDIA in the range of CMP-83 for

the target of 103 with a stop loss of 79 in short term.

Investment Rationale

RBI lifts restriction on bank’s operation

Bank of India’s exit from RBI’s prompt corrective action (PCA) framework is very positive. The bank’s

net non performing loan (NPL) ratios and capital – two of the four parameters that the RBI tracks as

part of the PCA improved significantly in Q3FY19. This would remove some lending restriction and

help to build quality loan book. In December 2018, Government of India infused around Rs.10000 crs

into PSU banks of which BOI received Rs.4500 crs from it. The capital helped bank to significantly

increase their loan loss coverage and reduce their NPL ratio below the trigger point for PCA inclu-

sion.

Slippages are normalizing and recovery is on track

Bank of India reported reduction in fresh slippages at 2916 crs in Q3 FY19 against 17789 crs in previ-

ous year. Whereas, there was improvement in recovery which stood at Rs. 2353 crs. in Q3 FY19 as

against 1178 cr in previous year. Bank has improved its asset quality with net non performing assets

(NPAs) trimming down to 5.87% of the net advances as against 10.3% in the previous year.

Execution Data

Target (Rs) 103

Stop loss (Rs) 79

Buying Range (Rs) CMP-83

Last Close Price (Rs) 88

% change Weekly 5.42

Weekly Oscillator Direction

13 WMA Downwards

21 WMA Downwards

50 WMA Downwards RSI Sideways Mode MACD Sideways Mode

Bank Of India

1

B P W E A L T H

Sector Outlook Neutral

Stock

BSE code 532149

NSE Symbol BANKINDIA

Bloomberg BOI IN

Reuters BOI.BO

Key Data

Nifty 10,863

52WeekH/L(Rs) 118/73

O/s Shares (Rs mn) 2696.7

Market Cap (Rs bn) 236.5

Face Value (Rs) 10

Average volume

3 months 1,22,75,600

6 months 1,10,66,870

1 year 1,08,00,610

Bullish reversal candlestick at upsloping trend line near lower end of the sideway range

RSI reversed from its oversold zone

2nd Feb ,

Buy


Casting & Forgings

Technical View

The stock has reversed after forming bullish reversal candlestick near down sloping trend line which is a bullish signal for short term trend. Also the recent trough is formed near lower trend line which is drawn parallel to the upper trend line and it has surpassed down sloping trend line with supportive volumes which is a bullish signal for short term trend. RSI has reversed from its oversold zone and has surpassed down sloping trend line which is a bullish signal for short term trend. We recommend to BUY BHARATFORG in the range of 505-490 for the target of 588 with a stop loss of 468 in short term.


Performance in sweet spot as all segments in upward trajectory

Bharat Forge (BFL) is India’s largest forging company with a global manufacturing footprint spread across India, Germany, Sweden, the US and France. The company has strong metallurgical knowl-edge, design and engineering capability and manufacturing prowess. It is one of the few listed Tier-1.5 manufacturers in India focusing on supplying high-end engineered forgings products The company has a total capacity of 625,000 MT as of FY18. In terms of business segments, the CV segment remains a major revenue driver at ~45% while other segments are PV, oil & gas, power, railways, etc. In terms of non-auto share, share of the business has risen to ~43% much ahead of the targeted ~40%.

Margins to remain strong with value addition

BFL is one of the best in terms of operating efficiency and value addition in the whole Indian forgings space. The content enrichment as well business mix change accounting for exports have led to a sharp EBIDTA margin increase reflected in ASP jump from ~INR 1.7 lakh/t in FY12 to ~INR 2.1 lakh/t in FY18. Going ahead, as demand increases and utilisation levels improve, we build in standalone EBITDA margins of 29.5% for FY20E. Consolidated EBITDA margins are expected at 22.5% in FY20E

Execution Data

Target (Rs) 588

Stop loss (Rs) 468

Buying Range (Rs) 505-490




13 WMA Upwards

21 WMA Downwards

50 WMA Downwards RSI Sideways mode MACD Sideways Mode

Bharat Forge Ltd.

