top 10 picks for 2020 - smc trade online€¦ · f bajaj auto is a global two-wheeler and...

“Price is what you pay. Value is what you get.”

- Warren Buffett

TOP PICKS FOR 2020

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SR.NO. CO_NAME SECTOR CLOSEPRICE* TARGET(RS.) UPSIDEPOTENTIAL(%)

*CMPason26thDecember,2019

FROMSMCRESEARCHDESK

Backathome,withamammothrecapitalisationandconsolidationdrive,bankingsectorproblemshavebeenaddressedtosomeextent.Recent

resolutionsofsomebigNCLTcaseshaveraisedhopesofsomemoreresolutionhappeningsinthenearfuture.Thereisanexpectationthattheauto

sector,basicallythetwo-wheelerandthree-wheelerwilldowellin2020.Theautomobileindustryhasalwaysbeencyclical.Rabiseasonisexpected

tobegoodthisyearasreservoirpositionsarehealthy,whichinturnisexpectedtorevivetwowheelerssalesastheyrelyonruralareasfornearly

60%oftheirsales.BesidestheentertainmentsectorhasasignificantopportunitygivenIndia`syoungdemographics.Government’sspeedof

spendingoninfrastructureandrailwaysisathemewhichisexpectedtoplayoutwellgoingnextyear.Moreover,domesticfocusedpharmaceutical

companiesareexpectedtodowellgiventheissuesthatarekeeponcomingfromoverseasregulatorybodies.Focusonthegreenenergyespecially

whenoilisonboilisanotherinvestmentthemethatwillremainfavouritesamonginvestors.

arketshavebeenmorevolatileovertheyearsand2019wasnodifferent,withmanymarketspostingsteadyrises.IndianMarkettooMpostedthumping&record-settingruns.BothNiftyandSensexwereupby13and15percentrespectivelyalbeitmidcapandsmall-cap

indexdidnotdowell,witnessedafallof4percentand9percentrespectively.Globaltraderift,liquidityworries,slowereconomic

growth,corporatetaxcut,andseriesofratecutsbytheReserveBankofIndia(RBI)areamongthefewthatguidedthemarketsthroughtheyear

2019.Investorswouldbeeyeingtheannouncementintheunionbudget.Thereisanexpectationthatpolicymeasuresannouncedsofarandother

measureswhichareexpectedtoannounceinupcomingbudgetmayreverseconsumptionandeconomicslowdown.AlsotheRBI’sreductionin

ratesisexpectedtosupporttheeconomy.Talkingabouttheglobaleconomy,thereishopeofaglobalgrowthpickupastradetensionshavelessened

andcontinuityofaccommodativemonetarypoliciesacrosstheglobeisexpectedtopay-offdividendin2020.

Atthisjuncture,itisadvisedtoinvestorstokeeponbookingprofitsandremaininvestedinthemarket.HappyInvesting

TOPPICKS-2020

1

6 InoxLeisure Entertainment 375.60 433 15

1 ICICIBank Banks 539.00 653 21

4 GujaratGas GasDistribution 223.95 262 17

3 BankofBaroda Banks 99.00 120 21

5 KECIntl. CapitalGoods-ElectricalEquipment 294.60 392 33

2 BajajAuto Automobile 3230.10 3710 15

7 JBChem&Pharm Pharmaceuticals 429.55 497 16

ICICIBANKLIMITED

F Domestic advancebook grew16%yoy toRs553324 crore,while the

overseasadvancebookcontinuedtodeclineat13%atRs60035croreat

endSeptember2019.Growthinthedomesticadvancebookwasledby

theretailloanbookcontinuingtoexpandatstrongpaceof22%yoytoRs

380966 crore at end September 2019. SME loan book growth also

acceleratedto30%yoyatRs19064croreatendSeptember2019.The

corporatebookrose3%yoytoRs153294crore.

F Thebankhasacceleratednetworkexpansionadding346branchesand

58ATMsinQ2FY2020.Ithasthenetworkof5228branchesand15159

ATMsatendSeptember2019.

