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TOP STOCKS FY 2018

A Year When Records Tumbled


TOP STOCKS FY 2018
A Year When Records Tumbled
Disclosure

William O Neil India Investment Adviser division, is one of the divisions of William O Neil India Private Limited, which is a company incorporat-
ed under the Companies Act 1956. William O Neil India Investment Adviser division is a registered investment advisor with the Securities and
Exchange Board of India and through its online product, MarketSmith India intends to provide quality equity research material and information
to its customers. The investments discussed or recommended through MarketSmith India may not be suitable for all investors and hence, you
must rely on your own examination and judgement of the stock and company before making investment decisions. Data provided through
MarketSmith India is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securi-
ties. Information and discussions made available through MarketSmith India contain forward looking statements that involve risks, uncertainties
and assumptions that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Wil-
liam O’Neil India Investment Adviser division or its employees / directors or any of its affiliates are not responsible for any losses that may arise
to any person who has made investments based on the contents of this document. Past performance never guarantees future results. Investment
in equities are subject to market risks and despite the best efforts to provide market leading research, William O’Neil India would like to exhort
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Performance results do not represent actual trading and may not reflect the impact that material, economic, and market factors might have
had on the investment-making process if actually managing client money. There is substantial speculative risk in most stocks. Performance com-
putations reflect a time-weighted rate of return and includes a brokerage of 0.5%. All holdings are rebalanced to equal rupee amounts daily.
Dividends are not considered in computations. Percent gains and losses are calculated for all issues that remain on the “Current Holdings” at
the end of the day. For stocks that were added to “Current Holdings”, the basis used to calculate the percent change is the price noted when
the issue appeared as a “Current Holdings” in MarketSmith India. For stocks that were removed, the selling price used to calculate the percent
is the price noted when the issue appeared as “Removed” in the MarketSmith India.
TOP STOCKS FY 2018
A Year When Records Tumbled

Table of Contents

Introduction 7

FY 2018 in Review 8

Featured Stocks 12

Complete List of Top Stocks 18

Index 78

-5-
-6-
TOP STOCKS FY 2018
A Year When Records Tumbled

Buoyed by burgeoning mutual fund inflows and the Indian government’s reform-oriented approach, market bulls dominated bears for
most part of the last fiscal. The BJP’s remarkable victory in Uttar Pradesh assembly elections in March 2017 set the stage for market
optimists at the onset of a new fiscal year. Despite a hiccup in the final quarter, the yearly rise was impressive at all the indices:

• Nifty gained 10.3%


• Nifty Midcap advanced 11.3%
• Nifty Smallcap rose 11.6%

The Nifty scaled new highs in 11 out of 12 months. But an anticlimax was in store, as the final two months saw bears overpowering
bulls. High valuation concerns, public-sector banking scams, return of long-term capital gains tax, rising crude oil prices, depreciating
rupee, increasing U.S. bond yields, and international trade war fears weighed on the Indian market. Eventually, the Nifty snapped a
four-quarter winning streak in March.

To sum up, the last fiscal saw bulls sprinting throughout the year, only to find bears waiting for them at the finish line.
Nobody can deny that investors made a lot of money in FY 2018. But the last two months left them bruised. It was a good example of
why one needs to be nimble-footed when it comes to booking profits in winners.

Investing is all about continuous learning and improvement. Post-analysis is the most important exercise you can undertake to repeat
your successes and avoid replicating your most common mistakes. Even after 50+ years, our founder William O’Neil continues to
study history’s greatest winning stocks, looking for common characteristics that preceded their big moves.

It remains a remarkable time to be an investor in the Indian market. High-growth companies with great products and services are
aplenty. All we need to do is shortlist the stocks with the best earnings profile and wait for an opportune time to invest in sync with the
market. Keep it simple and focused: study the charts and trade based on time-tested rules. Here’s to a prosperous 2018!
Best Returns

Anupam Singhi
-7- CEO, William O’Neil India
25%
FY 2018 Year-In-Review
April May June July August September
3rd 1st 3rd 1st 8th 3rd
India’s manufacturing PMI Real Estate Act comes into London terror attack India launches Goods and SEBI toughens stand North Korea’s proclaims
rises to a five-month high force, consumer’s the king weighs on global market. Services Tax, its biggest against 331 suspected Hydrogen Bomb test a
of 52.5 in March; stays tax reform in 70 years shell companies success; tensions with the
20%
above 50 for the third U.S. and regional allies
month in a row. 14th soar
7th
3rd 5th
11th India’s wholesale price
President Trump orders Government of India Saudi Arabia, UAE, Bahrain NSE hit by technical glitch, index rises 1.88%; picks 27th
military strike on Syria’s approves National Steel and Egypt call off diplo- trading halts for hours up for first time in five
Indian Army’s surgical
air base in response to Policy 2017. matic ties with Qatar; stop months.
strike hits the Nation-
the Syrian government’s all land, air and sea traffic. alist Socialist Council of
chemical weapons attack. 16th Nagaland-Khaplang along
15% 4th 20th
11th Market regulator Sebi the Indo-Myanmar border;
Cabinet clears ordinance Ram Nath Kovind elected
relaxes norms for stake Nifty drops 1.4%
Indian Government forms to tackle India’s bad loan 9th President of India with
panel to review NPA reso- mess. 65.65% votes purchase in distressed list-
British PM Theresa May ed companies by lenders.
lution rules. loses majority in parlia-
9th ment, faces pressure from
19th 31st
US President Donald opposition to resign.
Donald Trump signs Trump fires FBI Director India’s economic growth
executive order to review James Comey. slumps to three-year low
25th
10% H-1B visas of 5.7% in Q1 FY 2018.
CCI approves merger be-
tween Vodafone and Idea
Cellular.
31st 16th
India loses its tag of the India faces Rs 3.1 lakh
world’s fastest-growing crore ($49.1 billion) of
major economy after post- farm loan waiver.
5%
ing growth of 6.1% in Q4 18th
FY 2017, much lower than Infosys CEO Vishal Sikka
Chinese economic growth 21st
resigns; stock makes a 52-
27th
of 6.9%. week low, plunges 9.56% Central Government
Fitch retains India’s announces new Public
sovreign rating at ‘BBB-’; Private Partnership Policy
maintains stable outlook. to encourage private in-
vestments in affordable
housing.
24th 26th
0%
Cross-border tensions Nitish Kumar snaps pact
escalate, Pakistan violates with RJD and INC; joins
NIFTY50 hands with BJP.
Indian air space

-8-
25%

October November December January February March

3rd 2nd 12th 3rd 1st 8th


Indian government bites Trump nominates Fed Bitcoin hits record high of Factory activity expands Indian Finance Minister U.S. President Donald
the bullet; reduces excise Gov. Jerome Powell to be $20,000 fastest in 5 years, Decem- Arun Jaitley presents the Trump levies 25% tariff on
duty on petrol and diesel the next chairman of the ber manufacturing PMI at Union Budget for 2017- steel and 10% on alumi-
by Rs 2 per litre. The Federal Reserve, choosing 54.7. 18; Introduces LTCG on num imports. 20%
decision is expected to not to reappoint Janet 12th equities
result in a revenue loss Yellen. 10th
Factory output grows at 9th
of Rs 26,000 crore for the 8.4% in November 2017, Indian Government
government. Singh brothers quit as
the fastest pace in 17 announces introduction
directors of Fortis Health-
months. of E-way bill system for
4th care, stock jumps 24%.
movement of goods.
State Bank Of India 14th
appoints the current 13th 15%
14th U.S. Republicans reach Rs 11,500 crore fraud
Managing Director, Mr. 14th
agreement on sweeping rocks state-run PNB
Rajnish Kumar as the next Government of India Wholesale price inflation
Chairman. launches Bharat-22 ETF tax cuts that includes re-
(WPI) index at 7-month
with an intital target to ducing corporate tax rate
low of 2.48% in February
raise Rs 8,000 crore. to 21% from 35%.
10th
Indian Cabinet allows
foreign airlines to invest
upto 49% under approval 19th
10%
route in Air India; 100% UCO Bank discloses an
FDI in single brand retail exposure of more than Rs
trading permitted under 2,600 crore in the fraud
automatic route.
15th 13th
9th
Reliance Communications IDFC Bank and Capital NIFTY 50
defaults on dollar debt; First announce merger; 10.25%
Indian government eases shares plunge 13% to hit 18th
KYC norms for jewelery combined entity to have 5%
record low BJP continues winning assets under management
purchaes; revokes an
streak; Poised to form of Rs 88,000 crore. 22nd
order that mandated PAN 17th government in Gujarat Donald Trump signs mem-
and Aadhaar cards for 17th
Moody’s upgrades India’s and Himachal Pradesh orandum to levy tariffs
gold purchases exceeding Indian government cuts 28th
local and foreign currency of $50 billion on Chinese
Rs 50,000. additional borrowing to India regains status of
issuer ratings to BAA2 goods; Dow Jones slumps
from BAA3; outlook chang- Rs 20,000 crore, from fastest growing economy 2.7%.
es to stable from positive the earlier announced Rs by surpassing China’s
24th 19th 50,000 crore. growth rate of 6.8% in Q3 0%
Government announces 24th US Senate approves the 29th FY 2018. India’s GDP grows
Rs 2.11 trillion PSU bank S&P maintains India’s biggest tax cut and reform Nifty hits lifetime high of 7.2% in the December
recapitalisation plan ratings at ‘BBB-’ bill 11,171.55 quarter.

