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Sensex scales new peak! Top 13 wealth-creating ideas for 2-3 years

Wondering where to invest at a time when the market is trading near all-time highs? Or should we wait before putting fresh money
into markets? Well, these questions are running in your mind, rest assured, you are not alone.

Investors are caught between FOMO which is fear of missing out the rally and fear as the market could witness profit taking at
higher levels which could take the index lower.

The S&P BSE Sensex hit a fresh record high of 40,483 on Monday while the Nifty50 is still about 200 points away from hitting its
record high above 12,103.

Well, the good news is that the rally is here to stay and experts see the momentum to continue and take Nifty50 towards 12,700-
13,000 in the next 12 months. Hence, we are in a good buy on dips market.

“We have a one-year forward target of 12,700 for Nifty 50 post-Q1 result, which we are maintaining. The outlook for the equity
market has improved post the cut in corporate tax and interest rate, as well as, the reduction in the cost of raw material. All these
factors have contributed to better than expected Q2 results,” Vinod Nair, Head of Research at Geojit Financial Services told
Moneycontrol.

“Earnings from H2FY20 is likely to better on account of good monsoon and stimulus from the government. A further interest rate
cut from the RBI & Fed may improve the liquidity in the medium-term,” he said.

The latest corporate tax cuts are a structural move, and it would improve the corporate earnings estimates by around 7-10 percent
thus giving a northwards inflection, which would further continue backed by investments and subsequently consumption-driven
demand, suggest experts.

“Over the long term, say 3-5 years, markets are poised for a move northwards backed by solid domestic corporate earnings
growth supported by domestic consumption-led demand,” Pankaj Bobade, Head of Fundamental Research at Axis Securities told
Moneycontrol.

“The earnings performance of corporates over the last couple of quarters has been picking up though not in a secular manner; the
texture, quality of earnings is improving. The impact of corporate tax cuts could be seen from H2FY20 onwards; the impact of any
other reforms would be seen 6 months down the line,” he said.

We have collated a list of top 13 fundamentally strong stocks by different experts for your portfolio which could turn out
to be big wealth creators in the next 2-3 years:

Expert: D K Agarwal Chairman & MD, SMC Investments and Advisors Limited

Marico

The company will continue to drive sustained profitable volume-led growth over the medium term, through its focus on
strengthening the franchise in the core categories and driving the new engines of growth towards gaining critical mass.

Over the medium term, the company retains the target of 8-10 percent volume growth and healthy market share gains in the India
business.

The company aims to build Healthy Foods, Premium Hair Nourishment and Male Grooming into growth engines of the future and
expects to deliver value growth at 20 percent plus CAGR over the medium term in these portfolios.

On the international front, the company expects to clock organic broad-based double-digit constant currency growth over the
medium term.

Larsen & Toubro

The company looks forward to a period of increased investment momentum and continued growth. Initiatives towards improved
productivity, cost efficiencies derived from leveraging digital technology, capacity utilisation, and capability enhancement are
expected to help the company maximise its shareholder returns (RoE) on a sustainable basis.

Consolidated order book of the group stood at Rs 29,4014 crore as of June 30, 2019, with international order book constituting 21
percent of the total. The company successfully won new orders worth Rs 38,700 crore at the group level during the quarter ended
June 30, 2019, registering a growth of 11 percent.

International orders during the year at Rs 9,005 crore constituted 23 percent of the total order inflow. Order wins in Infrastructure
and Power segments were the major contributors to the order inflow during the quarter.

UltraTech Cement

The Government's firm commitment to revive the economy and the thrust on infrastructure spending augurs well for the growth of
cement demand. The company with its presence across all the zones in the country is the best positioned to take advantage of
the revival in cement demand.
As seen in the earlier acquisitions, the management’s ability to turn around the acquired assets provides confidence in the
company and the management expects similar performance even in the newly acquired Century assets. UltraTech completed the
acquisition of Century's cement business recently.

ITC

Despite an extremely challenging operating environment, the company has consolidated its leadership position in the industry and
continued to improve its standing in key competitive markets across the country.

This demonstrates the resilience of the company's portfolio of brands, superior consumer insights and its relentless focus on value
creation.

According to the management of the company, the company is focusing on growth of its FMCG business by entering newer
segments and tapping the opportunity in the foods segment. This would be a catalyst for topline growth in the long run.

ICICI Bank

The bank is focusing on growing the core operating profit in a risk calibrated manner instead of loan growth. The bank aims to
improve the share of profitable market opportunities by making delivery to the customers more seamless and frictionless through
digitisation and process improvements.

Business performance of the bank such as domestic loan growth, overall corporate advances, retail loan growth, CASA ratio is
continuously improving. The business of the bank increased at an accelerated pace of 18 percent YoY to Rs 12,53,147 crore at
the end of June 2019, supported by loan growth improving by 15 percent at Rs 5,92,415 crore.

Meanwhile, the deposits growth galloped to 21 percent at Rs 6,60,732 crore at the end of June 2019. The bank had indicated that
credit cost in FY2020 is expected to reduce significantly compared to FY2019.