F Thebankhadpostedhealthy26%increaseinNIIatRs8057.43crorefor

thequarterendedSeptember2019.Interestincomeincreased23%toRs

18565.30crore,whileinterestexpensesrose21%toRs10507.87crore.

F Withthehealthygrowth,theshareofretailbookintheoveralladvance

bookwasstableonsequentialbasisat62.1%atendSeptember2019

from6.1%endJune2019and57.30%atendSeptember2018.

F Thebusinessofthebankhadincreasedatacceleratedpaceof19%yoytoRs

1309632croreattheendSeptember2019,supportedbydepositsgrowth

risingto25%atRs696273croreatendSeptember2019.Theloanbookofthe

bankhadincreased13%atRs613359crore.

F The gross NPA additionswere Rs 2482 crore in Q2FY2020. The NPA

additions and gross provisions for the quarter were in line with

expectations.Theprovisioncoverageratioexcludingtechnicalwrite-offs

was76.1%.ThenetNPAratiodeclined from1.77%end June2019 to

1.60%endSeptember2019.

F The bank is focused on achieving a consolidated return on equity of

15.0%bythequarterendedJune2020.

2

CMP:Rs.539.00 Target:Rs.653 Recommendation:Buy

RISK

(Rs.inCr.)FINANCIALPERFORMANCE

P/BCHART

NonPromoterCorporateHolding 1.88

AsonSep’19 %OfHolding

Public&Others 6.48

Institutions 37.06

Foreign 54.58

SHAREHOLDINGPATTERN

INVESTMENTRATIONALE

UpsidePotential:21%

F RegulatoryProvisioningonassetsandCorporateGovernanceissue

F UnidentifiedAssetSlippages(Non-IdentifiedNPA’s)

VALUATION

Thebankcontinuestofocusongrowingthecoreoperatingprofitinarisk

calibratedmanner.Thebankaimstoimproveshareofprofitablemarket

opportunitiesbymakingdeliveryto thecustomermoreseamlessand

frictionless through digitization and process improvements. Business

performanceofthebanksuchasdomesticloangrowth,overallcorporate

advances, retail loan growth, CASA ratio are continuously improving.

Thus,itisexpectedthatthestockwillseeapricetargetofRs.653in8to

10monthstimeframeonanexpectedP/Bvxof3.24xandFY21BVPS

(BookValuePerShare)ofRs.201.66.

StockExchange BSE

P/BRatio(times) 3.24

FaceValue(Rs.) 2.00

P/ERatio(times) 67.88

52WeekHigh/Low 549.50/336.25

EPS(Rs.) 7.94

M.Cap(Rs.inCr.) 348641.03

VALUEPARAMETERS

NetIncome 3363.30 10541.91 18557.01

ACTUAL FORECAST

EPS 5.17 16.33 28.89

Ebit 23437.90 26850.40 32294.56

NII 27015.00 32477.83 37769.04

Pre-taxProfit 3776.76 17680.38 24566.37

FYMar-19 FYMar-20 FYMar-21

BVPS 168.10 177.72 201.66

RoE 3.20% 9.86% 15.06%

Source:Company'sWebsite,Reuters&Capitaline

BAJAJAUTOLIMITED

F ThecompanywillresumesalesinEgyptgoingforward.Themanagement

also indicatedthat ithasarobustpipelineofproducts forthenext18

months.

F Onthedevelopmentfront,thecompanytiesupwithHusquarnabrand

underKTMAustriaandexpectedtocommenceproductionduringcurrent

financialyearandwouldlaunchproductduringQ1FY21.Moreover,itstie

upwithTriumphisunderprocess.

F Onthefinancialfront,themarginsofthecompanyhasimprovedduring

Sep2019quarterto16.9%drivenbypricehike,changeinproductmix

and dollar realization. Moreover, realization of the company has also

improvedby6%QoQasthecompanyupgradedtheproductportfolioin

theentrylevelsegment.

F Regardingtheoutlookfortheindustry,managementfeelsthatwiththe

comingruraldemand;marketshareanddemandofthecompanywould

grow.Themanagementfeelsthat10%to12%growthinexportsisdoable

ona5-yearsCAGRbasis.Fordomesticmotorcycle,14%CAGRgrowthis

possibleover5years.

