Commodity uptick, domestic focus guide MFs’ April stock picks

Amidst the second wave of Covid-19 and high valuations, fund managers stuck to shares of companies that would benefit from the upcycle in commodities and also those more dependent on the domestic economy. ET takes a look at the companies that have caught the eye of fund managers at leading fund houses in April:

Cement
Bought by: Nippon MF

CMP: Rs 6,367

Market Capitalisation: Rs 1,83,806 crore

The largest cement company by capacity has been consistently gaining market share in the past year. Given its size, light balance sheet and sufficient free cash flow, analysts expect the company to gain incremental market share in the coming quarters. Besides, the company will be adding close to 20 MT capacity which will take its total capacity to 130.9 MT in the next two years. Taking these factors into account, analysts estimate the company’s earnings per share to grow in the range of 15-25% in the next two years.

Atul
Bought by: Mirae MF

CMP: Rs 8,201

Market Capitalisation: Rs 24,265 crore

The net profit and revenue growth of Atul Ltd, an integrated speciality chemical company, grew by 24% and 15.6% in the March quarter from the same period a year ago respectively. This performance was better than the Street’s estimates. Analysts estimate that the company’s revenue growth will be driven by three factors: entry into value-added cosmetic grade products in the aromatics segment, introduction of new products, and capacity addition. Given these revenue enhancing factors, analysts estimate 20- 25% growth in its earnings per share over the next two years

Tata Steel
Bought by: Axis MF

CMP: Rs 1,132

Market Capitalisation: Rs 1,35,476 crore

The country’s largest steel company is witnessing high growth and fast deleveraging. Steel prices in the US are at $1,500 per tonne, at €1,000 per tonme in Europe and $1,000-1,050 in Southeast Asia. In India, prices are below $900 per tonne. The current domestic steel prices may sustain as Indian steel buyers are at advantage in terms of cost to their global peers. Analysts are estimating Ebitda for FY22 to increase to Rs 42,000-45,000 crore against Rs 29,805 crore in FY21. Strong cash flows helped the company reduce net debt, which was down by Rs 10,781 crore in the March quarter to Rs 75,389 crore.

Lux Industries
Bought by: Nippon MF

CMP: Rs 2,000

Market Capitalisation: Rs 5,051 crore

Strong brandequity, introduction of new products, upgrade customers to premium products is attracting small-cap fund managers to this stock. They believe it could be a key benefi ciary of the market moving from unorganised to organised segment. It enjoys a 14% market share in the organsied men’s innerwear market, primarily catering to the economy and mid-premium segments. Analysts believe its extension to casual wear and women’s wear will unlock synergies that would lead to further growth.



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