Diwali Picks, 2019 - Peerless Sec · Diwali Picks, 2019 Diwali Picks, 2019 Fundamental Outlook Berger Paints is the second largest decorative paint company. Company has seven manufacturing

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Diwali Picks, 2019Diwali Picks, 2019Diwali Picks, 2019Diwali Picks, 2019



MUHARAT PICKS SAMVAT 2076 October October October October 11118888, 2019, 2019, 2019, 2019

StockStockStockStock SectorSectorSectorSector CMP (Rs)CMP (Rs)CMP (Rs)CMP (Rs) Target (Rs)Target (Rs)Target (Rs)Target (Rs) RatingRatingRatingRating Potential Potential Potential Potential

UpsideUpsideUpsideUpside

Berger Paints Decorative Paints 490 550 ACCUMULATE 12%

Colpal Consumer Staples 1536 1700 ACCUMULATE 11%

SBI Life Insurance - Life 904 990 ACCUMULATE 10%

ICICI Bank Private Banking 437 485 ACCUMULATE 11%

Cipla Pharma 444 500 ACCUMULATE 13%

Note: All price target for next 12 months period CMP as on October 18, 2019 around 10.30 IST.



Performance of Peerless Diwali Picks 2018

StockStockStockStock

RecommenRecommenRecommenRecommended price ded price ded price ded price

(Rs)(Rs)(Rs)(Rs) Target (Rs)Target (Rs)Target (Rs)Target (Rs) RecommeRecommeRecommeRecommendationndationndationndation RemarksRemarksRemarksRemarks

Target Achieved Target Achieved Target Achieved Target Achieved

DateDateDateDate

ReturnReturnReturnReturn

(%)(%)(%)(%)

TCS 1936 2200 ACCUMULATE Target achieved 30/04/19 13.63%

ICICI Bank 354 440 BUY Target achieved 27/06/19 24.29%

Berger Paints 292 330 ACCUMULATE Target achieved 19/12/2018 13%

Cipla 615 700 ACCUMULATE

Dabur India 371 470 BUY Target achieved 20/09/2019 26.68%

Tata Global Beverages 218 280 BUY Target achieved 27/09/2019 28.44%

Return calculated from recommended levels as on November 01, 2018



� Fundamental Outlook

� Berger Paints is the second largest decorative paint company. Company

has seven manufacturing facilities spread across India, besides four

overseas manufacturing facilities. It has a strong presence in East and

North India, which accounts for 60% of its distribution network while

South & West India accounts 40% of distribution network. Company

derives around 80% of revenue from decorative paints and the rest from

industrial paints of which Automotives accounts for 8%, powder coating

accounts for 2% and other industries accounts for 10%.

� 1QFY20 revenue was up 15.7% YoY (16.6% QoQ) at INR 17.16bn

aided by strong performance in domestic decorative segment due to price

increases. Domestic business grew 15.5% YoY led by robust top line

growth in their protective coatings business

� Management guided that it will continue to focus on Tier 2 and Tier 3

towns; and that the regional demand trend is in line with previous

quarters, while rural grew a tad above the urban market. Demand in tier-

1 and tier-2 cities has strengthened for the past 2 quarters

� We are positive on the long term fundamentals of the domestic

decorative business on account of Housing for all, Swachh Bharat

Abhiyan and premiumisation

� Theme & Outlook

� The stock price has been in strong momentum as the stock price rallied

sharply from Rs 400 to 484 in under 2 months. The stock has been in

bullish trend for last few years as it is consistently moving up making

higher top higher bottom formation in weekly chart. The stock price also

has been is steady uptrend following upward parallel channel.

� The recent sharp upmove has been with very strong volumes and

declines accompanied with much lower volumes and this henceforth any

declines provides good opportunity for the stock price to accumulate.

Technical indicator in weekly chart of positive DI crossover along with

ADX staying above 25 and gradually moving up shows strength in

medium to long term.

� The stock will keep its uptrend intact and head higher given the technical

strength and uptrend intact in long term. We recommend

‘ACCUMULATE’ for the stock for price target of Rs 550 in time frame

of next 12 months.

N

Stock Picks

Berger Paints Ltd. – ACCUMULATE

Sector Decorative

Paints

Current Price (Rs) 490

Market Cap. (Rs) 47,960 cr.

52 week High/Low 495/260

Avg. Volume (3 Mo.) 1.36million

Beta 1.07

Current PE (TTM) 86

Promoter’s

Holding(Jun-19) 75%

Target- Rs 550



Colgate Pamolive(India) Ltd. - ACCUMULATE

Sector Consumer

Staples


Market Cap. (Rs) 41967 cr.

52 weeks High/Low 1589/1070

Avg. Vol. (3 Mo.) 1.06million

Beta 0.50

Current PE (TTM) 56

Promoter’s

Holding(Jun-19) 51%


� Q1FY20 revenue grew 4.1% YoY to Rs. 1,076cr (-6.2% QoQ), aided by

domestic sales growth of around 6% YoY. EBITDA margin improved

120bps YoY to 29.3%, on account of revenue growth and lower costs of

purchases. Adjusted EPS rose to Rs. 6.2 from Rs. 5.7 in Q1FY19. The

company continues to invest in advertising (+5.4% YoY to Rs. 151cr) to

further strengthen its brand value.