F Thecompany’sdomesticmotorcycleretailmarketsharestandsat20%

while domestic CV market share stood at 59.4% in 2QFY20. On the

developmentfront,themanagementofthecompanyisexpectedtolaunch

newmodels in its executive and premium segments, which will help

improvemarketsharegraduallyoverthemediumterm.Furthermore,the

company also expects to launch electric two-wheelerBajaj Chetak till

January2020 inPune followedbyBanglorewhilemanagementof the

companyexpectstoseeimprovementin3WsegmentfromAprilonwards.

F Bajaj Auto is a global two-wheeler and three-wheeler manufacturing

CompanywhichisbasedinPune,Maharashtra.Itmanufacturesmotorcycles,

scootersandautorickshaws.ItsplantsincludeWalujplant,Chakanplantand

Pantnagarplant.

F Onexportsfront,themanagementhasmaintainedthatexportsaredoing

wellandtheexportsforPulsarbrandhaveimprovedsignificantlyinnew

markets of Bangladesh, Nepal and Malaysia. The firm registered its

highest ever exports sales. Exports jumped14% to 1.95 lakhunits in

November2019comparedwith1.72lakhunitsinNovember2018.Total

domestic sales slipped 12% to 2.07 lakh units in November 2019 as

against2.34lakhunitsinNovember2018.

3


RISK


P/ECHART



Public&Others 17.60

Promoters 53.52

Foreign 14.54

Institutions 9.79

SHAREHOLDINGPATTERN

INVESTMENTRATIONALE

UpsidePotential:15%

F Commoditypricing

F Currencyfluctuation

VALUATION

Thecompanyhasadiversifiedbusinessmodelandstrongfocusonthe

profitable growth, widening reach in export markets and strategic

allianceswithglobalmajors.Thedomestic2-wheelermarketwouldstart

growing & would continue to grow for next couple of years. The

managementassuredthatonewillseeaveryhealthytoplinegrowthand

averyhealthyEBITDAincreaseincomingquarters.Thusitisexpected

thatthestockwillseeapricetargetofRs.3710in8to10monthstime

frameona5yearaverageP/Eof20.28xandFY21(E)earningsofRs.

182.94.

DividendYield(%) 1.86

52WeekHigh/Low 3289.50/2400.00


StockExchange BSE

EPS(Rs.) 162.34



FaceValue(Rs.) 10.00

VALUEPARAMETERS

ACTUAL FORECAST

EPS 149.78 170.09 182.94

Ebit 4716.33 5007.54 5408.70

Pre-taxProfit 6361.16 6416.37 7001.03

Revenue 30249.96 31041.70 34551.44

NetIncome 4333.18 4910.13 5297.38

BVPS 752.67 851.15 955.13

Ebitda 4982.02 4975.00 5479.31


RoE 21.20% 21.01% 20.16%


BANKOFBARODA

F T hebankhasexpandeditsoperationsthroughmergersofDenabankand

VijayaBankanditisamongstthefivelargestbanksinIndiawithadomestic

branchnetworkpresencethrough9,449branches&13,153ATMsandCash

Recyclers supported by self-service channels. Well distributed branch

networkwith31%coverageinRural,27%inSemi-urban,23%Metroand

20%Urban.Thecustomerbaseofbanksstoodat13crore,whilethebankhas

workforce of 86170 employees. The Bank has a significant international

presencewithanetworkof100overseasofficesspanning21countries.

F Globalbusinessofthebankgrewby2%yoytoRs1531470croreatend

September2019.Thebusinessgrowthwasdrivenbydomesticbusiness

rising3%toRs1316666crore,whileoverseasbusinessdeclined2%toRs

214804croreatendSeptember2019.

F ThebankaimstoreduceNNPAratiobelow3%andimproveprovisions

coverageratioto80-85%byendMarch2020.

F Net Interest Income (NII) of the merged entity increased 10% to Rs

7027.93 crore in thequarter endedSeptember2019. Interest income

increased8%toRs19274crore,whileinterestexpensesrose6%toRs

12246croreinQ2FY2020.