-9-
Featured Stocks

-10-
Featured Stocks—Profit from Conviction and Patience
The record-setting highs of FY 2018 were buoyed by extended runs from a majority of stocks. Simply put, many stocks took off and kept making
fresh highs.

The top-most gainers saw some commodity producers making the cut as China’s crackdown on polluting industries played in favor of Indian man-
ufacturers.

The best stocks of last fiscal, however, were sometimes tricky to hold. They required longer periods of time to run (patience) and more faith that
potential sell signals were not indicative of a negative turn (conviction).

By the end of the year, spotting sell signals became equally important following a correction in the general market. Quite a few stocks came un-
der the pump in the final quarter. However, the gains accumulated in the first nine months were more than enough for some fundamentally strong
stocks to end the fiscal with stupendous returns.

This section highlights 30 stocks that passed the screening criteria listed below. It begins with charts marked up by MarketSmith® Product Coaches
to indicate the kind of technical and fundamental analysis crucial to post-analysis. Weekly charts for the screened stocks are accompanied by an
article laying out the fundamental story of the stock. The featured stocks are organized by sector and sorted by performance within each sector in
descending order.

Screening Criteria:

• Stock Price ≥ Rs 20
• March 2018 High price > March 2017 High price
• Stock Price increase by at least 100% in FY 2018
• Average Daily Rupee Volume on 31/3/2018 ≥ Rs 1,00,00,000

-11-
Nifty - Daily
Index Charts

LOG (Fixed) PRICE

17K

16K

15K

14K

13K

12K

11171.55

11K
10631.65
10490.45
10409.55

10404.65 10,113
9709.30 10276.30 10K
10094.00 10033.35 -70.45 -0.69%
9273.90

9341.65
9000
9075.15

8000

7000

28-03-2018
LOG VOLUME

355.0M
300M
200M
+47%
90M
60M

May

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-12-
Nifty - Weekly

Index Charts
LOG (Fixed) PRICE

50K
46K
42K
38K
34K

30K

26K
24K
22K

19K
17K

15K

13K
12K
11K
+54% +31% 10,113
10K
+11% 9000
+115.65 +1.16%
8000

+25% -13% -12% 7000


+25% +14% -13%
-18%
6000
-8%
-10% 5000
-18% 4600
-13%
4200
3800
3400

3000

2600
2400
2200

1900
1700

1500

1300
1200
1100
1000

28-03-2018
LOG VOLUME

900M
858.4M
700M
-25%
500M

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-13-
Sensex - Daily
Index Charts

LOG (Fixed) PRICE

50K

48K

46K

44K

42K

40K

38K

36K

33865.95 33770.15
34K

33703.37 32,968
31522.87
32683.59 32K
-205.71 -0.62%
32565.16

31128.02 31081.83
30680.66 30K

28K

26K

24K

22K

20K

19K

28-03-2018
LOG VOLUME

10B

-29%
3B
1.3B
1B

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-14-
Sensex - Weekly

Index Charts
LOG (Fixed) PRICE

190K
170K

150K

130K
120K
110K
100K
90K
80K

70K

60K

50K
46K
42K
38K
+27%
34K
+50% 32,968
+9% +29%
+11% 30K
-5%
+372.14 +1.14%
26K
+23% -12% -12% 24K
+11% +13% -13% 22K
-19%
19K
-7%
-1% -10% 17K
-15%
15K

13K
12K
11K
10K
9000
8000

7000

6000

5000
4600
4200
3800
3400

28-03-2018
LOG VOLUME

20B

-41%
7B
4.5B
4B

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-15-
Nifty 500 - Daily
Index Charts

LOG (Fixed) PRICE

15K

14K

13K

12K

11K

9895.00
10K

9286.85

8976.75
9000
8,912
8496.00 8949.00 8981.95 8968.50
8404.10 -66.00 -0.74%

8249.10 8000
8087.00

7000

6000

28-03-2018
LOG VOLUME

159.2B
+21%
100B
80B

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-16-
Nifty 500 - Weekly

Index Charts
LOG (Fixed) PRICE

46K
42K
38K
34K

30K

26K
24K
22K

19K
17K

15K

13K
12K
11K
10K
9000
8,912
+62% +34%
+11% 8000
+111.30 +1.26%
7000

-12% -12% 6000


-13%
+28% +13% -21%
5000
4600
-6% 4200
-12% 3800
-19%
3400

3000

2600
2400
2200

1900
1700

1500

1300
1200
1100
1000
900

28-03-2018
LOG VOLUME

500B
416.0B
400B
300B
-32%
200B

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-17-
HEG
Basic Material

EPS Strength Price Strength Buyer Demand Group Rank


POOR : 3 GREAT : 99 GREAT : A+ POOR : 76
INE545A01016
EPS +1% from Pivot in 3 Weeks LOG (Fixed) PRICE
20 x
4600

Solid technical ratings 4200


41% 3800
3400
3,185 INR
3000
-25.95 -0.81%
2600
2400
2200

1900
1700

1500

1300
1200
1100

Stock zooms to a 52-week high 1000


900
on huge trading volume 800

700

600
35%
500
460
420
380
340

300

260
240
220

190
170

150

-32% -29% 130


-62% 120
110
100
Massive acceleration in 90

sales and earnings growth rates


28-03-2018
LOG VOLUME

1.6M
1M
-52%
400K

60K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-18-
HEG

HEG Hits Jackpot in FY 2018

Basic Material
HEG had an incredible year at the bourses as the stock multiplied more than 14x in FY 2018. One of the
world’s leading producers of graphite electrodes, the Company benefitted immensely from graphite electrode
prices going through the roof last year.
A mismatch in supply-demand fuelled the rally after an aggressive anti-pollution campaign in China resulted in
the shutdown of 30% of the country’s graphite electrode production capacities. Besides, a crackdown on tradi-
tional steel blast furnaces also played in favour of the graphite industry.

Graphite electrodes are the primary heating component in electric arc furnaces (EAF) for steel production. To
produce one ton of steel, an EAF plant requires two kilograms of graphite electrode. Steel production via EAF
is more environment friendly compared with the use of blast furnaces. EAF players gained prominence after
China came down heavily on blast furnaces and steel exports dropped 35% to 75 mmt in 2017. Against this backdrop, other countries were forced
to increase steel capacities to fill the gap. Eventually, the closure of high polluting graphite plants in China and burgeoning demand for electrode
from existing and new EAF plants resulted in a massive uptick in graphite electrode prices.

With an annual capacity of 80,000 tons, HEG is a renowned graphite electrode player not only in India but also globally. Buoyed by rising demand
for graphite electrodes, its capacity utilization escalated to 80% in FY 2018, compared with a mediocre 55% two years ago. Higher utilization levels
helped the Company to return to profitability in Q2 FY 2018, after six straight quarters of losses.

