Gold Silver Reports — Large-Cap Stocks You Can Look at After the Fall — The 1.7% fall in the benchmark Nifty on Monday presents a good opportunity for investors to look at largesized companies which have fundamentally sound business models and high earnings visibility. ET Intelligence Group compiles a list of five such large-sized companies where investors can look to invest:
Larsen & Toubro
Larsen & Toubro (L&T) plans to focus only on its key businesses and has announced that it would not enter new business verticals. The com pany would look at emerging opportunities in business verticals such as defence, nuke and smart cities. It aims to grow its revenues by compounded annual growth rate of 1215% in the next five years by executing its order backlog worth $37 billion. The Company also plans to cut losses of its other business verticals such as shipping and nuke forging. Having an asset-light strategy of divesting stakes in group companies will also help it to trim debt.
Earnings’ visibility of BPCL is expected to improve with the government’s decision to reduce oil subsidies, besides the robust demand for diesel and petrol. Of the OMCs, BPCL’s earnings have been the most resilient. For the past three years, BPCL has reported ROEs of over 20% (31% in FY16), and for the past five years, its ROEs have been higher than its peers HPIOC -thus BPCL has traded at premiums valuations.
State Bank of India
Improving asset quality , strong current account savings account (CASA) growth and merger of five subsidiary banks are a few key factors which would drive the profitability of India’s largest lender State Bank of India. The bank is likely to benefit from its strong capital posi tion (Tier-1 of more than 11%), liability franchise (more than 40% CASA), underwriting (lowest corporate book stress) and high value accretion in subsidiaries (SBI Life).
LIC Housing Finance
LICHF continues to benefit from the declining interest rates. As in the case of its peers, diversification to non-core segments is driving its loan growth. It is likely to continue with its steady business performance in the medium term, although the retail home loan segment remains muted. LICHF’s 25% net interest income growth was largely supported by 20 bps YoY net interest margin expansion to 2.6% even as its loan growth was moderate at 15%.
Adani Ports & SEZ
Increasing container traffic, which is expected to be in the range of 1015%, and improving margins and getting back the money given as loans to group companies augur well for Adani Ports and Special Economic Zone in the coming quarters. — Neal Bhai Reports