F DuringQ2FY2020,thebankhasreportednetprofitofRs736.68crore

withtheimprovedmarginsandstronggrowthinnon-interestincomeand

decline inexpenseratio.However, thebankhaswitnessed increase in

creditcostforQ2FY2020.

F Globaldepositsincreased3%toRs894130crore,whileglobaladvances

movedup3%toRs637340croreatendSeptember2019.Credit-deposit

ratio of the merged entity rose on sequential basis to 71.3% at end

September 2019 from 70.7% a quarter ago and 70.7% a year ago.

ContributionofBank'sInternationalBusinessattheendofSeptember

2019was14.2%comparedwith14.6%asofSeptember2018dueto

effectofrationalisationofoverseasoperationssettingin.

4


RISK


P/BCHART

Promoters 71.60


Institutions 13.69

Public&Others 8.80


Foreign 5.26

SHAREHOLDINGPATTERN

INVESTMENTRATIONALE

UpsidePotential:21%

F CorporateGovernanceissue

F RegulatoryProvisioningonassets

VALUATION

Apickupintheinvestmentcycle,highergrowthinretail&SMEsegments,

healthyfeeincomegrowth,andgrowthinCASAwouldleadtoarebound

inRoAs.The transformation journey aims at improvedmarket share,

quality business growth, portfolio diversification and enhanced fee

income,withcuttingedgedigitizationofprocesses,whileensuringdue

focusisaccordedtocomplianceandcontrols.Thus,itisexpectedthatthe

stockwillseeapricetargetofRs.120in8to10monthstimeframeonan

expected P/Bvx of 0.75x and FY21 BVPS (Book Value Per Share) of

Rs.160.18.

FaceValue(Rs.) 2.00


52WeekHigh/Low 143.60/85.70


EPS(Rs.) 2.01


StockExchange BSE

VALUEPARAMETERS

RoE 0.85% 6.20% 11.58%


NII 18683.81 28134.88 31899.50

BVPS 192.72 148.22 160.18

EPS 1.41 5.54 15.85

Ebit 13486.82 18052.03 20841.99

Pre-taxProfit 698.15 4927.05 9418.15

ACTUAL FORECAST

NetIncome 433.52 2872.85 6938.32


GUJARATGASLIMITED

F The company has around 23,200 kms of gas pipeline network. It has

around344CNGstationsanddistributesapproximately8.5mmscmdof

naturalgas toabout13,55,000households,approximately2 lakhCNG

vehicles(servingperday)andtoover3540industrialcustomers.

F Themanagementofthecompanyisaimingatsettingupmorethan63

CNGstationsinfinancialyear2020,forthetargettoincreasevolumeof9-

9.5 mmscmd in FY20. The debt stands at Rs 1,800 crore and the

managementofthecompanyislookingatEBITDAmarginofaround13

PercentinFY20.

F G ujaratGasLimited(GGL),isthelargestCityGasDistribution(CGD)player

withitspresencespreadacross23DistrictsintheStateofGujarat,Union

Territory of Dadra & Nagar Haveli and Thane Geographical Area (GA)

(excluding already authorised areas), which includes Palghar District of

Maharashtra.In10thCGDbiddingroundannouncedbyPNGRB,thecompany

haswon6GAscomprisingof17citiesinthestateofPunjab,Haryana,Madhya

PradeshandRajasthan,makingGGLapanIndiaCompany.

F GovernmentofGujarathasalsoinitiatedaCNGSahbhagiSchemeandalso

pushingforthismarketinotherwayandhaveeasedlandrequirement

from1000squaremetertoabout500-550squaremeterandpermission

processhasbeenfastenedinGujaratnow.

F Soecosystemaroundthecompanyhasbeenimprovedduetothateffort

and in lastbudget,Gujarat government allocated1,000 crore forCNG

buses.Therefore,allthesewillhelpittoimproveitsCNGvolumesandthat

needstopushmoreCNGstationsintimetocome.