HEG’s stock price started advancing well ahead of its fundamentals as the stock broke out of a first-stage cup-with-handle base in February 2017.
It remained in a strong uptrend throughout FY 2018, posting monthly gains in 11 out of 12 months. HEG made investors wealthy by an astonish-
ing 1,330% in the last fiscal year.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-19-
Graphite India
Basic Material

EPS Strength Price Strength Buyer Demand Group Rank


FAIR : 62 GREAT : 99 GREAT : A+ FAIR : 54

EPS 20% to Pivot LOG (Fixed) PRICE


20 x
1700

Strong technical profile 1500

1300
1200
1100
1000
900
800
726.10
700 INR
-13.75 -1.86%
600

Stock breaks out after moving sideways for seven years; 500
scales new high amid massive accumulation 460
420
380
340

300

260
40% 240
220

190
170

150
23%
130
120
110
100
-25%
90
80

-23% 70
-21%
-27% 60

-35%
48
44
40
36

Accelerating sales growth; 32

massive earnings growth 28-03-2018


LOG VOLUME
10M
6.0M
4M
-38%
600K
200K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-20-
Graphite India

Graphite India Remains Unstoppable

Basic Material
Graphite India had a phenomenal year at the bourses as the stock multiplied more than six times in FY 2018.
The Company, one of the world’s leading producers of graphite electrodes, benefitted largely from a sharp rise
in graphite electrode prices, driven by an unprecedented shift in the industry’s supply and demand dynamics.

Anti-pollution drive and tougher environmental laws in China resulted in restriction on steel production through
blast furnaces. This led to a 35% drop in Chinese steel export in 2017, making way for an increase in global
steel production through electric arc furnaces (EAF). The closure of traditional steel blast furnaces favored the
graphite electrode industry, as it is the major heating component for steel production through EAF.

To produce one ton of steel, an EAF plant requires 2 kg of graphite electrodes. Steel production through EAF
route is more environmentally friendly. With China imposing restrictions on steel production using blast furnace, EAF players expanded their opera-
tions, resulting in high demand for graphite electrodes.

With an annual production capacity of 98,000 MT, Graphite India is well-positioned to benefit from the growing demand for graphite electrodes.
The rising demand across the globe led to an improvement in the Company’s capacity utilization levels. In Q4 FY 2018, the Company achieved
a utilization level of 100%, leading to an average utilization of 85% in FY 2018 compared with 75% in FY 2017. Driven by higher electrode prices
and optimum utilization levels, Graphite India attained accelerating revenue and triple-digit net profit growth in all four quarters of FY 2018. Over-
all, it reported a 123% increase in revenues and about 15-fold jump in EPS during last fiscal.

Robust sales growth, incremental margins, 14.6x jump in net profit, strong working capital management, and increasing return ratios came togeth-
er to support a meteoric rise in its stock in FY 2018. The stock broke out of a consolidation base in June 2017 and maintained its uptrend through-
out FY 2018. On the back of rising institutional sponsorship, the stock appreciated by a massive 548% during last fiscal.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-21-
Bhansali Engineering Polymers
Basic Material

EPS Strength Price Strength Buyer Demand Group Rank


GREAT : 98 GREAT : 98 GREAT : A- FAIR : 56

EPS 473% from Pivot LOG (Fixed) PRICE


20 x
340
Solid technical ratings 300

260
+1057% 240
220

190
170.60
170 INR
+8.40
150 +5.18%
-28%
130

Leading earnings profile 120


110
100
90

Stock breaks out to a 80

multi-year high on massive volume 70

60

50
46
42
38
34
+58%
42% 30

26
+78% +125% 24
+50%
22

19
-20% 17

15
-50%
13
12
-54% -45% 11
10
-55% 9
8

Impressive sales and 7

earnings growth rates


28-03-2018
LOG VOLUME

2.1M
100K
-42%
10K
1K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-22-
Bhansali Engineering Polymers

Strong ABS Demand Propels Bhansali Engineering Higher

Basic Material
Bhansali Engineering Polymers (BEPL) is India’s fastest growing manufacturer of Acrylonitrile Butadiene Styrene
(ABS) and Styrene Acrylonitrile (SAN) resins. The Company operates in a duopoly market and, along with IN-
EOS Styrolution, controls almost 50% of the domestic demand. The remaining 50% is met by imports.

BEPL’s products are mainly sourced by clients in fast-growing industries, with more than 80% of revenues com-
ing from the automotive and appliances industries. ABS manufacturers generally have long-term contracts
in place due to high degree of customization and switching costs. The Company’s technological tie-ups with
renowned international players (Sumitomo and Nippon) have allowed it to build a marquee customer base over
the past two decades. Its clients include Maruti Suzuki, Honda, LG, Samsung, and Whirlpool, among others.

ABS resins continued to witness strong demand in FY 2018, with more businesses opting for engineered plastics instead of commodity plastics
owing to the former’s durability. Amid strong demand for high-quality plastics in home appliances and automobiles, BEPL’s products gained trac-
tion throughout FY 2018. Further, plant shutdowns in China resulted in higher pricing of products. This allowed the Company to post strong sales
growth in all four quarters of the last fiscal. Overall, BEPL delivered a revenue growth of 65% in FY 2018.

Following rising demand for ABS resins, the Company’s capacity utilization levels improved substantially, resulting in margin expansion. Its EBITDA
margin improved 600bps to 15% and EPS jumped 182% to Rs 6.03 during the last fiscal.

Considering supply shortage in the domestic market and a strong growth outlook for ABS resins, BEPL undertook expansion at its Abu Road facility.
By the end of 2018, its annual production capacity is expected to jump 71% to 137,000 tons from 80,000 tons. To cater to international markets,
the Company also plans to construct a port-based plant with annual capacity of at least 200,000 tons by FY 2021. BEPL plans to fund these expan-
sions via internal accruals.

Amid strong expansion plans, solid sales and earnings growth, and 100% reduction in long-term borrowings, the stock witnessed strong price-vol-
ume accumulation throughout FY 2018. Eventually, it multiplied investor wealth by a massive 4.7x.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-23-
Rain Industries
Basic Material

EPS Strength Price Strength Buyer Demand Group Rank


GREAT : 97 GREAT : 98 GOOD : B POOR : 76

EPS -7% from Pivot in 13 Weeks LOG (Fixed) PRICE


20 x
800

Solid EPS Rank Strong price strength and buyer demand 700

600

500
460
420
380
374.65 INR

Rain Industries breaks out of 340


+1.25 +0.33%
300
eight-week-long cup base pattern -36%
260
on above-average volume 240
220

190
170

Stock breaks out to new highs 150

IJūƑǶƑƙƥƥĿŞĚĿŠŠĿŠĚNjĚîƑƙ 130

ĿŠcîŠƭîƑNjȃȁȂȈ
120
110
100
90
+105%
80

70

20% +77% 60
+57%
+55% +73%
+31% 50
+41% 46
42
-6% 38
34
-34% 30
-32%
-25%
-43% 26
-53%
24
-43%
22

19
17

15

28-03-2018
LOG VOLUME
20M
8M
4.1M
3M
-74%
500K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-24-
Rain Industries

Raining Profits on Investors

Basic Material
Rain Industries is a vertically integrated manufacturer of carbon, cement, and chemical products. It is one of the
world’s leading producers of calcined petroleum coke (CPC) and coal tar pitch (CTP) which are predominantly
used in production of aluminium. Besides aluminium, its high-value carbon products are also used by graphite,
carbon black, and titanium dioxide, among other industries. Driven by rising global demand for aluminium and
soaring prices of CPC, the stock had a dream run in FY 2018.

About 80% of the CPC produced by Rain Industries is used up by the aluminium industry. In 2017, the global
aluminium demand increased 6% y/y to 64.2 million tonnes, with Chinese demand growing 8% to 35 million
tonnes. As a result of high global demand and capacity cuts in China, India’s aluminium exports jumped 36%
in FY 2018. In the domestic market, rapid urbanization and favourable government reforms aimed at improv-
ing overall infrastructure also fuelled the demand for aluminium. With CPC prices increasing rapidly due to higher aluminium demand and supply
constraints following China’s curb on polluting industries, Rain Industries raked in elevated realizations for its CPC.

