Budget 2019: Top 5 shares to buy before Nirmala Sitharaman tables Modi 2.0's 1st budget - What Karvy suggests
As per the Karvy Stock Broking stock market investors can think of buying the following stocks — Larsen & Toubro, Mahindra and Mahindra, KRBL, KEC International and MOIL.
Budget 2019 is about to be presented in Parliament and FM Nirmala Sitharaman is busy meeting with her lieutenants. The stock markets are also looking at cues from these meetings as it would help them decide about the stocks that they can buy ahead of budget presentation. As per the Karvy Stock Broking stock market, investors can think of the following stocks — Larsen & Toubro, Mahindra and Mahindra, KRBL, KEC International and MOIL.
On top five budget 2019 stock picks Vivek Ranjan Misra, Head of Fundamental Research at Karvy Stock Broking said, "We highlight stocks that should benefit from government policy in general and budget announcements in particular. Stock selection is based on what Karvy Research believes shall be the thrust of government policy and would gain from the budget announcements and its implementation in the year ahead and how the company is positioned to benefit." He said that Larsen & Toubro, Mahindra and Mahindra, KRBL, KEC International and MOIL are the stocks that Karvy recommends stock market investors as thier budget share to buy on July 5th.
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Larsen & Toubro: we believe Infrastructure will be a major push for the government, which should benefit capital goods stocks, this is a bellwether stock for the sector. The order book in Mar 2019 stood at Rs 2934 Bn spread across sectors. While the domestic private sector witnessed a pickup, public sector orders constituted mainly state government orders. Going forward we expect new orders to pick up with a broad-based recovery in the economy. It has gained a majority stake in Mindtree which should help add significant scale to its hi-tech, CPG, retail and travel verticals. Also, we believe that its excellent execution capabilities and its balance sheet strength place it in a strong position for a capex cycle rebound.
Mahindra and Mahindra: revival of the rural economy, consumption especially discretionary consumption will be a major focus in the budget and beyond and Mahindra & Mahindra will be a major beneficiary. We expect M&M’s overall volumes to grow at 7.1% CAGR, sales at 9.5% CAGR and PAT to grow at CAGR of 2.7% over FY19-21E. Though the growth outlook for tractor industry in FY20 remains uncertain due to unpredictable monsoon performance, any stimulus to the rural sector will be positive for the stock and the management expects domestic tractor market to grow at ~5% in FY20. The stock remains one of the most inexpensive stocks amongst large-cap Auto Companies in India which makes it attractive as well.
KRBL: The stock will benefit from the push to promote food processing industry and the rural sector in general. KRBL Limited posted robust consolidated operating performance in FY19 on year on year basis on the back of strong sales and realization in domestic and export markets. It's export markets, mainly the Middle East are performing well. Strong domestic and export demand for Basmati rice to accelerate sales and thereby profitability for KRBL. We believe that KRBL with good brand recall will benefit from an increase in food exports. Valuations are attractive at a forward PER of 12.8x.
KEC International: We believe the next focus on the power sector will focus on transmission and distribution and KEC international will be a beneficiary. We expect this business to grow at 15-20% in FY20. Competitive intensity has also reduced as liquidity crunch is likely to lead to consolidation. Also, non T&D business has been growing rapidly. Railways and Civil are segments that can benefit from budget announcement and government focus on infrastructure in general. The existing strong order book to boost revenues at 14% CAGR during FY19-21E, and valuations are favourable.
MOIL: About 95% of manganese ore is used in steel manufacturing. Thus, the demand outlook for manganese ore is directly linked with the demand outlook for steel. Demand for steel has suffered in recent months because of an overall slowdown in construction and manufacturing activities as a result of a slowdown in CapEx activities ahead of the general election, a sharp contraction in the auto sector. Going forward, the economy should recover with a bit of help from the government, largely via a stimulus from the budget. The company trades at a forward PER of 7.7, which implies attractive valuations.
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