2

B P W E A L T H


Stock

BSE code 500493

NSE Symbol BHARATFORG

Bloomberg BHFC IN

Reuters BFRG.BO

Key Data

Nifty 10,863

52WeekH/L(Rs) 785/452

O/s Shares (Rs mn) 465


Face Value (Rs) 2

Average volume

3 months 17,86,130

6 months 15,94,190

1 year 13,87,180

Surpassed down sloping trend line after forming Bullish reversal candlestick earlier

2nd Feb ,

Buy


Housing Finance

Technical View The stock has reversed after completing bullish ABCD harmonic pattern which is bullish signal for medium term trend. Post that stock been trading in parallel rising channel and recently has revered taking from lower end of the channel trend line and is now expected to head higher initially towards upper end of channel trend line. MACD had earlier given a bullish crossover and is now resuming its up move after converging around its average which compliments the bullish view of price. We recom-mend to BUY CANFINHOME in the range of CMP-265 for the target of 340 with a stop loss of 249 in short term.


Stable operating performance despite a challenging environment imputes confidence

For Q3FY19, the company was able to report consistent NIMs at 3.2% on a QoQ basis with a slight improvement in NII growing at 7% YoY. This was commendable as Can Fin was able to hold up in an adverse liquidity environment when many of the company’s peers were struggling to stay afloat due to lack of liquidity and subsequently constraining their ability to lend-marginal cost of borrowings at 8% in Q3FY19 compared to 7.9% in the preceding quarter . We feel that the company’s parentage coupled with strong balance sheet and financials would continue to support operations, specially in such situations. Profitability also remains intact with ROA of 1.9% and ROE of 21.4% for the period and expect the company to maintain profitability going ahead by calibrating growth and focusing in select regions to prevent margin compression.

Focus on Non-metros to drive growth while granular retail focused portfolio provides safety

In the light of intensifying competition from banks and NBFCs specially in the metros and Tier –1 cit-ies the company has been growing its presence in tier 2 and lower markets to strengthen and estab-lish its foothold. Can Fin plans to open 30 branches in non metros clustered around Karnataka and Tamil Nadu and its branch network remains heavily skewed towards non metros with 109 branches and 66 branches in metros as of Q3FY19.Since the portfolio comprises majorly of salaried individuals with small ticket sizes we expect the asset quality to remain stable and not spew any negative sur-prises going ahead.

Execution Data

Target (Rs) 340

Stop loss (Rs) 249





13 WMA Upwards

21 WMA Upwards

50 WMA Downwards RSI Sideways Mode MACD Buy Mode

Can Fin Homes Ltd.

3

B P W E A L T H


Stock

BSE code 511196

NSE Symbol CANFINHOME

Bloomberg CANF IN

Reuters CNFH.BO

Key Data

Nifty 10,863

52WeekH/L(Rs) 557/217



Face Value (Rs) 2

Average volume

3 months 13,81,320

6 months 15,60,490

1 year 13,63,140

RSI has formed positive divergence

Bullish Reversal Candlesticks near support zone

Stock has completed Bullish ABCD Harmonic pat-tern and reversed from lower end of Parallel channel

MACD is resuming its up move after converging around its moving average

2nd Feb ,

Buy


Diversified Execution Data

Target (Rs) 565

Stop Loss (Rs) 460





13 WMA Downwards

21 WMA Downwards

50 WMA Downwards

RSI Sideways Mode

MACD Sideways Mode

Technical View

The stock has formed Morning star a bullish reversal candlestick pattern which suggests the short term trend to turn bullish, also the recent trough coincides with 61.8% retracement level of its inter-mediate up move which increases the reliability of the recent trough to act as strong support for short term trend. RSI has reversed from its oversold zone which is a bullish signal and compliments the bullish view of price. We recommend to BUY GODREJIND in the range of CMP-480 for the target of 565 with a stop loss of 460 in short term.


Diverse business segments reduce dependence on single business

On a consolidated basis, GIL is a conglomerate with interests and leadership positions across diverse areas. Its standalone business is structured into three major business divisions (oleochemicals, estate management, and finance and investments). However, on a consolidated basis, its interests are spread across diverse business areas (including property development, oil palm plantation, animal feeds and agri-inputs, dairy, personal care, household care, and high-end grocery retailing, among others), through its subsidiaries, associate companies and JVs. It enjoys leadership position in oleo-chemical industry with prominent position in various sub segments.