� Higher investment in advertising and brand-building activities expected

to help the company sustain its No 1 position in the oral care market and

beat competition. The company has strong presence in e-commerce,

such as Amazon.in, BigBasket, Amazon Prime and Flipkart. The e-

commerce business grew substantially (~18x) during FY15-18.

� COLPAL continues to diversify its portfolio by launching new products,

e.g. Colgate Strong Teeth, Colgate Zing Zang Neem and Colgate Super

Flexi Virat Pack. It focuses on strengthening its brand value by making

higher investments in advertising and taking new initiatives such as

‘Keep India smiling’. It is likely to experience sales growth stabilization

in rural markets; it garners 45%+ of its revenue from these markets.

� Theme & Outlook

� The stock price of Colpal has been under steady and gradual upmove and

in its upmove it has been moving up through ladder step type formation.

The stock price has been making beautiful formation of U pattern and

taking time with base building formation and finally giving breakout of

the pattern. Every time the breakout happened, the stock makes higher

top higher bottom formation and previous high becomes support.

� Continuous higher levels of U pattern breakout with higher top higher

bottom formation is a classic trend for the stock in last six year.

Henceforth we find immense technical strength in the pattern of the

stock.

� Technical indictors ADX with positive Directional Indictor shows

strength in weekly chart and MACD remains in positive zone indicating

strength in medium to long term.

� The stock price is expected to touch its U pattern target of Rs 1700 given

the formation. We are bullish in the stock and we recommend

‘ACCUMULATE’ with target price of Rs 1700 in time frame of next 12

months.

Target- Rs 1700



SBI Life Insurance Company Ltd.- ACCUMULATE

Sector Insurance - Life


Market Cap. (Rs) 90,485 cr.


Avg. Vol. (3 Mo.) 893,411

Beta -0.22

Current PE (TTM) 62

Promoter’s Holding

( Sept-19) 62.80%


� SBILIFE continues to deliver strong performance with NBP(New

Business Profit Margin) growth of 52.7%. Total APE(Annual Premium

Equivalent) grew a strong 41.7% YoY, ahead of pvt. industry growth of

21.9%. Growth was strong in both group and individual business at

+100.0/36.9% YoY. Gross written premium grew 40.7% YoY, driven

by new business premium (NBP) growth of 51.4% in Q1FY20. Assets

under management (AUM) increased 22% YoY to Rs. 146,950cr.

� Value of new business (VONB), which measures the profitability of

new business underwritten during the period, grew 49% YoY to Rs

3,300cr. VONB margin, which is computed as the ratio of VONB to the

amount of new business underwritten in the period, increased 90bps to

17.9%

� Tie-up with Syndicate Bank expanded to around 6,000 branches, and

SBI Life has tied-up with Indian Bank as well. The company covered

2.4cr lives (~4.0% YoY) as of Q1FY20. It maintained its leadership

position in individual rated new business premium, with a growth of

35%, while private industry and overall industry have grown by 24%

and 14% respectively

� Given the strong distribution footprint of its parent SBI (24k+

branches), improving protection share (1QFY20: 11.2%), lowest

operating cost ratios (11.2%), improving margins and tailwinds from

financialisation of savings, we expect SBILIFE to deliver strong

numbers going ahead.

� Theme & Outlook

� The stock price was in medium term consolidation zone since Jan2018

to August 2019 and in this period the stock remained in corrective

phase and then made a W pattern formation which took 1 year to

complete. Thereafter the stock price broke out of this pattern and

consistently is holding above this pattern for last few months. This

shows bull strength of the stock. Breakout of W pattern on upside

suggest that the stock price has just started fresh uptrend after remaining

in consolidation.

� The stock also is strongly hold its positive moving average crossover of

5wema, 10wema and 20wema which has given positive crossover in

March 2019 and continuing to maintain momentum in its upswing.

� The stock price will move higher and W pattern target on the upside

will be target of the upside which comes to Rs 990. We maintain

‘ACCUMULATE’ in the stock for target price of Rs 900 in time frame

of next 12 months.

Target – Rs 990



� Outlook

� ICICI Bank is India’s largest private sector bank with a network of 4,882

branches and 15,101 ATMs across India. Gross loans grew 17.9% YoY to

Rs. 5,924cr in Q12019, driven by home loans (up 19.1% YoY) and rural

loans (up 17.1% YoY). Term deposits increased 33.7% YoY, reflecting

management’s focus towards the category.

� Net profit surged to Rs. 1,908cr (vs. Rs. 120cr loss in Q12019) as

provisions declined 41.5% YoY. Net interest margin gained 42bps to

remain at 3.6% (vs. 3.2% in Q12019), supported by a strong uptake in net

interest income (up 26.8% YoY). Further, total income rose 15.2% YoY,

driven by interest income (up 22.1% YoY), partly offset by decline in

other income (down 11.1% YoY).