5


RISK


P/BCHART



Foreign 12.23

Institutions 5.73

Promoters 60.89

Public&Others 6.22

SHAREHOLDINGPATTERN

INVESTMENTRATIONALE

UpsidePotential:17%

F Fluctuationincommodityprices

F Regulatorychanges

VALUATION

The company has strong & steady revenue growth momentum and

sustainable margins. It shall continue to focus on growing the

penetration in the current operating areas by increasing the PNG

connections and additional CNG stationswhile tapping the untapped

potential by expeditious rollout of distribution network in the newly

acquiredgeographicareasaswell.Withthisfocusedendeavor,GGLshall

continueitseffortsinprovidingcleanfuelsolutionsacrossalloperational

areatoaugmentanenergetictop-lineandbottom-lineincomingyears.

ThusitisexpectedthatthestockwillseeapricetargetofRs.262in8-10

monthstimeframeonanexpectedPBVmultipleof4.8timesandFY21E

BVPSofRs.54.64.

EPS(Rs.) 14.88

StockExchange BSE


FaceValue(Rs.) 2.00



52WeekHigh/Low 236.80/116.00


VALUEPARAMETERS

Revenue 7962.480 10552.082 11747.619

RoE 21.43% 36.02% 25.76%


NetIncome 418.450 920.074 946.100

EPS 6.080 13.032 13.581

Pre-TaxProfit 595.620 1160.797 1309.273

BVPS 32.03 43.13 54.64

Ebit 696.630 1210.330 1328.616

Ebitda 984.640 1529.537 1671.434

ACTUAL FORECAST


KECINTERNATIONALLIMITED

F TheRailwaybusinesscontinuestobeonahighgrowthtrajectoryonthe

backofconsistentorderinflows.T&Dgrowthwillbelargelydrivenby

internationalinFY20withexecutionofordersfromSAARC/Bangladesh,

Brazil and Arica start picking up during the fiscal. The management

expects Brazilwould give 35-40%order growth in FY20 and tenders

alreadystartcomingfromSaudiArabia,WestAfricaandEastAisa.

F K ECInternationalisaglobalinfrastructureengineering,procurementand

construction (EPC) major. It has presence in the verticals of power

transmissionanddistribution,railways,civil,solar,smartinfra,andcables.

Globally,thecompanyhasempoweredinfrastructuredevelopmentinmore

than63countries.

F KECInternationalreporteda42%increaseinconsolidatedprofitaftertax

to Rs 139 crore in Q2 September 2019 as against Rs 98 crore in Q2

September2018.Revenues increasedby17% toRs2809 crore inQ2

September 2019 as against Rs 2408 crore in Q2 September 2018.

RailwaysQ2revenuescrossRs500Crsmarkandthecompanycontinues

tofocusonExecutionfocuscontinues.

F Recently, it has secured orders of Rs 885 crore for transmission &

distribution projects from Power Grid Corporation, Tamil Nadu

Transmission Corporation and Karnataka Power Transmission

Corporation.Further,theurbantransportbusinesssegmenthassecured

anorderofRs853crorefortheconstructionofelevatedviaductalong

with10stationsoftheDelhiMetroPhaseIVproject,fromDelhiMetroRail

Corporation(DMRC).TherailwaysbusinesshassecuredanorderofRs

517crorefortheconstructionofroadbeds,majorandminorbridgesand

associatedcivilworks,fromRailVikasNigam(RVNL)inIndia.

F The company has robust and well diversified order book and its

managementisconfidentof15-20%growthinrevenueforFY2020.The

companyexpectsitsRailwaybusinessrevenuetoregisteragrowthof20-

25%forFY20andthatofT&Dasawholeisexpectedtoregisteragrowth

of15%forFY20.

