2014: Angle Broking's best bets from FMCG, metal, pharma

Dec 31, 2013, 02.07 PM IST

2013 was an exceptional year for IT and pharmaceutical. Lot of polarisation happened within the top tier companies. In 2014 as well, earnings growth will largely be dependent on export oriented sectors, Mayuresh Joshi, Angel Broking said.

Tags HCL Tech, TCS, KPIT Tech, Sun Pharma, Dr Reddys Labs, Cadila Health, ITC, Britannia, Dabur India, Tata Steel

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2014: Angle Broking's best bets from FMCG, metal, pharma

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In an interview to CNBC-TV18 Mayuresh Joshi, Angel Broking cherry picked his bet best for 2014 from various sector.

Angle Broking is bullish on HCL Technologies and Tata Consultancy Services (TCS) and believes that earnings growth in dollar and rupee terms will be exceptional for these companies. "With the US economy picking up and European markets stabilizing, discretionary spends on the IT side whether it be BFSI or the other sectors should grow going forward. It should support the EBITDA margins of both these companies within the top tier IT names," he said.

From midcap IT, it sees huge potential in KPIT Cummins . "The management has indicated that it will outperform Nasscom estimates by a huge margin. It has been consistently delivering results over the past few quarters. Our expectations are that the revenue growth both in dollar and rupee terms for KPIT can be much better than the industry," he said.

Pharma

One can buy largecaps Sun Pharma and Dr Reddys Laboratories on dips. From the midcap pharma space, Ipca Laboratories and Cadila Healthcare have huge potential. "Ipca Labs has utilization of Rs 80-100 crore in terms of bottom-line performance. It has got 36 ANDAs in the pipeline, 62 percent of its revenue contribution comes in from the export markets," he added. Cadila Healthcare can also be placed in one's portfolio as the company has got good pipeline of products, which can be revenue accretive.

FMCG

ITC , Britannia and Dabur are the broking firm's best bets from this space. "We see tremendous growth in the rural markets. Especially in case of Dabur, we expect its juices business to do well. It has been able to maintain margins at 15-16 percent; volume growth has been pretty good between 10-12 percent. Valuation wise it is a little bit expensive at 34-35 times, but looking at growth coming from rural and urban areas, the stock is poised to do well, "he added.

Metal

From the metals pack, it is betting on Tata Steel . "We believe that the import substitution theory can play out very well for Tata Steel. It has been able to maintain that margins, growth and revenues in a tough economic environment from its European operations. Once the domestic macro economic conditions improve, Tata Steels domestic operations can aid and benefit from this move and again aid earnings growth going forward," he said.

From the agro-chemical play, it is bullish on United Phosphorus. "The stock is not trading too expensively- it is at seven times FY15 earnings. The stock looks reasonable; buyback at Rs 220 will be a good support for the stock from a medium to long-term perspective," he added.

Bergaya Sehat