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Kotak Securities lists its top picks for September. How many do you have?

Updated : 2020-09-03 15:01:12

The markets have continued their upwards trend in August after a 7 percent rise in July. Despite the recovery, Kotak Securities cautions that investors need to remain ultra-cautious on markets from hereon. It will be ideal to have a bottoms-up approach on individual stocks based on their merit, it said, adding that in value stocks, one needs to differentiate between value trap and growth-oriented companies. It advises investors to go for individual stock picking. Here are its top picks for September:

 Bharti Airtel:  Bharti remains a solid play on one of the two mutually exclusive events likely to play out in the Indian wireless industry if market stays a 3-player one or the market consolidates further. India Revenues came in at Rs 12,877 crore, up 19 percent y-o-y, which was above estimates. The brokerage expects the company to generate free cash flows of Rs 29,561 crore in the next three years and reiterates buy with a fair value of Rs 710.
Bharti Airtel: Bharti remains a solid play on one of the two mutually exclusive events likely to play out in the Indian wireless industry if market stays a 3-player one or the market consolidates further. India Revenues came in at Rs 12,877 crore, up 19 percent y-o-y, which was above estimates. The brokerage expects the company to generate free cash flows of Rs 29,561 crore in the next three years and reiterates buy with a fair value of Rs 710.
 JSPL : JSPL’s consolidated adjusted EBITDA of Rs 2,263 crore record highs and was ahead of estimates led by outperformance across segments. It's EBITDA of Rs 370 crore also beat the forecast on higher prices and lower costs. The firm expects to conclude the Oman divestment in the near future, which would reduce its net debt by Rs 6,000-6,500 crore or by 17 percent. Fair value: Rs 270/share
JSPL: JSPL’s consolidated adjusted EBITDA of Rs 2,263 crore record highs and was ahead of estimates led by outperformance across segments. It's EBITDA of Rs 370 crore also beat the forecast on higher prices and lower costs. The firm expects to conclude the Oman divestment in the near future, which would reduce its net debt by Rs 6,000-6,500 crore or by 17 percent. Fair value: Rs 270/share
 JK Lakshmi Cement:  Demand improved month on month in May-July 2020, with July volumes being higher on a yoy basis. However, demand has started to moderate in both East and North markets from August 2020 due to seasonal weakness and easing of pent-up demand. Due to Covid-19, the company had put on hold its expansion plans but now plans to announce a capacity expansion in North India for a planned capex of Rs 1,200-1,400 crore. It also has the necessary land for the same and aims to commission the plant in two years. Fair Value: Rs 340/share.
JK Lakshmi Cement: Demand improved month on month in May-July 2020, with July volumes being higher on a yoy basis. However, demand has started to moderate in both East and North markets from August 2020 due to seasonal weakness and easing of pent-up demand. Due to Covid-19, the company had put on hold its expansion plans but now plans to announce a capacity expansion in North India for a planned capex of Rs 1,200-1,400 crore. It also has the necessary land for the same and aims to commission the plant in two years. Fair Value: Rs 340/share.
 GAIL:  Gas demand has recovered materially across all segments, with overall transmission volumes back to 109 mcm/d and gas marketing volumes at ~89 mcm/d currently. The brokerage remains constructive on the stock expecting the company to benefit from the implementation of unified tariffs. It expects GAIL to benefit from the inclusion of natural gas in GST, as it will remove stranded taxes on input gas for its LPG/petchem production segments. It's the dominant presence in the value chain also makes it well-positioned to gain from higher demand for gas in the long run. Fair Value: Rs 140/share.
GAIL: Gas demand has recovered materially across all segments, with overall transmission volumes back to 109 mcm/d and gas marketing volumes at ~89 mcm/d currently. The brokerage remains constructive on the stock expecting the company to benefit from the implementation of unified tariffs. It expects GAIL to benefit from the inclusion of natural gas in GST, as it will remove stranded taxes on input gas for its LPG/petchem production segments. It's the dominant presence in the value chain also makes it well-positioned to gain from higher demand for gas in the long run. Fair Value: Rs 140/share.
 DCB Bank:  In Q1FY21, DCB Bank reported flat revenue growth and earnings YoY led by 100 percent YoY growth in provisions. Operating profits grew by 15 percent YoY due to tight cost control. Kotak believes that DCB Bank should come out better in this cycle on a relative basis given its cautious approach to growth and underwriting. Fair value: Rs 150/share.
DCB Bank: In Q1FY21, DCB Bank reported flat revenue growth and earnings YoY led by 100 percent YoY growth in provisions. Operating profits grew by 15 percent YoY due to tight cost control. Kotak believes that DCB Bank should come out better in this cycle on a relative basis given its cautious approach to growth and underwriting. Fair value: Rs 150/share.
 Power Grid:  The brokerage remains positive on the company on account of attractive valuations and attractive dividend yield. Visibility on an earnings growth trajectory as the company will also capitalize projects aggregating Rs 54000 crore over the next three years that will yield 10 percent CAGR in earnings, it added. Also, there are incremental opportunities for the firm in intra-state and inter-state transmission as well as to establish a reliable green energy corridor for the development of renewable assets. Fair Value: Rs.220
Power Grid: The brokerage remains positive on the company on account of attractive valuations and attractive dividend yield. Visibility on an earnings growth trajectory as the company will also capitalize projects aggregating Rs 54000 crore over the next three years that will yield 10 percent CAGR in earnings, it added. Also, there are incremental opportunities for the firm in intra-state and inter-state transmission as well as to establish a reliable green energy corridor for the development of renewable assets. Fair Value: Rs.220
 ICICI Lombard:  The company's strong performance in 1QFY21 was largely driven by lower claims in the motor business likely due to the lockdown even as COVID-related claims in the health segment were high. The proposed Bharti Axa deal brings little on the table for ICICI Lombard, apart from its motor business that can provide some synergies. Bharti Axa business is sub-optimal negligible PAT in FY19 and net loss in FY20. Stake sale by promoters will be a key overhang on the stock in the near term. Fair value: Rs 950
ICICI Lombard: The company's strong performance in 1QFY21 was largely driven by lower claims in the motor business likely due to the lockdown even as COVID-related claims in the health segment were high. The proposed Bharti Axa deal brings little on the table for ICICI Lombard, apart from its motor business that can provide some synergies. Bharti Axa business is sub-optimal negligible PAT in FY19 and net loss in FY20. Stake sale by promoters will be a key overhang on the stock in the near term. Fair value: Rs 950
 Avenue Supermarts:  Dmart saw several store closures in Q1FY21 on account of Covid-19 led restrictions. The situation is constantly improving, but the continuous change in local policies are impacting store operations. The company is witnessing lower footfalls in its stores as social distancing is keeping customers away from crowded locations. The customer mix for Dmart has seen a shift from high-income level to mid to lower category due to COVID fear. The brokerage is cautious on Dmart due to rich valuations. Fair Value: Rs 1,480
Avenue Supermarts: Dmart saw several store closures in Q1FY21 on account of Covid-19 led restrictions. The situation is constantly improving, but the continuous change in local policies are impacting store operations. The company is witnessing lower footfalls in its stores as social distancing is keeping customers away from crowded locations. The customer mix for Dmart has seen a shift from high-income level to mid to lower category due to COVID fear. The brokerage is cautious on Dmart due to rich valuations. Fair Value: Rs 1,480
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