6


RISK


P/ECHART

Public&Others 10.97

Promoters 51.59

Foreign 8.09

Institutions 27.14



SHAREHOLDINGPATTERN

INVESTMENTRATIONALE

UpsidePotential:33%

F Increaseinescalationcostduetodelayinprojects

F Politicaluncertaintiesandchangesinregulations

VALUATION

Thecompanyiscontinuouslyperformingwellanddeliveringinallthe

three parameters of revenue, profitability and order intake. T&D

businesshasdeliveredastellarperformance,backedbyrobustexecution

inSAARCandtheAmericas.TheRailwaybusinesscontinuesitsgrowth

momentumasitexpandsportfolioinothersegments.Themanagement

ofthecompanyexpectsinternationalbusinesstopickupwithlargeorder

inflow from Jordan, Saudi, Far East (Indonesia, Thailand), etc and

international T&D, sub-stations and civil infrawill be key drivers for

FY20.Moreover,thecompanyhasmaintaineditsannualguidanceof20%

growthforFY20revenue.Weexpectthestocktoseeapricetargetof

Rs.392in8-10monthtimeframeonaoneyearaverageP/Eof14.06xand

FY21(E)EarningsPerShareofRs.27.90.


52WeekHigh/Low 340.50/229.95

EPS(Rs.) 20.96



StockExchange BSE

FaceValue(Rs.) 2.00


VALUEPARAMETERS

Ebitda 1149.91 1317.06 1478.53

Ebit 1032.78 1182.12 1331.56

EPS 19.28 24.06 27.90

NetIncome 495.77 618.57 719.12

ACTUAL FORECAST

Revenue 11000.53 12709.52 14175.16

RoE 22.37% 22.62% 21.78%

BVPS 94.71 114.95 138.70


Pre-TaxProfit 743.51 861.24 988.83


INOXLEISURELIMITED

F Content continued to be the decisive force behind the remarkable

performanceoftheQuarter,withnumerousmoviesdoingextremelywell

attheBoxOffice.MissionMangal,Super30,TheLionKing,Chhichhore,

Saaho andDreamGirlwere the top contributors. BatlaHouse, Fast&

FuriousPresentsHobbs&ShawandSpiderMan-FarFromHomealso

madesignificantcontributionstowardstherecordticketsales.

F Thecompanyhasadded27newscreensintheFY20sofar,underlining

Company’sexpansionfocus.INOXcontinueditsfocusontechnologyand

formats with the roll out of India’s first 270-degree multi-projection

ScreenX auditorium at Inorbit Mall Malad, Mumbai and Quest Mall,

Kolkata.

F INOXLeisureLimited(INOX)isamongstIndia’slargestmultiplexchainswith

144multiplexes and598 screens in 68 cities. INOXhas redefinedmovie

experiencesinIndiamakingittrulya7-starexperience.EachINOXpropertyis

uniquewithitsowndistinctarchitectureandaesthetics.

F The management feels that there is enough scope for increasing the

occupancylevelsiftheseatscanbefilledfromMonday-Thursdayandis

exploringdifferentconceptstodoso.In1QFY20,itdidsobyscreeningICC

cricketworldcupmatchesforcorporatesinthetheatersandwantstotake

upsimilarinitiativesgoingforward.Italsobelievesthatgoodcontentand

scriptisthegreatestforcebehindincreasingtheoccupancyrateswhich

mostlyoscillatesinthe25%-30%rangecurrently.

F Recently, it has launched Megaplex – world’s first multiplex with

maximumformatsunderoneroof,atInorbitMallMalad.Besidesbeingan

architecturalmarvelspreadover60,000SqFt,the11-screenspectacleis

also a destination for connoisseurs of good foodwith numerous F&B

conceptsandcuisines.AlsolaunchedBengals’sfirstScreenXtheateratits

multiplexatQuestMall,kolkatta.ScreenXTechnologyoffersapanoramic

270-degreemoviewatchingexperiencetotheaudience.ScreenXisthe

worls’s firstmulti-projection theatre designed to enhance themovie-

goingexperience.

7


RISK


P/ECHART

Promoters 51.89



Institutions 21.19

Foreign 12.58

Public&Others 13.04

SHAREHOLDINGPATTERN

INVESTMENTRATIONALE

UpsidePotential:15%

F QualityFilmContentFlow

F ObtainingBusinessLicenses

VALUATION

Withtheconsistencyinperformanceandahealthypipelinesignalstrong

growth,thecompanyisexpectedtoseegoodgrowthgoingforward.It

continuestoimpresswithindustryleadinggrowthacrossallparameters.