The Company’s carbon products segment revenues grew 26% y/y in 2017 and accounted for 75% of its total revenues. At EBIT level, carbon prod-
ucts made up 93.5%. Driven by better realizations and operating leverage benefits due to higher capacity utilization, Rain Industries’ profit growth
outpaced top-line growth comfortably in 2017. The Company’s EPS jumped 162% y/y to Rs 22.7.

The stock caught attention of some marquee investors and witnessed massive accumulation for most part of the last fiscal. Backed by strong fun-
damentals, conducive industry dynamics, and rising institutional sponsorship, it accumulated gains in 10 out of 12 months, before ending FY 2018
with an astounding return of 242%.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-25-
Himadri Speciality Chemical
Basic Material

EPS Strength Price Strength Buyer Demand Group Rank


GOOD : 83 GREAT : 93 GOOD : B- FAIR : 56

EPS LOG (Fixed) PRICE


20 x
340

Good earnings profile Leading price strength, good accumulation 300

and decent group rank 260


240
220

Stock breaks out of an eight-week-long


190
170
cup base pattern on high volume, 150
146.15 INR
before commencing a long rally -1.80
130 -1.22%
120
110
100
90
80

70

60

50
46
42
38
34

-32% 30

26
24
-35%
22

19
17

15

-64% -42% 13
-46%
12
-51% -51% 11
10
9
8

Consistent and strong sales


and earnings growth rates 28-03-2018
LOG VOLUME

7M
3.0M
2M
-59%
500K
100K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-26-
Himadri Speciality Chemicals

Special Year for Himadri Speciality Chemical

Basic Material
Himadri Speciality Chemical is the leading integrated manufacturer of coal tar pitch (CTP) and carbon black.
The Company holds a strong position in CTP market with a market share of 70% and a notable customer base.
On the back of huge demand for its product, the Company delivered strong double-digit sales and triple-digit
earnings growth in all four quarters of the last fiscal.

CTP is an important input material used in the manufacturing of anode, which in turn is used in aluminium and
graphite smelters. Amid strong growth outlook for aluminium and graphite, the CTP market witnessed huge
demand in FY 2018. Himadri being the market leader in CTP market grabbed all the attention from its custom-
er base. Moreover, the prescribed requirement of CTP to get transported at 250°C favoured Himadri Specialty
as its major plants are strategically located close to end customers and it owns a customised fleet of more than
140 tankers for transportation.

In addition to CTP, the Company also produces speciality carbon black and advanced carbon material (ACM). These products have higher realiza-
tion compared to other products. ACM is used in lithium-ion batteries. More specifically, the adoption of electric vehicle and its burgeoning demand
across the globe is driving the demand for ACM. Adding to that, Himadri is the lone producer of anode material for lithium-ion-battery in India
from its in-house distilled coal tar. The production of ACM is supported by its backward integration in terms of raw material (coal tar) and power
(20 MW of captive power) compared to the external dependency of inputs for its global competitors.
In order to meet the rising demand of ACM, the Company plans to expand its annual capacity from 600 tonne to 20,000 tonne by FY 2020. With
rising demand and robust capex plan in place, the Company seems to be at an inflection point to become a key global player in the anode materi-
al space.

With respect to financial performance, the Company’s earnings growth outpaced its sales growth in all four quarters of FY 2018, driven by operat-
ing leverage benefits. While its revenue grew 51% y/y, net profit jumped 200% in FY 2018. Himadri managed to lower its debt for the fourth year
in a row, resulting in 15% drop in finance cost in FY 2018. It also reduced its working capital requirement to 31% of sales in FY 2018, compared to
55% in FY 2014, driven by better supply chain management.

Going forward, the Company is well-positioned to benefit from the increase in the domestic aluminium production capacity, which is expected to
reach 4 MTPA by FY 2019 from the current figure of 2.75 MTPA. On the back of strong fundamentals and improved outlook, the stock multiplied
investor wealth by 3.3x in FY 2018.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-27-
Phillips Carbon Black
Basic Material

EPS Strength Price Strength Buyer Demand Group Rank


GREAT : 90 GREAT : 95 GOOD : B FAIR : 56

EPS -1% from Pivot in 13 Weeks LOG (Fixed) PRICE


20 x
45% 2000

Impressive EPS Rank Strong buyer demand 1800


1600
and relative price strength 1400

1200
1100
1,085 INR
1000
¡ĺĿŕŕĿƎƙ îƑċūŠċƑĚîŒƙūƭƥūIJîǶƑƙƥɠƙƥîijĚČƭƎ +93.20
900
+9.39%

ċîƙĚƎîƥƥĚƑŠūŠîċūDŽĚɠîDŽĚƑîijĚDŽūŕƭŞĚɒ 800

¬ƥūČŒƎūƙƥƙijîĿŠƙĿŠŠĿŠĚūƭƥūIJȂȃŞūŠƥĺƙĿŠGÞȃȁȂȉ 700

600

480
440
400
360
320

280

240
220
200
38% +282%
-30% 180
+228% +55% +38% 160

140
+40%
120
110
100
-32%
90
-9% -45%
80
+110% -45% 70

60

48
44
-32% 40
36
32
-59% 28

24

28-03-2018
LOG VOLUME
4M

1.0M
700K
300K
-40%
100K

Sep, 12 Mar, 13 Sep, 13 Mar, 14 Sep, 14 Mar, 15 Sep, 15 Mar, 18

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-28-
Phillips Carbon Black

Phillips Carbon Black Weaves Magic

Basic Material
Phillips Carbon Black is India’s largest carbon black company and the seventh largest globally (by volume) with
operations in more than 30 countries. The Company caters to one-third of the domestic consumption in India
and 10% of Asian market (excluding China).

Carbon black, mainly used as reinforcing filler in tyres and other rubber products, is gaining traction in the
Indian market following an increased demand from the tyre industry (65% of CB demand comes from tyre). The
industry continues to outpace the production growth of automobile on account of heavy demand from replace-
ment market. Tyre production has been growing at a CAGR of 6.3% (FY 2013-2017) outpacing automobile
production growth of 5.6%. The strong demand from the industry helped Phillips Carbon to expand its client
base, which includes some of the notable players such as MRF, Michelin, CEAT, Bridgestone, JK Tyre, and Conti-
nental, among others.

Amid rising demand, the Company’s production grew 8.5% during the period FY 2014-2018 and capacity utilization jumped from 77% in FY
2015 to 97% in FY 2018. It plans to grow at a much faster pace through capacity expansion, which is expected take total capacity to 715KT from
the current capacity of 515KT.

Besides demand from the tyre industry, favorable macro environment is also helping domestic players. China is the major source for global car-
bon black production (44% of global capacity). The anti-pollution campaign in China that resulted in shutdown of chemical plants, helped Phillips
Carbon to capture the vacated space and improve its international market share. Moreover, the anti dumping duty on import of carbon black used
in rubber applications suppressed imports from China.

Phillips Carbon being the market leader, benefitted largely from a diversion in demand from China to India. In addition to rubber carbon black,
the Company is focusing on high graded speciality black, used as black pigment and as an additive to enhance material performance. This is a
premium sub-segment of carbon black industry with gross margin per tonne being 4-5x than that of rubber carbon black. The Company aims to
expand this high graded carbon black capacity by 32,000 MTPA, which bodes well for overall margin expansion.