Embedded value of investment portfolio significantly higher than book value

The company has a sizeable market value buffer on its investments (excess of market value over the book value of investments amounted to ~Rs. 29,216 crore as on September 30, 2018). This supports GIL's capital structure and imparts significant liquidity support. The company has a track record of monetising these investments (as reflected in the recent divestment in GAVL) to support its cash flows, a trend expected to continue.

Godrej Industries Ltd.

4

B P W E A L T H

Sector Outlook Positive

Stock

BSE code 500164

NSE Symbol GODREJIND

Bloomberg GDSP IN

Reuters GODI.BO

Key Data

Nifty 10,863

52WeekH/L(Rs) 656/434



Face Value (Rs) 1

Average volume

3 months 3,90,580

6 months 4,72,460

1 year 5,13,600

Morning Star candlestick pattern near 61.8% retracement

2nd Feb ,

Buy

Diversified

Technical View

The stock has reversed after forming bullish reversal candlestick near long-term rising trend line which is drawn connecting significant troughs, also the recent trough coincides with 78.6% retrace-ment levels of its previous advance from 517 to 1300 levels which increases the reliability of the re-cent trough to act as strong support for short term trend. RSI and Bollinger has formed positive diver-gence with price which is bullish signal and compliment bullish view of price. We recommend to BUY GRASIM in the range of CMP-760 for the target of 920 with a stop loss of 720 in short term.


Strong growth outlook for VSF business

Grasim is a pioneer in the viscose staple fibre (VSF) business with an aggregate capacity of 498 ktpa. Grasim’s VSF business commands 9% market share globally. It is continuously focusing on increasing the usage of VSF in India by leveraging its Brand Liva and enriching the product mix through a larger share of specialty fibre. The company is expected to focus on its viscose staple fibre (VSF) business to register growth and expand its market in India. Going ahead, bulk of the growth in the textile business is expected to come from the company’s VSF business in the future. Therefore, strong growth in textile industry, where Grasim is well placed would augur well for the company.

Cement sector up-cycle expected by industry players

Cement companies’ focus on capacity additions and fight for market share gain make us believe that the industry up-cycle is still 1.5-2 years away. The urge to gain market share has put pressure on cement prices since CY18. Cement industry is expected to commission ~52mt of new capacities be-tween FY19E and FY21E. Grasim Industries being holding company of India's largest cement player - Ultratech cement, is poised to benefit from the expected up-cycle.

Execution Data

Target (Rs) 920

Stop loss (Rs) 720





13 WMA Upwards

21 WMA Downwards

50 WMA Downwards

RSI Buy Mode

MACD Buy Mode

Grasim Industries Ltd.

5

B P W E A L T H


Stock

BSE code 500300

NSE Symbol GRASIM

Bloomberg GRASIM IN

Reuters GRAS.BO

Key Data

Nifty 10,863

52WeekH/L(Rs) 1,164/688



Face Value (Rs) 2

Average volume

3 months 13,86,980

6 months 14,50,280

1 year 12,50,160


Reversed from cluster of support

RSI has formed positive divergence with price

2nd Feb ,

Buy

Aviation

Technical View

The stock has been taking support at 78.6% retracement levels of its previous advance from 163 to 367 and near the same juncture stock has formed multiple bullish reversal candlestick pattern which indicates recent trough to act as strong support and short term trend to turn bullish. MACD had earlier given a bullish crossover and is now resuming its up move after converging around its average which compliments the bullish view of price. We recommend to BUY JETAIRWAYS in the range of CMP-215 for the target of 285 with a stop loss of 205 in short term.


Approval of restructuring plans to shot in the arm for liquidity and can kick-start growth

Based on this plan, we expect jet airways to generate positive cash flow of INR3bn over FY19- 21 versus our previous estimate of negative cash flow of INR28.7bn. Interest coverage will improve to 1.2/2.2x in FY20E/FY21E versus our earlier estimate of 0.9/1.6x owing to lower interest outgo on account of the reduction in debt as well as borrowing cost (down 50bps due to repayment of costlier debt). Z-score (an indicator of bankruptcy risk) for FY20 will thus improve to 2.35 from 0.91. Factoring in FY20/FY21E oil prices at USD65/75/bbl and PAX growth of 2%/5%, we estimate jet airways to generate positive operating cash flow of INR27bn over the next two years. We, therefore, believe the company will scale up its fleet capacity, which has been stagnant (100–110 planes) since 2012. An uptick in PAX growth will drive a significant re-rating of the stock—5% change in PAX growth will lead to 17% earnings revision.