In addition, strongmarketposition reflected in ability to consistently

raise ticket prices and strong screen pipeline,will help in increasing

averagefootfallsandconsumerspending. Thus,itisexpectedthatthe

stockwillseeapricetargetofRs.433in8to10monthstimeframeona

currentP/Exof25.72xandFY21EPSofRs.16.84.




52WeekHigh/Low 390.00/234.00

StockExchange BSE

FaceValue(Rs.) 10.00


EPS(Rs.) 14.60

VALUEPARAMETERS

Ebit 212.850 346.381 392.220

ACTUAL FORECAST

Pre-TaxProfit 199.100 201.985 237.799

RoE 16.96% 15.75% 17.58%


BVPS 98.135 84.337 99.397

EPS 14.19 14.33 16.84

Revenue 1692.180 2055.428 2361.610

Ebitda 309.160 560.139 637.972

NetIncome 133.490 136.125 165.636


JBCHEMICALS&PHARMACEUTICALSLTD

F ThecompanyhasastrongR&Dandregulatoryset-upfordevelopmentof

newdrugdeliverysystemandformulations,filingofDMFsandANDAs.

It’s State-of-the-Art manufacturing facilities are approved by health

authoritiesofregulatedmarkets.

F JB Chemicals & Pharmaceuticals Limited (JBCPL), one of India’s leading

pharmaceutical companies, manufactures & markets a diverse range of

pharmaceuticalformulations,herbalremediesandAPIs.JBCPLexportsto

many countriesworldwidewithpresence inUS,Europe,Australia, South

Africa,otherdevelopingcountries,RussiaandCIS.

F Withwidegeographicalpresenceintheinternationalmarket,increased

focusonANDAfilings,focusonnewproductsintroductioninRussia-CIS

market, focuson lucrativecontractmanufacturingbusinessbackedby

State-of-the-art manufacturing facilities with approval from health

authoritiessuchasUSFDA,UKMHRA,TGAAustralia,MCCSouthAfrica,

MoH-Russia,Ukraine(PICs),ANVISABrazil,MoH-Japan,andwiderange

of products across injectable, solid and semi-solid present a good

opportunityininternationalbusiness.

F The future outlook for the industry and growth expectations remains

positive in view of increased government and private spending on

healthcare.

F The management of the company focuses on harnessing potential of

existingproducts,launchingofnewlineextensions;achievingofnewline

productivity will be pursued with scientific product promotions and

aggressivemarketing strategies. The stringent initiatives takenby the

company have resulted in rationalization of inventory position and

releaseofcashforgrowth.

F DuringQ2FY20,DomesticformulationsbusinessatsalesofRs.189.38

croresregisteredgrowthof15.70%YoY.Theoverallstrategyofexpansion

of field force is playing out well. Domestic sales of contrast media

products at Rs. 14.98 crores were 11.90% higher YoY. Formulations

exportsinGlobalbusiness(otherthanRussia-CIS)atRs.116.42crores

declinedby8%YoYmainlydueto19%lowersalesinUSmarket.Saleof

Company'sSouthAfricansubsidiaryatRs.41.07croreswasflat.

8


RISK


P/ECHART

Public&Others 20.28

Promoters 56.02


Foreign 7.17


Institutions 15.36

SHAREHOLDINGPATTERN

INVESTMENTRATIONALE

UpsidePotential:16%

F CurrencyFluctuation

F Regulatoryrisks

VALUATION

Thecompanyaccordshighprioritytodomesticformulationsbusiness,

whichofferssignificantvalueproposition.Ithasconsistent,strongfree

cashflows,withalowdebt-equityof0.02x.Italsoplanstocontinueto

pursue focusonharnessingpotential of theexistingproducts, launch

newproductsselectivelyandachieveincreasedproductivity.Thus,itis

expectedthatthestockwillseeapricetargetofRs.497in8to10months

timeframeonacurrentP/Exof13.68xandFY21EPSofRs.36.35.