Backed by capacity expansion and strong demand, the Company showcased impressive financial performance, with 99% speciality carbon black
sales volume growth, 39% EBITDA growth, and 228% PAT growth in FY 2018. This financial performance translated into robust share price move-
ment. After the stock broke out of a 15-week-long cup base in February 2017, the stock kept moving higher and ended FY 2018 with a stupendous
return of 229%.
©2018 williamoneilindia marketsmithindia@williamoneilindia.com
-29-
Gravita India
Basic Material

EPS Strength Price Strength Buyer Demand Group Rank


GREAT : 91 GREAT : 92 GREAT : A- POOR : 76

EPS 14% to Pivot LOG (Fixed) PRICE


20 x
420

High EPS Rank


380
340

300

260
240
220

190
170
Stock breaks out of 155.85
150 INR

three-week tight area, -2.15


130
-1.36%
-29%
-34%
driven by massive buying interest 35%
120
110
100
90
35% 80

70

60

50
46
42
38
34

-40% 30

26
24
-74%
22
-38%
-89% 19
-41%
17

15
-49%
13
12
11
10
9
8

Strong growth rates 28-03-2018


LOG VOLUME

1M
400K
374.9K
-68%
60K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-30-
Gravita India

Gravita India Triples Investor Wealth

Basic Material
Gravita India is a leading lead recycling company in the country that caters to the auto, telecom, pharma,
power, and nuclear industry. It processes lead ore, lead concentrate, lead battery scrap, and aluminium scrap
to produce secondary lead metal and aluminium ingots. It operates through 18 manufacturing plants in seven
countries and has a capacity of 164,219 million tons per annum (MTPA). Management expects to increase it to
235,319 MTPA in FY2019.

The Company’s modus operandi? It collects lead-based scraps such as batteries and inverters from the market,
and recycles them to sell to companies like Exide Industries and Amara Raja Batteries and many others. Gravi-
ta’s other recycling segments like aluminium scrap, plastics and paper are also growing and have a lot of room
for further expansion.

Also, the Company’s strong global scrap collection network not just gives it a lead over its competitors but also makes it difficult for new players to
enter the market. The Company also makes most of its machines in house that helps it to stay highly efficient. In such an environment, it is difficult
for the new players to be cost efficient like Gravita.

Industry dynamics also acted in its favour. For example, China was the largest producer of lead but shut thousands of its factories in a bid to reduce
pollution. That created a mismatch between supply and demand and pushed lead prices higher, opening a window of opportunity for Gravita. For
FY 2018, Gravita India has tripled investors’ wealth after the stock broke out of a first-stage cup-with-handle base in March 2017.

The strong technical characteristics were backed by robust fundamentals. Being the market leader in the lead recycling industry in India, the Com-
pany’s revenue and PAT has expanded at a CAGR of 36% and 33% between FY 2008 and FY 2018. During Q4 FY 2018, the Company received
orders worth Rs 250 crore from Luminous Power Technologies Private Limited (a part of European Schneider group) and also bagged orders worth
Rs 300 crore from Singapore firm Kyen Resources Pte Ltd for supplying 18,000 MT of pure lead and lead bullion. These orders will help the Com-
pany to expand its footprint across new geographies like Europe, North America, South America, Africa, and Asia.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-31-
Avanti Feeds
Basic Material

EPS Strength Price Strength Buyer Demand Group Rank


GREAT : 97 GREAT : 91 GOOD : B- FAIR : 51

EPS 24% to Pivot LOG (Fixed) PRICE


20 x
3800
3400
3000
Strong proprietary ratings and rankings Stock breaks out of a 16-week-long 2600

cup-with-handle base on above-average volume 2,234


2200
1900
INR
+69.40 +3.21%
1700
1500
1300
1100

900
+139% 800
+91% +90% 700
600

+2176% 500
440
380
-34%
340
-51% 300
260
-33%
220
190
170
150
130
110

90
80
70
60
+153% 50
44
38
34
30

-36% 26
22

18
-59% 16
14

Solid earnings growth rates 28-03-2018


LOG VOLUME

900K
300K
267.9K
100K
-51%

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-32-
Avanti Feeds

Avanti Ends FY 2018 with Stellar Returns

Basic Material
Avanti Feeds is India’s leading manufacturer of prawn and fish feeds and exporter of processed shrimps. The
Company collects shrimps from cultivators, to whom it sells its feeds. It caters to over 13,000 shrimp farmers
and generated 83% of FY 2018 revenues from the shrimp feed business.

During the last fiscal, India’s shrimp production increased ~20% y/y, driven by strong export demand. This re-
sulted in strong feed consumption growth. Since most of the shrimp production is exported to western countries
that have stringent quality norms, farmers prefer usage of high quality branded feed. Avanti Feeds provides
nutritionally balanced high-quality feeds that foster faster growth and high survival rate. For farmers, this trans-
lates into higher yields and profits. This has been the biggest factor in the Company winning the faith of the
farming community. With an enviable market share of 43% in the shrimp feed industry, Avanti Feeds benefitted
immensely and its revenue from the feed segment grew 26% y/y in the last fiscal.

The softer raw material prices for shrimp feed also helped Avanti in improving overall profitability. Shrimp feed is manufactured using three major
raw materials - sardine fish, soyabean and wheat. Sardine fish is the major contributor to the total feed cost, prices of which declined substantially
from Rs 130/kg in Q1 FY 2018 to Rs 70/kg in Q3 FY 2018. This resulted in higher margins. While raw material prices bottomed out and began to
rise in the fourth quarter, lower input costs in the first three quarters helped the Company to end FY 2018 with a 109% growth in EBIT on the back
of an 800 bps improvement in the EBIT margin of the shrimp feed segment.

Apart from shrimp feeds, Avanti’s processed shrimp business has gained traction in recent times following the Indian government’s approval for
the highly popular Vannamei shrimps, rising consumption of shrimps in the U.S., and reducing dependence on Thailand in the global shrimp mar-
ket. The anti dumping duty of 2.34% by the United States as opposed to 10% on most of the exporters provides a competitive advantage to Indian
exporters. In FY 2018, the processed shrimp segment’s revenue grew 51% y/y.

With both business segments doing well, Avanti reported solid double-digit sales growth in all the four quarters and triple-digit earnings growth in
the first three quarters of FY 2018. Anticipating strong future demand for shrimp feeds, the Company commissioned a 175,000-ton mill near Ra-
jahmundry in Q4 FY 2018, increasing its annual feed capacity by 41% to 600,000 ton. In addition to solid sales and earnings growth in FY 2018,
Avanti’s timely expansion plan also boosted investor sentiment.

In FY 2018, Avanti Feeds proved to be a delight for investors as its share price tripled amid heavy accumulation. After breaking out of a first–stage
cup with handle base in early 2017, the stock remained in a strong uptrend, notching up gains for seven straight months during the last fiscal.
©2018 williamoneilindia marketsmithindia@williamoneilindia.com
-33-
Prakash Industries
Basic Material

EPS Strength Price Strength Buyer Demand Group Rank


GREAT : 93 GREAT : 89 FAIR : C FAIR : 47

+ 15% from Pivot in 24 Weeks LOG (Fixed) PRICE

600

High EPS and Price Strength 500


460
420
380
340

300

260
Stock breaks out of a seven-week-long 240

consolidation base on above-average volume


220

190
170
169.10 INR
-0.650
150 -0.38%
130
120
110
100
62%
90
80

23% 70

60

50
46
-61%
42
-31%
38
34

-31% 30

26
24
-58% 22
-81%
19
17

15

13
12
Massive growth in EPS 11

supported by strong sales growth


28-03-2018
LOG VOLUME

7M
5.6M
3M
-55%
600K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-34-
Prakash Industries

Steel Sector Boom Brings Success for Prakash Industries

Basic Material
Prakash Industries is a fully integrated steel company that began with producing PVC pipes before foraying into
steel production. The Company benefitted from the boom in the steel sector on the back of downswing in Chi-
na’s steel production and India’s fast-growing affordable housing sector. Taking cues from the favourable mac-
ro environment and the Company’s strong growth rates, investors lined up to buy the stock, driving the share
price higher by 120% in FY 2018.

The Company’s steel portfolio consists of wire rods, HB wires, structural steel, TMT bar, ferro alloy. This product
portfolio is completely aligned with housing and infrastructure sector which is the major focus of the govern-
ment. Some of the noteworthy initiatives of the government of India such as affordable housing, housing for all
by 2022, power for all by 2019, 100 smart cities by 2022, Atal Mission for Rejuvenation and Urban Transpor-
tation, and expansion of railway networks is creating strong demand for steel in the country. It is expected to grow national capacity to the tune of
300MT by 2030-31.

In addition, the government is also making efforts to promote domestic coal utilization to reduce imports. Since coal is the major ingredient for
producing steel, Prakash Industries attains 100% of its coal requirement through linkage for the sponge iron plant in Chhattisgarh (capacity of 1MT
per annum). Coal supply through linkage auction saves over 20% on cost compared to supplies through spot auctions. The total coal linkage se-
cured by it now stands at 1.556MT per annum (including linkages for Captive Plant), which yields annual savings of Rs 90 crore on fuel cost.

