Long term Ideas

Here are some of my long term stock ideas across sectors which I feel should reward investors with a decent returns.

Banking & Financial Services: Axis Bank, Yes Bank and HDFC

Axis Bank and Yes Bank are mainly focussed on the SME space though the retail share will increase going forward. The management of both the banks are excellent. ROE of above 20% and ROA above 1.3%.  HDFC is a play on mortgages along with brokerage, AMC, Life insurance, General Insurance. The value unlocking process should start by the end of this financial year.

Retail : Pantaloon Retail

Pantaloon is a consumer play. It operates Big Bazaar, Central, Pantaloon, Food Bazaar, Brand Factory, EZone,   Electronics Bazaar , Collection , Furniture Bazaar , Home Town. Its subsidiaries include Future Capital, Future Bazaar, Future Media, Future Generalli (Life & General Insurance), Future Brands, Future Logistics and Future Knowledge Services.  It has entered into JV with Staples for Future Staples, Liberty, Blue Foods, Talwalkars. It is targetting a turnover of Rs.30,000 crs by FY11. Many of its subsidiaries will be listed through IPO in the next 2 years.

Engineering & Infrastructure: Voltas and Punj Llyod

Voltas, a Tata group company, is a leading player in India’s Heating, Ventilation and Air Conditioning (HVAC) market, having a ~28% market share in electromechanical projects. The company offers engineering solutions for a wide spectrum of industries in areas such as HVAC, refrigeration, electromechanical projects, textile machinery, machine tools, mining and construction equipment, materials-handling vehicles, water management, building management systems, indoor air quality and chemicals. Voltas have a strong presence in Middle-East and 17% market share in the retail AC market next to LG. Company has given a guidance of Rs10,000 crore turnover and NPM at 10% by FY11.

Punj Lloyd is one of the largest engineering and construction (E&C) companies in India offering integrated design, engineering, procurement, construction and project management services, mainly to the energy and infrastructure segment. The hydrocarbon sector is the thrust area for the company, which provides a whole gamut of product offerings like E&C services for onshore and offshore pipelines, gas gathering systems, oil & gas tanks and terminals and process facilities for refineries. The company operates in numerous geographies and has strong presence in West Asia, Asia Pacific, Africa and South Asia. Overseas business contributed almost 65-70 per cent of FY 2007 consolidated revenues.Punj Lloyd appears poised to ride on the strong growth in the hydrocarbon sector where proposed capex is pegged at Rs 2,49,800 crore over the next four years.

Media : Zee News

Zee News is a play on regional channels. Zee News operates news channels, regional GECs and regional movie channels (Zee Talkies and plan to launch Bengali movie channel). Zee Marathi is a leader in the Marathi regional GEC segment with a 51% market share. Zee Talkies has a complete monopoly. Company aims to grow at twice the industry rate.

Beverages: Champagne Indage

Champagne Indage is a leader in the Indian wine market with over 65% market share. Indian wine market would continue to grow at 30-35% for the next few years. Company plans to open 1000 outlets in the next three years. Its subsidiary Seabuckthorn Indage operates the “Leh Berry” juices. Company has completed a string of acquisitions which includes Australian Vintage’s Loxton winery for 60 million Australian dollars, VineCrest and UK’s Darlington Wine for distribution. It is looking to acquire wineries in South Africa. With these acquisitions, capacity will increase to 200 million litres.

Pharmaceuticals: Glenmark and Divi’s Labs

Glenmark is a research driven company. It’s vision is to be a Global end-to-end specialty company. Company projects a revenues of $504mn (CAGR of 29%) and profit of $157mn (CAGR of 30%) by FY10 through organic growth only assuming exchange rate of ~40.28 INR/USD for FY08 and ~ 40 INR/USD for FY09 and FY10. Company plans to enter US through acquisition. This acquisition are excluded from projections. Glenmark has usually exceeded its projections. I wouldn’t be surprised with Net Profit CAGR of 35% or more.

Divi’s Labs is basically a play on Contract research and manufacturing services (CRAMS). It is a leader in this space. A recent KPMG-CII report on the Indian pharma industry identifies CRAMS as the industry’s key growth driver. Outsourced manufacturing activities are currently estimated at $20 billion and are projected to increase to $31 billion by 2010. The Indian CRAMS market is expected to grow at 25-30% over the next few years, and domestic companies could gain 35-40% of the global CRAMS market. Divi’s EPS is expected to grow at a CAGR of 40% with EBIDTA margin and ROE around 40%.

Textiles: Bombay Rayon Fashions Ltd (BRFL)

BRFL operates in two segments i.e. fabrics and garments. During Q3FY08, Garments share was 45% which is expected to increase to over 50% in FY09 with the increase in garment capacities. Company is setting up a new facility, which will increase its fabric manufacturing capacity by 4.3 times to 235 million metres per annum and double its garment manufacturing capacity to 200,000 pieces per day by Q3FY09. BRFL is well positioned in the high end premium apparel segment versus peers given its in-house designing capabilities, superior margins and higher earnings visibility (EPS CAGR of 65% through FY08-10E). US contribution to the total sales is just 15% thus impact of rising rupee is insignificant and slightly affected if US goes into recession. ROE and ROCE’s will improve going forward.

Technology: Tanla Solution and 3i Infotech

Tanla operates in a niche space of telecom aggregation. 3i Infotech has a unique business model. It is a one stop shop for BFSI products and services. 3i Infotech EPS is expected to grow at a CAGR of 35+ for the next few years. 3i provides growth with visibility.

 As for Oil & Gas and other commodities, I would refrain from any Ideas as it is outside my competencies. Better stay invested in RIL is all i can say !!

 

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4 responses to “Long term Ideas

  1. Again an informative post.
    It would help if you could enlighten us a little more about any revenue guidance for Champagne Indage, or any relevant item?

  2. Champagne Indage did a string of global acquisitions in the past two-three months so the revenues will start trickling in from this quarter. Assuming no equity dilution, i expect the company to report an EPS of 45 for FY09, 50% growth over last year. Company aims to be among the top 10 wine producers in the world in 3 years.

  3. Champagne has done an EPS of Rs 6 in first two quarters.
    Are you still betting on Rs 39 in the last two quarters?
    The company interest cover is hardly inspiring.
    However, FII selling seems overdone in this case.

  4. Champagne’s growth is back-ended. My expectation of 45 EPS was based on by consolidating Loxton’s acquisition. Since that acquisition is postponed till April 2009, EPS might end up at the level of last year.

    Read this article for more:
    http://www.livemint.com/2008/11/04004229/Indage-eyes-multiple-takeovers.html?d=1

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