To cut down on loss-making routes and realign capacity

Given the heightened competition in the domestic market, Jet airways plans to rework its network and align capacity towards less competitive routes, especially in the international market – in Q2, domestic capacity grew by only ~1% whereas international capacity was up ~11%. This is evident in the improvement in the pricing scenario in the international segment, which witnessed improvement in RASK while the domestic market continued to face more pressure.

Execution Data

Target (Rs) 285

Stop loss (Rs) 205



% change Daily 1.02


13 WMA Downwards

21 WMA Downwards

50 WMA Downwards

RSI Sideways Mode

MACD Buy Mode

Jet Airways (India) Ltd.

6

B P W E A L T H

Sector Outlook Positive

Stock

BSE code 532617

NSE Symbol JETAIRWAYS

Bloomberg JETIN IN

Reuters JET.BO

Key Data

Nifty 10,863

52WeekH/L(Rs) 751/163

O/s Shares (Rs mn) 113.6


Face Value (Rs) 10

Average volume

3 months 8,26,13,810

6 months 15,31,02,870

1 year 21,01,09,000


Support at rising trend line

Resuming up move after taking support at down sloping trend line

MACD is resuming its up move after converging around its moving average

Bullish reversal candlestick at 78.6% retracement

2nd Feb ,

Buy


Steel and Power

Technical View

The stock has given breakout from Falling wedge a bullish reversal price pattern which suggests the

short term trend to turn bullish. Also the recent trough coincides with the lower trend line of the down

sloping channel which increases the reliability of the recent trough to act as strong support for me-

dium term trend. MACD has given a bullish crossover after long time which is a bullish signal for short

term trend. We recommend to BUY JINDALSTEL in the range of 153-147 for the target of 184 with a

stop loss of 138 in short term.


Downstream capacity ramp up to improve margins

The 1.2mtpa plate mill has been operating at utilisation of ~85% over the past two months. Besides,

the plates being produced are high-tensile and a premium variant that typically fetches better mar-

gins. We also saw the bar rod mill (BRM) operating at rated capacity. Furthermore, a spurt in logistics

is evident vis-a-vis our previous two visits, indicating robust sales. We expect the ramp-up of down-

stream capacity to improve margins.

Going forward optimum utilization of Angul plant to improve efficiency

Angul achieving 5mtpa production through commencement of production from 1.8mtpa DRI plant by

mid March and slated to achieve 11000tpd by end of this financial year. Post commissioning, the

management expects to increase production from 5.2 MT to 6.5MT in FY20

Execution Data

Target (Rs) 184

Stop loss (Rs) 138

Buying Range (Rs) 153-147




13 WMA Upwards

21 WMA Upwards

50 WMA Upwards RSI Sideways Mode MACD Buy Mode

Jindal Steel & Power Ltd.

7

B P W E A L T H


Stock

BSE code 532286

NSE Symbol JINDALSTEL

Bloomberg JSP IN

Reuters JNSP.BO

Key Data

Nifty 10,863

52WeekH/L(Rs) 265/123



Face Value (Rs) 1

Average volume

3 months 1,30,46,800

6 months 1,26,88,830

1 year 1,13,02,350

Breakout from falling Wedge price pattern after taking support at lower trend line of channel

MACD has given positive crossover after good amount of time

Research Desk Tel: +91 22 61596406

Disclaimer Appendix

Institutional Sales Desk Tel: +91 22 61596403/04/05

Analyst (s) holding in the Stock : Nil

Analyst (s) Certification:

We analysts and the authors of this report, hereby certify that all of the views expressed in this research report accurately reflect our per-sonal views about any and all of the subject issuer (s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation (s) or view (s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the BP Equities Pvt. Ltd. (Institutional Equities).

General Disclaimer

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