The savings reflected in Company’s income statement, as its EBITDA and PAT grew 139% y/y and 347% y/y, respectively, in Q4 FY 2018. On
annual basis, its EBITDA and PAT grew 125% and 392% in FY 2018. Apart from long term agreement with Coal India, the Company also tied up
with supplies of iron ore from Odisha miners and NMDC on long term basis. The Company plans to expand its sponge iron capacity by 0.4MT per
annum with the commissioning of its sponge iron kiln by September 2018. With the industry in a multiyear up-cycle combined with better sourcing
facilities, the Company managed to attain improved sales realization (sixth consecutive quarters of double-digit sales growth).

Strong steel prices, full utilization of steel capacity, uninterrupted supply of iron ore from Odisha helped Prakash Industries in strengthening its busi-
ness in FY 2018. Being a low cost and fully integrated steel manufacturer with operations focused only on domestic market made Prakash Indus-
tries an ideal stock in the midcap metal space. Prakash Industries stood out among its peer with a low debt to equity ratio (0.3x), while its compet-
itors struggled with highly leveraged balance sheets. The stock broke out of a consolidation base in April 2017 and maintained its uptrend for the
most part of FY 2018 and multiplied investor wealth by 2.2x.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-35-
NOCIL
Basic Material

EPS Strength Price Strength Buyer Demand Group Rank


GREAT : 95 GREAT : 89 GOOD : B+ FAIR : 56

19% to Pivot LOG (Fixed) PRICE

380
Good technical ratings 340

Stock rebounds from 10-week 22% 300

Solid EPS Rank moving average after breaking out +298% 260
240
of a four-week-long tight area +225%
220

191.85
190 INR
+3.50
170 +1.86%
150

130
120
110
100
+120% 90
23% 80

+77% 70

+50% 60
+269% -28%
44% 50
+35% 46
42
38
34
+107% 30
-36%
26
24
+32% +22% 22

19
+37%
17

-18% 15
-20%
13
-30% -19% 12
-39% 11
10
9
8

Accelerating sales and


strong EPS growth rates 28-03-2018
LOG VOLUME

6M

2M
1.5M
600K
-72%

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-36-
NOCIL

NOCIL Benefits from Anti-Pollution Campaign in China

Basic Material
NOCIL is India’s largest rubber chemicals manufacturer that prides itself on its rich history spanning more
than four decades. A part of the Arvind Mafatlal Group, its past records of excellence allow the Company to
build long-term business relationships in Indian and international markets. In an industry largely dominated
by China, NOCIL managed to grab a noteworthy global market share of more than 5%. On the domestic
front, the Company prevails as the undisputed leader with more than 40% market share.

NOCIL produces rubber chemicals that are lapped up by tyre manufacturers. Its clientele comprises notable
players such as MRF, Ceat, Apollo Tyres, Bridgestone, Michelin, and Continental, among others.

In FY 2018, NOCIL rose to the occasion in the wake of an anti-pollution drive that resulted in chemical plant
shutdowns in China, and got itself a foot in the door. To add to this, the Indian government’s landmark reforms of demonetisation and GST went
on to suppress the import of rubber chemicals from China. Things couldn’t have gotten better for NOCIL! The Company was swift to cash in on this
diversion in demand from China to India.

Equipped with a market leadership position in India, NOCIL made the most out of macro growth drivers last year and emerged as one of FY
2018’s star performers. The Company posted accelerating sales growth for five straight quarters coupled with strong double-digit rise in net profit.
On the operations front, the commissioning of a modern, zero-wastage facility at Dahej paved way for NOCIL to meet increasing demand and
improve overall margin. Management has called for timely expansions at existing facilities and measures such as these will put the Company in a
sweet spot to benefit from industry tailwinds in the future.

Accelerating sales growth, expanding margins, double-digit profit growth, improving working capital cycle, debt reduction, increasing return ratios,
and timely expansion plans came together to aid a meteoric rise in NOCIL’s stock in FY 2018. It broke out of a cup-with-handle base in February
2017 and maintained its uptrend throughout FY 2018. The stock gained by a massive 105% during FY 2017, egged on by improving fundamen-
tals and steady increase in institutional sponsorship.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-37-
Sterlite Technologies
EPS Strength Price Strength Buyer Demand Group Rank
FAIR : 63 GREAT : 93 GOOD : B FAIR : 54
Capital Equipment

25% to Pivot LOG (Fixed) PRICE

500
Impressive technical ratings 460
Stock breaks out to new high 420

on heavy volume 380


340
45% 312.40 INR
300
-2.20 -0.70%
260
240
220

190
25% 170

150

130
120
33% 110
100
90
80

70
-22%
60

-36% 50
-40%
46
42
-32%
38
25% 34

30

26
24
22
-26%
19
17

15
-28%
13
12
11
10

Solid growth profile 1243/1000

28-03-2018
LOG VOLUME

20M

7M

2.3M
2M
-68%

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-38-
Sterlite Technologies

Sterlite Makes Most of India’s Digitization Drive


India’s leading provider of optical fibre and fibre optic cables, Sterlite Technologies had a fabulous run in FY
2018. With a wide range of products and services that include optical communication products, system and
network integration services and telecom software, the Company is one of the world’s few ventures to have
complete control over the data network creation value chain.

Capital Equipment
Sterlite Technologies is the only company worldwide to possess an integrated silicon-to-software capability,
which makes it an end-to-end global leader in designing, building and managing digital smart networks. With
a strong market share of 40% in India’s optical fibre market, the Company benefitted largely from the digitiza-
tion drive in the country in FY 2018.

The tag of India’s only vertically-integrated player in the field of data network infrastructure certainly helped Sterlite in securing some notable proj-
ects. It was declared the Master System Integrator for Kakinada Smart City in June 2017, its fourth smart city project. In February 2018, it also
bagged a Rs 3,500 crore project from the Indian Navy to build and manage the latter’s communication network.

With the global internet traffic shooting up, companies providing data network infrastructure and solutions have found themselves in a sweet spot.
The adoption of new technologies such as 4G, 5G and fibre to the home (FTTH) has further augmented demand.

Moreover, Sterlite Technologies’ reach is not just limited to India. The Company exports its products to more than 100 countries, enjoying a global
market share of 6%. Its international business enjoyed tremendous success in FY 2018. Overseas revenues recorded impressive growth of 81%,
accounting for 54% of total revenues, compared with 37% in FY 2017.

Thanks to global data usage explosion and the deployment of new technologies (4G, 5G, FTTH), the Company’s order book ballooned 73% in
FY 2018. Amid strong demand for optical fibre cables, its capacity utilisation levels jumped to 70% from 40% a year ago. Sterlite’s EBITDA margin
expanded 400bps to 25% on operating leverage benefits. The Company posted strong double-digit sales and earnings growth rates throughout
the last fiscal year.

After breaking out of a flat base pattern in April 2017, its stock trended higher for most part of FY 2018 and multiplied investor wealth by almost
2.5 times.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-39-
Shakti Pumps India
EPS Strength Price Strength Buyer Demand Group Rank
FAIR : 61 GREAT : 90 GREAT : A FAIR : 59
Capital Equipment

EPS -2% from Pivot in 9 Weeks LOG (Fixed) PRICE


20 x
1300
1200
Solid technical profile 1100
1000
900
800

700

+435% 600
545.20 INR
500
+24.50 +4.71%
Stock breaks out of a 49-week-long 460
420
cup-with-handle base on massive volume -27%
380

42% 340
+325% 300
+53%
260
240
220

+45% 190
170
-30%
-40% 150

130
120
30% -53% 110

+133% 100
-43%
90
-46%
80

70
+46%
-26% 60

50
46
42
-44% 38
-37% 34

30

26

Good earnings growth in 24

June and December quarter 28-03-2018


LOG VOLUME
4M

600K

165.5K
90K
-83%

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-40-
Shakti Pumps

Shakti Pumps Posts Powerful Return


Shakti Pumps is India’s leading manufacturer of energy efficient submersible pumps that are used widely in the
agricultural, industrial, domestic, and horticulture sectors. Its product portfolio consists of a variety of pumps,
including solar, submersible, end suction, open well, pressure booster, and centrifugal, among others.