Expert: Pankaj Bobade, Head of Fundamental Research at Axis Securities

Kotak Mahindra Bank (KMB)

The net interest margins (NIMs) of KMB are amongst the best in the industry and have been in the range of 4-4.6 percent over the
last 3 years. The management expects better pricing power in certain high yielding segments which will help in sustaining NIMs.

KMB has maintained benign asset quality with limited exposure to stressed sectors and conservative lending practices. Further
improvement in asset quality since FY18 was seen with G/NNPAs at 2.2/0.7 percent in Q1FY20 (Slippages 1.45 percent ann).
Provisioning Coverage Ratio stood at 67 percent which provides comfort.

KMB is well positioned due to higher capitalisation (Tier I - 17.3 percent), a strong liability franchise (CASA: 51 percent) and
benign asset quality, which would allow it to gain further market share.

RITES

RITES has a strong and diversified order book. RITES’ standalone order book stands at Rs 6,052 crore (3x FY19 revenue). The
order book is expected to grow by over 17 percent in FY20 which provides strong revenue visibility for the next 2-3 years.

The Order book is well diversified with high margin consultancy and low margin turnkey business contributing 41 percent each.
RITES has a competitive edge in winning orders owing to its over four decades of experience in transport infrastructure
consultancy and its association with MoR.

Ample opportunities within railways (50 percent revenue share) being captured by RITES via venturing into turnkey projects and
railway station development is increasing its scale of operations. Focus on strengthening EPC business, diversification and
continuous infrastructure push by the government is expected to augur well for RITES.

Dixon Technologies

Dixon is a leading player in Flat Panel Display (FPD) TV with over 50 percent market share. It is also a leading player in Lighting
accounting for over 35 percent domestic volumes and commands over 40 percent share in the Washing Machines EMS market.

Indian Consumer Electronics and Appliances market is expected to grow at a faster pace of 19 percent CAGR between FY19-21E
as compared to global CEA market growth at 8 percent CAGR in the same period. High growth in consumer electronics and
increasing EMS presents a huge opportunity for players like Dixon.

We expect strong growth in key segments viz., Consumer Electronics, Lighting and Home Appliances led by a strong order book.
The addition of new clients, recovery in the mobile segment and robust growth in the security surveillance segment would aid
revenue growth, going forward.

Amber Enterprises

Amber is the market leader in the OEM/ODM industry with 55.4 percent share in volume terms (outsourced market). AEL’s share
stands at 19.1 percent in the overall residential air-conditioning (RAC) market in terms of volume.
Key customers include Godrej, Bluestar, Daikin, Hitachi, LG, Panasonic, Voltas, Whirlpool and Carrier Midea, which together
account for 75 percent of the market share.

With the acquisition of Sidwal Refrigeration, the company has made a foray in the mobile air-conditioning segment. We believe
that Sidwal Refrigeration Industries Pvt Ltd (SRIPL) is a strategic fit in Amber’s portfolio.

Amber will continue to deliver industry-leading growth and is a proxy play in evolving and fast-growing RAC market- the most
underpenetrated segment in the white goods category in India.

Expert: Vinod Nair, Head of Research at Geojit Financial Services

Avanti Feeds

A leading exporter of processed prawn and fish feeds in India. Avanti has five shrimp feed manufacturing units with a capacity of
6,00,000 MT and two processing and exporting units with a capacity of 22,000 MT.

Being the market leader in the feed segment the company is aiming to become one of the largest players in the processing
segment through its capacity addition.

The recent improvement witnessed in farm-gate and stabilisation in export prices provides a better outlook for both Feed and
Processing segments. Going forward the revenue/PAT is expected to grow at 14/19 percent CAGR over FY19-21E.

Coromandel International

Largest privately-owned phosphatic fertilizer manufacturers in India with a considerable presence in its home market, Andhra
Pradesh, Telangana, and other nearby states.

The subsequent improvement in monsoon and central government schemes like the Pradhan Mantri-Kisan scheme announced
this year to help double farmer income and boost the demand for fertilizer products.

Expect PAT to grow by a CAGR of 17 percent during FY19-21E on the back of an increase in the share of new unique grade
products and improvement in margins due to backward integration.

Mold-Tek Packaging:

It is one of the leading manufacturers and suppliers of high quality airtight and pilfers proof containers/pails in India for Paints,
Lubricants, Food and FMCG.

The company is credited with shifting Indian paint and lubricant industry to plastic pails from metal containers. Going forward,
MTEP is expected to capitalise on long-term growth opportunities, aided by higher volumes due to increasing acceptance of IML
in paint and lubricant segments.

Further, focus on capacity expansion, diversification of end-users and penetration into newer markets will drive earnings growth.

Brokerage: HSBC

L&T Finance Holding

The brokerage has a buy rating on L&T Finance Holding with a target price of Rs 130. LTFH delivered a stable September
quarter performance in a very challenging environment.

Focused loan book grew 19 percent on a YoY basis, while asset quality and margins (plus fees) remained largely stable on QoQ.
It raise FY20-22e earnings on lower tax outgo.

The management has maintained a fine balance between growth and asset quality. Risks associated with asset quality outlook of
the wholesale mortgage loans appear priced in.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the
website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment
decisions.