� Loan growth in Retail Leading will grow faster as company is focusing on

Resale flat financing and used car financing after marginal slowdown in

retail sales. On margin front, it is devising strategies to deal with external

benchmarking regime. Some of the options the bank has been considering

includes linking high-value deposits to an external benchmark, shortening

the liability profile by focusing on the 1-year bucket as the bank expects

hedging tools to emerge.

� Bank’s digital initiative ‘InstaBIZ’ will support the growth of MSMEs and

selfemployed customers. Further, its iMobile app could help the company

cross-sell products.

� In Q1FY20, ICICI reported significant improvement in profitability with

good asset quality. We believe that the NPA additions will be significantly

lower, increasing profits in the coming quarters.

Theme & Outlook

� The stock in long term has given a classic long term breakout after it

formed a double top formation in year 2015 and then fell from same point

of Rs 360 in 2018. Thereafter it formed a bullish pattern breakout of Cup

& Handle pattern formation. The price broke out of this pattern above Rs

360 in year 2019 and now moving higher with formation of higher top

higher bottom formation.

� Moreover weekly RSI has been taking support around its 30 level and

moving up. Currently RSI is giving good opportunity to enter as price has

retraced from short term high levels of Rs 458.

� The stock price given the pattern breakout is likely to touch its Cup &

Handle pattern target of Rs 485. We recommend ‘BUY’ in ICICI Bank

and our target price is Rs 485 in time frame of next 12 months.

Target – Rs 485

ICICI Bank Ltd. - ACCUMULATE

Sector Private

Banking


Market Cap. (Rs) 2,82,232 cr.


Avg. Vol. (3 Mo.) 20million

Beta 1.92

B/BV 1.8x

Promoter’s Holding 0%



Cipla Ltd. - ACCUMULATE

Sector Pharma


Market Cap. (Rs) 35,725 crore


Avg. Vol. (3 Mo.) 2.4 million

Beta 0.47

Current PE (TTM) 23

Promoter’s

Holding(Jun-19) 37.60%

Target – Rs 500

Theme & Outlook

� Cipla reported strong operational numbers in Q1FY2020. Operating

profit grew by a strong 24.5% y-o-y to Rs. 904.6 crore. OPM

improved by 424 bps y-o-y to 22.7% (vs. our expectation of 21.5%).

Gross margin improved significantly by 630 bps to 69.3% due to a

limited competition product opportunity.

� Sales growth remained tepid at 1.3% y-o-y to Rs. 3,989 crore.

Adjusted profit for the quarter reported a strong growth of 21% y-o-

y to Rs 470 .7 crore. During the quarter, US business witnessed a

whopping 67% y-o-y jump on account of limited competition

product gSensipar (which shall normalise from Q2FY2020 due to

increased competition).

� We like Cipla for its strong India franchise, rich US pipeline and low

risk of price erosion in the US market (due to a benign base and low

concentration). Operating leverage in the US business will be a key

margin driver in the next two years. So far, Cipla has had a good

compliance track record with the USFDA.

� Theme & Outlook

� The stock had come to its long term support zone of Rs 400-380

from where it rallied in year 2014. However technical pattern

developed is strong where RSI went below 30 twice and rebounded

back above 30. Stochastic also has given positive divergence just

like year 2016 and when such pattern happens in both these

indicators, the stock ends its corrective phase and starts upmove for

medium term.

� The stock price also has corrected and came to its 61.8% Fibonacci

retracement level from upmove started in year 2008 bottom to year

2015 life time high of range of Rs 750 from Rs 150. Given the

technical pattern and indicators in weekly chart shown, the stock

price shows that it has completed its correction over long term and

poised to move up.

� The upside rally of the stock is above its 30wema under this

technical condition. However we project minimum price target of Rs

500 in time frame of next 12 months.



Disclaimer

RATING PARAMETER

BUY We expect the stock to deliver more than 15% returns over the next 12 months

ACCUMULATE We expect the stock to deliver 6% - 15% returns over the next 12 months

REDUCE We expect the stock to deliver 0% - 5% returns over the next 12 months

SELL We expect the stock to deliver negative returns over the next 12 months NOTE Target prices are for a period of 12-month perspective. Returns stated in the rating

parameter are for our internal benchmark.

TECHNICAL CALL RATING PARAMETER

BUY A condition that indicates a good time to buy a stock. The exact circumstances of the signal will be determined by the indicator that

an analyst is using.

SELL A condition that indicates a good time to sell a stock. The exact circumstances of the signal will be determined by the indicator that

an analyst is using.

STOP LOSS An instruction to the broker to buy or sell stock when it trades beyond a specified price. They serve to either protect your profits or

limit your losses.

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Documents

Diwali Picks, 2019 - Peerless Sec · Diwali Picks, 2019 Diwali Picks, 2019 Fundamental Outlook Berger Paints is the second largest decorative paint company. Company has seven manufacturing