INSUBCONTINENT EXCLUSIVE:
NEW DELHI: Football fever is gripping the investment world as much as soccer fans, with the Fifa World Cup 2018 kicking off
Globally, brokerages are making projections for potential World Cup winners, just like they do them for stock prices and corporate
earnings.
So involved is the financial world with this game of brawn that one analysis found as much one-third drop in equity trading
volumes in select countries during this four-yearly extravaganza.
On Dalal Street, several renowned faces are either already in Russia or
heading there to watch all the action live.
And then there are analysts and brokerages which are trying to draw simile between soccer and
World Cup.
IIFL Institutional Equities has gone one step ahead to pick the equivalent of a World Cup soccer team from among the listed
stocks, comprising the traditional strikers, defenders and goalkeeper.
The brokerage assigned the job of the coach to Prime Minister
Narendra Modi.
Ayon Mukhopadhyay of IIFL Institutional Equities said he was tempted to put in four forwards or go the way of the 1970’s
Dutch Total Football format for team formation.
However, he had to settle for a more orthodox approach
The stocks picked for the team do have a few substitutes, if conditions change, he said in a note.
Here are stocks the brokerage picked for
its Dream Team:3 Forwards:Mukhopadhyay defined them as
alpha generators; cyclical, high rewarding stocks with goal scoring appetite,
His picks are:-
Biocon: Having established its credentials in global leagues now with Mylan tieup, this sharpshooter is my centre forward
Expected to clear its ‘dope tests’ for its biosimilars approvals, revenues can grow 6 times in next four years
Mukhopadhyay says he would not be surprised if this ends up with the ‘Golden Boot’.
Yes Bank: The focus on scoring at all cost at times
has led to RBI handing it the red card
But shedding the bad boy image by aligning its stressed asset recognition methods and extending the term to Rana Kapoor, Yes Bank is more
No matter what they do off the pitch, on ground action is what matters, and the stock is a winner on that count all the way
Still inexpensive, with strong earnings trajectory, Yes Bank will find the back of the net consistently.
Larsen Toubro: The old war horse
is getting fitter by realigning its business and shedding the non-core flab
Valuations at historical averages and with cyclical tailwinds and focus on core EPC business, this ambidextrous striker can get you off the
mark very fast in an early uptick of the investment cycle and expand the lead in the more competitive late capex cycle.
Midfield: They have
‘slightly attacking’ characteristics
They would still be high earners in a cyclical environment but could drop back and keep possession to allow consolidation when need to be
less adventurous, Mukhopadhyay
said.HDFC Bank: The bellwether of the financial markets is the superstar
It is also the captain of team, who can effortlessly thrust forward with scale, organisational knowledge and cost competitiveness to drive
growth and maintain profitability
As profitability is driven by both productivity and efficiency improvements, earnings growth will sustain and so will its tag as one of the
Its ADR avatar commands an even higher wage in the Major League in US.
Tata Motors: Another old hand, which is available at a decadal low
But given the new launches of JLR and Indian business looking up (with CV improvement), things should turn around and it can be the
attacking midfield option
Given the double dividend, I will play the DVR avatar.
Teamlease: A rookie, which has had a phenomenal run since its debut two seasons back
But has it peaked too soon Not really, it's well-positioned to mature to legendary status as it makes multi-year earnings growth underpinned
by low penetration of temp staffing in India and market share gains from a vast unorganized sector.
Defence: These are the pillars of the
Nothing can sneak past them
Be it on sunny days, or torrential storms, these will give you the comfort.Hindustan Unilever: A consumer stock as defence is an old
cliché, but this beast guarding the northern wall is India’s largest FMCG company
Hours on the training ground with manic focus on costs have led to this veteran ensuring an increase in operating margins for 7 seasons now
It has played the offside trap of GST to its advantage and long term drivers include market share gains with premiumisation
opportunities.
Infosys: Having forayed across the pitch in various roles under countless mentors (with ugly exits) and been sidelined to the
wilderness, the prodigal son of India IT returns with a rejuvenated but conformist mindset
With focus on scaling the digital business and use of AI/Automation to modernise the clients’ core and accelerating large deals and
improving win rate, this refreshed new look augers well
Also tackling down the nemesis of rising USD-INR, a (still 20 per cent cheaper than TCS) new look Infy is the cornerstone of my
defence.
Motherson Sumi: The three-pronged strength across its 3 lines with mid-to-high-teens earnings growth in standalone (led by volume
and value) and SMR (led by market share gain, slight margin expansion) brings a steady head to the backline
High endurance training is also leading to significant Ebitda margin expansion for SMP/PKC and would result in multi-fold rise in earnings
of these two subsidiaries.
Bajaj Finance: Earnings keep compounding for this stallion which is still shy of considering itself a big boy
Strong cross selling capabilities making core product an acquisition tool, long runway in underpenetrated market, strong management team,
well managed execution and scalable businesses will keep overall growth higher than peers
A rock in the defence with clear visibility on earnings.
The goalkeeper: A safe no-frills option to do the job.PowerGrid: Choosing from the
PSU Club maybe unpopular, but given its regulated ROE model, and strong earnings visibility through FY21, PGCIL is safe as a house
A strong balance sheet and impeccable track record of clean sheets give it stability to stop any surprise attack of private competition
Also, its low risk model makes it best positioned to stop the penalties of global volatilities of liquidity crunch/portfolio reallocation
Very cheap (10x PE with 3% yield ) price gives it the gloves.
And finally the coachPM Narendra Modi
A year back it seemed his position was sealed for a long term
But recent events at home have jolted his long term hopes a bit
Still loved by players, but popularity is dwindling
Need his team to fire to get back the confidence.
If you want a few more stock ideas, here are your substitutes:
Equitas: A forward with
immense potential but seems to be less communicative on its role of MFI, SFB or NBFC
Also now shrugging off its provisioning injuries it should be well fit to ride the operating leverage to gain superior RoEs
A bit more faith shown by investors should see this kid take star status.
Ujjivan: Another kid to have graduated from the MFI academy but
growing faster than Equitas
Very tempting option if you do not trust the old legs of LT to score.
Asian Paints: Another expensive defender but worth its price tag with
unmatched distribution network and leadership position
Proven ability to defend margins with price hikes makes it a first change if the formation needs to change to 5-3-2.
Zee: An attacking
midfield option, which will benefit from sharp recovery in ad spending in India.