Capital Equipment
Following a torrid two years, Shakti Pumps lived up to its name, delivering a powerful return of 177% in FY
2018. With solar pumps gaining traction in India, and the Company benefiting from a shift in unorganized to
organized segment in the aftermath of GST, Shakti Pumps saw a huge demand for its products during the last
fiscal.

The Indian government’s ambitious target of doubling farmers’ incomes by 2022 led to multiple initiatives in
the field of agriculture and irrigation, with an aim to improve overall yields and lower production costs. As a result, the Indian government encour-
aged moving from conventional pumps to energy-saving solar pumps. The recently launched solar water pump subsidy scheme, Kusum Yojana,
should provide a further fillip to the use of solar pumps for irrigation purposes.

A majority of the state governments backed the use of solar pumps, with some even providing subsidies to farmers. With an annual capacity of five
lakh pumps and a low capacity utilization of 46% in FY 2017 (due to below-average monsoons), Shakti Pumps found itself in a sweet spot in FY
2018 amid improved demand outlook for solar pumps.

Being a market leader in the solar pumps segment, the Company cashed in on the opportunity, reporting two strong quarters of double-digit sales
and triple-digit earnings growth. Also, operating leverage benefits kicked in as the Company sold 4,518 solar pumps in FY 2018 (+22% y/y),
thereby improving overall EBITDA margin by 400bps to 18.7%. Moreover, the export business (30% of total revenues), which was earlier affected by
geopolitical tensions in the Middle East, did well, growing 11% in FY 2018. Its EPS jumped 58% to Rs 18.56.

The stock broke out of a very long consolidation period that lasted for 49 weeks in late March 2017. It then saw five straight months of a strong
uptrend, before settling for about 2.8x price appreciation in FY 2018.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-41-
Dilip Buildcon
EPS Strength Price Strength Buyer Demand Group Rank
FAIR : 71 GREAT : 95 GREAT : A FAIR : 48
Capital Equipment

EPS 5% to Pivot LOG (Fixed) PRICE


20 x
3400

3000

High relative strength and strong demand for stock 2600


2400
2200

1900
1700

1500

1300
1200
1100
28%
1,003
1000 INR
900
+17.95 +1.82%
Stock enters new high ground after 800
breaking out of a three-week tight area -27% 700

600

500
460
420

+55% 380
340

300
+47%
260
240
220

190
170

150

130
120
110
100
90
80

70

Solid fundamentals 28-03-2018


LOG VOLUME
2M

1.2M
800K
-40%
500K
300K

Sep, 12 Dec, 12 Sep, 13 Dec, 13 Sep, 14 Dec, 14 Sep, 15 Dec, 15 Sep, 17 Dec, 17

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-42-
Dilip Buildcon

Highway Projects Soar; Dilip Buildcon Follows Suit


India’s largest and fastest growing road developer, Dilip Buildcon (DBL), made investors rich by a whopping
187% in FY 2018. As the Indian government fast-tracked highway contract awards, DBL made the most of the
opportunity. In FY 2018, the NHAI awarded road projects of 7,400 km, an enormous increase of 70% from FY

Capital Equipment
2017.

In a sector marred by project delays, DBL managed to stand tall thanks to its superior execution capabilities.
Driven by robust process management and in-house execution, the Company has developed a knack for com-
pleting projects on time. It performs all the core construction activities in-house and does not sub-contract. The
ownership of more than 8,500 construction equipment enables it complete control over project execution.
Besides that, a cluster approach to bid for projects has also worked in DBL’s favor. The Company can maneu-
ver manpower and equipment to nearby projects rather quickly and easily. DBL has built a reputation for completing projects before time. In the
last five years, it has earned bonuses worth Rs 317 crore because of early execution. This coupled with high-quality work is like icing on cake and
makes DBL one of the most preferred players in the road construction space. Its industry leading profit margins are a testament to its savvy project
execution skills.

A strong margin profile has also allowed the Company to bid for projects at very low rates. DBL has emerged as the lowest bidder for multiple
road projects in recent times, resulting in a strong order book. The Company ended FY 2017 with an impressive order book/revenue ratio of 3.44,
providing it high revenue visibility. It has delivered solid sales and earnings growth quarter after quarter, becoming one of the top performers at the
bourses.

After delivering an impressive return of 60% since its IPO listing (Aug’16), its stock broke out of a three-week tight area in April 2017. From there
on, it kept its impressive uptrend, which remained mostly undeterred all through FY 2018.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-43-
Action Construction Equipment
EPS Strength Price Strength Buyer Demand Group Rank
GREAT : 97 GREAT : 97 GREAT : A+ POOR : 133
Capital Equipment

EPS +117% from Pivot in 23 Weeks LOG (Fixed) PRICE


20 x
300

Leading earnings profile Strong technical ratings 260


240
220

190
170
167.65 INR
150
+3.15 +1.91%

Stock breaks out of a 20-week-long 25%


130
120
cup-with-handle base on huge volume 110
100
90
80

70
+86%
24% 60
+59% +59%
+329% +57% -25%
50
46
42
38
-33%
34
-26% -26%
-35% 30
44%
26
24
22

19
+105% 17

15
-61%
13
12
11
-73% -28% 10
9
8

-51% 7

Impressive growth in
sales and EPS 28-03-2018
LOG VOLUME
8M
4M
2M
1.8M
1M
-65%
400K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-44-
Action Construction Equipment

Action Construction Delivers the Goods


Action Construction Equipment (ACE) is India’s leading manufacturer of cranes, material handling, construction,
and agriculture equipment. On the back of strong demand for its equipment, the Company delivered accelerat-
ing sales and earnings growth in all the four quarters of the last fiscal.

Capital Equipment
Following an improved growth outlook, market participants lined up to accumulate the stock, sending its price
northward by 181% in FY 2018.
Over the last two decades, ACE has consistently improved its product portfolio and continues to offer latest
technology equipment at reasonable prices. This strategy has served well for the Company, as it has been able
to increase its customer base from five to more than 15,000 over the last 22 years. Its clients include notable
companies from both public and private sectors.

ACE is mainly focused on cranes, which accounted for 69% of its revenues and 82% of its EBIT in FY 2018. With a market share of over 60% in
mobile and tower cranes, the Company benefitted largely from the Indian government’s focus on improving infrastructure across the country and
different areas such as roads, railways, airports, housing, ports, metro rail, and overall urban infrastructure. Moreover, a revival in the domestic
steel market boosted demand for pick and carry cranes, resulting in a 51% growth in the Company’s revenues from cranes in FY 2018.

On the back of high demand for cranes, ACE’s capacity utilization level soared from a mediocre 48% in FY 2017 to 75% in FY 2018. With operat-
ing leverage benefits kicking in, the Company’s margins expanded consistently, enabling its net profit growth to outpace sales growth in all the four
quarters of FY 2018. Eventually, revenues grew 44.7% y/y while EPS jumped 265% in FY 2018.

Besides improvement in earnings, the Company also strengthened its financial position by reducing borrowings for the second year in a row. This
resulted in a 15% drop in finance costs in FY 2018. ACE’s return ratios also witnessed massive improvement with return on capital employed jump-
ing to 19%, compared with a meagre 9% in FY 2017.

Going ahead, the Company seems well-positioned to benefit from an increase in infrastructure spending, which is expected to reach 9% of India’s
GDP by FY 2020 compared with 7.2% in FY 2017. Moreover, ACE owns a large land parcel of 82 acres, of which 63% stands unutilized, giving it
ample room for expanding production capacity in the future.