52WeekHigh/Low 434.50/293.00



EPS(Rs.) 31.41


FaceValue(Rs.) 2.00

StockExchange BSE

VALUEPARAMETERS

ACTUAL FORECAST

EPS 23.54 32.35 36.35

Ebit 249.75 273.70 316.30

Ebitda 305.39 355.19 408.58

Revenue 1643.20 1802.87 2015.20

Pre-TaxProfit 286.99 331.24 383.89


BVPS 184.74 190.72 192.64

RoE 13.24% 16.11% 16.48%

NetIncome 193.47 249.98 286.74


E-mail: [email protected] Research also available on Reuters

SMC Research Desk

All disputes shall be subject to the exclusive jurisdiction of Delhi High court.

Disclaimer: This Research Report is for the personal information of the authorized recipient and doesn't construe to be any investment, legal or taxation advice to the investor. It is only for private circulation and use. The Research Report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. No action is solicited on the basis of the contents of this Research Report. The Research Report should not be reproduced or redistributed to any other person(s)in any form without prior written permission of the SMC. The contents of this material are general and are neither comprehensive nor inclusive. Neither SMC nor any of its affiliates, associates, representatives, directors or employees shall be responsible for any loss or damage that may arise to any person due to any action taken on the basis of this Research Report. It does not constitute personal recommendations or take into account the particular investment objectives, financial situations or needs of an individual client or a corporate/s or any entity/s. All investments involve risk and past performance doesn't guarantee future results. The value of, and income from investments may vary because of the changes in the macro and micro factors given at a certain period of time. The person should use his/her own judgment while taking investment decisions. Please note that SMC its affiliates, Research Analyst, officers, directors, and employees, including persons involved in the preparation or issuance if this Research Report: (a) from time to time, may have long or short positions in, and buy or sell the securities thereof, of the subject company(ies) mentioned here in; or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the subject company(ies) discussed herein or may perform or seek to perform investment banking services for such company(ies) or act as advisor or lender/borrower to such subject company(ies); or (c) may have any other potential conflict of interest with respect to any recommendation and related information and opinions.

SMC is a SEBI registered Research Analyst having registration number INH100001849. SMC or its associates has not been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities market. SMC or its associates or its Research Analyst or his relatives

do not hold any financial interest in the subject company interest at the time of publication of this Report. SMC or its associates or its Research Analyst or his relatives do not hold any actual/beneficial ownership of more than 1% (one percent) in the subject company, at the end of the month

immediately preceding the date of publication of this Report. SMC or its associates its Research Analyst or his relatives does not have any material conflict of interest at the time of publication of this Report.

The views expressed by the Research Analyst in this Report are based solely on information available publicly available/internal data/ other reliable sources believed to be true. SMC does not represent/ provide any warranty expressly or impliedly to the accuracy, contents or views expressed

herein and investors are advised to independently evaluate the market conditions/risks involved before making any investment decision. The research analysts who have prepared this Report hereby certify that the views /opinions expressed in this Report are their personal independent

views/opinions in respect of the subject company.

SMC Global Securities Ltd. (hereinafter referred to as “SMC”) is regulated by the Securities and Exchange Board of India (“SEBI”) and is licensed to carry on the business of broking, depository services and related activities. SMC is a registered member of National Stock Exchange of India

Limited, Bombay Stock Exchange Limited, MSEI (Metropolitan Stock Exchange of India Ltd) and M/s SMC Comtrade Ltd is a registered member of National Commodity and Derivative Exchange Limited and Multi Commodity Exchanges of India and other commodity exchanges in India. SMC is

also registered as a Depository Participant with CDSL and NSDL. SMC’s other associates are registered as Merchant Bankers, Portfolio Managers, NBFC with SEBI and Reserve Bank of India. It also has registration with AMFI as a Mutual Fund Distributor.

SMC or its associates/analyst has not received any compensation from the subject company covered by the Research Analyst during the past twelve months. The subject company has not been a client of SMC during the past twelve months. SMC or its associates has not received any

compensation or other benefits from the subject company covered by analyst or third party in connection with the present Research Report. The Research Analyst has not served as an officer, director or employee of the subject company covered by him/her and SMC has not been engaged in the

market making activity for the subject company covered by the Research Analyst in this report.

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