The scenario has changed as a month ago, Nifty touched 12,200 levels. September emerged as worst for the market after February 2016.
Investors lost almost Rs 15 lakh crores of wealth in just one month. Midcaps and small caps plunged to new 52-week lows in the biggest monthly since 2008. In this turmoil, the Nifty crashed 7% from its peak. However, look at the broader scenario, the BSE Midcap and Smallcap indices are down 19.5% and 28.5%, respectively. The NSE Midcap 100 and NSE Smallcap 100 indices plunged 21.5% and 37%, respectively, from their January highs.
Most stocks listed on exchanges are available 40-60% below their January high. It had seen a mega rally in midcap and smallcap stocks in the last 5 years, but now after the steep sell-off from recent peaks, no one wants to buy midcap and smallcap stocks.
No one is interested, despite many stocks are available below their valuations.
The list of negative news is still continuing: IL&FS crisis, Yes Bank controversy, rising in crude oil prices, rupee depreciation, global trade war issues, etc. Investors have lost faith in the last 9 months by looking market scenario. Investors will get the best chance after the Q2 earnings to reshuffle and average out their portfolios. In the short term, all eyes on RBI’s monitory policy, but a bounce back is expected this week.
This week to focus on three L&T’s subsidiaries.
The firm posted better-than-expected performance across all fronts during Q1 FY2019. Revenue growth was driven by the broad base which led to constant currency revenue growth of 5.1% QoQ and 22.9 % YoY while USD revenue increased by 3.5% QoQ and 23.4% YoY.
It reported EBITDA margin to 19.4 %, an improvement of 170bps on QoQ basis. Net profit during the quarter increased 24.8 % QoQ to Rs.361.3 crores. The company has registered double-digit sequential growth in BFS and High-Tech & Media space.
The management is positive of remaining in the industry’s top quadrant in terms of revenue growth in FY19 similar to FY18 led by current deal wins, higher large accounts mining and higher digital revenue mix (Digital is now 34% of its revenues) and growth. It is trading at a P/E ratio of 27.3x. It has paid 2150% dividend for FY18. It has recommended a buy for medium to long term.
L&T Technology Services
During Q1FY19, the firm had more than doubled its net profit while its revenue increased by 40%. On a sequential basis, revenue and net profit increased by 9.2% and 24%, respectively. In US dollar terms, revenue stood at $169 million; growth of 5.6% QoQ in constant currency, 32% YoY. EBITDA margin improved 170 bps at 17% from 15.3% in the previous year quarter.
The company has won five multi-million dollar deals across the process industry, telecom & hi-tech, industrial products and transportation. We believe LTTS is well set to tap the shift in ER&D spending from products to software and services, and a rising preference for third-party players. It is trading at a P/E ratio of 29.05 x. It has paid 800% dividend for FY18. It has recommended a buy for medium to long term.
L&T Finance Holdings
The company reported excellent results for Q1 FY19, NII has improved by 48.2% YoY to Rs.1528 crores while PAT increased by 71.3% to Rs.538 crores as against Rs.314 crores. The overall loan book of the company is up by 24% YoY to Rs.86571 crores in Q1 FY19. The company has mentioned 76% growth in rural finance, 48% growth in housing finance and 7% growth in wholesale finance.
It’s AUM in MF business increased by 60% to Rs.71118 crore in Q1 FY19. At CMP, the stock is trading at P/E of just 15.4x. In March 2018, the company has allotted the preferential shares to L&T, of 107.81 million equity shares at Rs 185.51 per share and raised Rs 1,000 crore through QIP at the price of Rs 158.6. It is available much below above prices and looks strong buy candidate for investors. It has recommended a Buy for medium to long-term investment perspective.
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