Pramod Amthe on 3 stock ideas for June and 2 stocks where they booked profit
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, Head of Institutional Equity Research,, says they have booked profit in Adani Port and moved out of Cipla due to margin challenges, while introducing Camlin Life Science, anticipating stabilization and benefits from anti-dumping duties. Thyrocare with new franchise expansion and Birla Corp's undervaluation drove outperformance in May. InCred also upgraded two stocks around February, March at the bottom of the market, Bajaj and SAMIL.If you look at earnings season for Nifty 50, the growth is still tepid on the EPS basis at around 5%. This was broadly in line with the expectations and that is a comforting factor. But for all the 4,000 odd listed companies, the growth is around 9%. So, the mid and smallcaps are definitely giving a better profit growth even in the March quarter, which is similar to the December quarter growth of 9%.Having said that, some of the macro factors have played out well for India in the sense of the last fortnight prediction for early onset of monsoon, or the oil prices coming down. So, macros are getting much quickly factored into the marketplace and hence the inclination more towards our bull case index targets are playing out, better than the expected in the short term.High conviction is a monthly bottoms-up approach which we look at for our 200 stock coverage universe. What we have done for June, the ones which you listed, have been there for the last couple of months. What we have done in case of our high conviction ideas is we have booked profit in Adani Port which has been one of the good performers in the last couple of months as it is near our target price and risk-reward at this juncture we feel is not too much in favour.We have moved out of Cipla which has been high conviction for the last couple of months because we feel there can be near-term margin challenges because of the product mix related issues. At the same time, we have introduced a smallcap name Camlin Life Science which is going to see the stabilisation of the vanillin plant along with the benefit of rights issue and the imposition of anti-dumping duties is going to give a substantial upside from the current levels.These are the three stock ideas for this month along with the remaining 17 to 18 of which you have taken a couple of stocks that have been big outperformers for us in May. As you rightly called out, one is Thyrocare on a strong visibility of new franchise expansion leading to the momentum in sales and the loss making division turning around on the high-end pathological test is the key driver for Thyrocare.Birla Corp is more on the midcap undervaluation per tonne basis is what plays out along with some momentum in the cement as seen in the fourth quarter results. Those are the things which have played out for us in these two stocks.We upgraded two stocks around February, March at the bottom of the market, Bajaj and SAMIL. Bajaj has seen a decent amount of correction from the top levels. We feel at this juncture the worst of KTM acquisition news is factored in in the current price levels and the valuation. Having said that, the firm has already clearly transitioned itself both into e-three-wheeler portfolio and also in case of e-two-wheelers, they are neck to neck in terms of the leadership in the electric scooters.The biggest comfort is the neutrality of the corporate margins in spite of handling such a big transition for the company. Even though the investors are a little bit concerned about the market share loss in motorcycles, we feel that can be addressed with the new product launches and hence at these current valuation with the expected addressable market expanding for them with a low speed scooters and the e-rickshaw, we are definitely looking at mid-teen to high-teen earnings growth for them in the next two years.Recent channel checks on it indicate that there are still headwinds. The recent restriction in terms of travel to India is going to be a little headwind to close the deals, especially large deals which have been the drivers of topline for it excluding, so we downgraded it somewhere in early part of the calendar year to neutral. We continue to hold the same as the full year guidance has not been great, encouraging, and the short-term headwinds on travel restrictions do play out in the short term.Other than the valuation factor, the topline outlook is still dim. So, we stay put with that rating. In terms of FMCG, we have been much more selective in the names which we want to play out in the FMCG sector. I would say the broader play in terms of interest rate sensitive are going to be the way we would like to play out is more on autos where we are neutral than on the consumption or on the FMCG basket where we would like to play more on the high-end side which is Ethos and the derivative of the consumption is more on TCPL Packaging which are on the high conviction idea stocks for us.We have dropped a couple of names in the recent past on the consumption side. We dropped out of Pidilite and Marico in the last three months from the high conviction list and have no immediate plans to add them back as the recovery seems to be more back-ended than the immediate benefit.
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