Amid improving fundamentals and anticipation of continued growth in future, the stock multiplied investor wealth by 2.8x in FY 2018.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-45-
TeamLease Services
EPS Strength Price Strength Buyer Demand Group Rank
GREAT : 95 GREAT : 89 GOOD : B+ GREAT : 19
Capital Equipment

13% to Pivot LOG (Fixed) PRICE

11K
Leading earnings profile Good technical profile 10K
9000
8000

7000

6000

5000
4600
Stock breaks out of a 64-week long 4200

consolidation base pattern; 3800

generates massive buying interest


3400

3000
in subsequent weeks 23%+203%
2600
2400
2,221
2200 INR
+104.40
1900
+4.93%

1700

1500

1300
1200
1100
1000
900
800
-30% -29%
700

600

500
460
420
380
340

300

260
240
220

Strong EPS growth rates 28-03-2018


LOG VOLUME

600K

116.4K
90K
30K
-49%

Mar, 13 Mar, 14 Mar, 16

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-46-
TeamLease Services

Healthy Growth Momentum Fuels Interest in TeamLease


TeamLease is one of India’s leading human resource service companies in the organized segment. In FY 2018,
the stock was continuously hitting fresh record-highs, making investors wealthier by 128%. Given its leadership
position in general staffing (5% market share) and favorable industry dynamics, the Company manages to
make the most out of it.

Capital Equipment
TeamLease’s core business is to provide staffing solutions for different sectors; a majority share of its revenue
is generated from general staffing. The general staffing market is in high demand due to flexi staffing options.
Flexi staffing includes a relationship between clients, associates, and employer, where clients hire an associ-
ate for a particular project but the associate is on the payroll of an employer. This helps the clients utilize the
human resources more efficiently and save on training, over-hiring, and integration cost. In general staffing,
TeamLease has managed to employ 1,30,950 associates for more than 2,500 clients.

The flexi staffing industry is highly fragmented with unorganized players occupying 70% of the market share. India ranks fourth in the flexi staffing
industry but constitutes only 0.5% of the total workforce in India as compared with 2-4% of the total workforce in developed countries.

TeamLease looks to expand its portfolio of services and geographical presence via acquisitions. In FY 2018, the company completed four acqui-
sitions: Keystone Business Solutions – to strengthen IT staffing; 30% stake in Freshersworld.com; Evolve Technologies – to enter Telecom staffing
business; and acquired 40% stake in online education company Schoolguru.

Globally, the flexi staffing industry is expected to more than double to 0.46-0.48 crore in terms of labor force by 2019. Hence, TeamLease Services
with its high global reach in multiple industries, technology, and adequate resources to fill the positions, will continue to reap the bounty and main-
tain its leadership in India’s growing staffing industry.

With the rising demand in staffing industry, the Company managed to grow its revenue and EPS at an average of 25% and 70% over the last five
years. Also, the technical indicators like buyers demand of A was top notch, when the stock broke out first time from its 64-week-long-consolidation
pattern in the week of May 19, 2017, before rallying in FY 2018.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-47-
KEI Industries
EPS Strength Price Strength Buyer Demand Group Rank
GREAT : 95 GREAT : 89 GREAT : A FAIR : 54
Capital Equipment

9% to Pivot LOG (Fixed) PRICE

600

Strong technical ratings Stock advances to a new high after breaking out
o� a si���ee��long �a� �ase on a�o�e�a�erage �ol��e 31% +106% 460
420
385.00
380 INR
340
+22.25 +6.13%
300
260

Solid earnings profile 220

190
+60%
170

24% 150
+38%
130

110
+1228% 100
-18%
90
-26%
80
-33%
70
26%
60

46
42
38
34
58% 30
26
+33% 22

19
17
+116%
15
-23%
13

11
10
9
-53%
8
7

Consistent and solid growth in sales and EPS 28-03-2018


LOG VOLUME
4M

700K
585.0K
300K
-44%
100K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-48-
KEI Industries

KEI Industries: Firing On All Cylinders


KEI Industries, one of India’s leading players in the cables and wires space, had a buoyant FY 2018, with its
stock price surging 111%. It is one of the few cable companies that possess a product portfolio comprising a
wide range of power cables from housing wires to extra high voltage (EHV) cables. Besides producing cables,

Capital Equipment
the Company provides design, engineering, construction, and project management services under its EPC busi-
ness.

KEI Industries’ long-standing technical collaboration with Brugg Kabel, the Swiss pioneer in EHV cables, pro-
pelled its progression as India’s first manufacturer of EHV cables up to 400kV. Until recently, EHV cables of 400
kV were mostly imported from international markets. However, the expansion carried out at its Chopanki plant
has put the Company in a sweet spot to cater to the demand for 400kV EHV cables in India.

Heavy capex in the Indian power sector has served well for KEI Industries, which saw its order book growing to Rs 2,800 crore in FY 2017 from
Rs 1,100 crore in FY 2014. Moreover, the Indian government’s ambitious goal of providing 24-hour power supply to the entire country by 2022
has attracted huge capex in the sector. A whopping Rs 45,000 crore in capex is expected to be incurred by Power Grid and state electricity boards
during FY 2017-2020 to improve intra-state power network.

Management’s continued focus on diversifying the Company’s revenue stream and improving its margin profile produced strong results last year.
Revenues generated from the high-margin retail business have risen consistently, driven by strengthening of dealership network and an increase in
ad spending. In FY 2018, KEI Industries added 137 dealers, increasing its dealer count to 1,284. It aims to increase its dealer count to 1,500 by FY
2019 and retail segment sales to 40-45% of total revenues (31% in FY 2018). Another key growth avenue has been international sales. The Com-
pany exports to 45 countries and delivered a 98% and 21% growth in its international business in FY 2017 FY 2018, respectively.

Driven by its thriving retail and international businesses and a rise in capacity utilization, KEI Industries delivered strong double-digit sales and
earnings growth, resulting in large institutional investors flocking to buy the stock last year. The stock broke out of a flat base pattern in April 2017
and remained in an uptrend for most part of the last fiscal. Eventually, the stock multiplied 2.1x in FY 2018.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-49-
Goa Carbon
EPS Strength Price Strength Buyer Demand Group Rank
GOOD : 83 GREAT : 99 GREAT : A+ POOR : 63

EPS -7% from Pivot in 12 Weeks LOG (Fixed) PRICE


20 x
1700
Good EPS Rank Leading technical ratings 1500

1300
1200
1100
1000
Energy

962.25 INR
900
+96.70 +11.17%
800

700

24% 600

500
460
420
Stock breaks out of a 380

26-week long consolidation base; 340

hits new high on heavy volume 300

260
240
220

190
28%
170
+127%
150

130
120
110
100
+29%
90
80

70

-27% 60

48
44
40
36

Massive growth in sales and EPS 32

28-03-2018
LOG VOLUME

2M
700K
759.1K
200K
-9%
80K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-50-
Goa Carbon

Chinese Crackdown and Aluminum Revival Fuel Rally in Goa Carbon


Goa Carbon is India’s second largest manufacturer of calcined petroleum coke (CPC), with an annual pro-
duction capacity of 240,000 MT. CPC is used as a primary source of carbon by aluminium, steel and titanium
dioxide industries. Closure of polluting industries in China played in favour of Goa Carbon as it filled the gap
created due to supply constraints in FY 2018. On the back of rising demand for its product, the Company deliv-
ered superior financial performance in FY 2018, which was mirrored by a stupendous 725% appreciation in its
stock price.

The Company has three production facilities in India located at Goa, Paradeep and Bilaspur. With two units sit-
uated on each of India’s coasts and one plant in central India, Goa Carbon is a preferred supplier of CPC due

Energy
to its strategically located production facilities that help in efficient logistics management.

About 85% of CPC is used in aluminium smelting process, which makes Goa Carbon a direct beneficiary of growth in aluminium demand. In
2017, global aluminium demand grew 6% y/y to 64.2 million tonnes, with Chinese demand growing 8% to 35 million tonnes. In India, rapid ur-
banization and favourable government reforms aimed at improving overall infrastructure also fuelled the demand for aluminium.

Amid CPC supply constraints owing to plant shutdowns in China and increasing demand for aluminium, Goa Carbon delivered a sales volume
growth of 31.2% in FY 2018. Driven by higher realizations, the Company managed to almost double its revenues. As a result of high demand for
CPC, its capacity utilization soared to 87% in FY 2018 from 66% in FY 2017. This in turn resulted in massive operating leverage benefits, allowing
the Company to improve its EBITDA margin to 17.2% in FY 2018, compared to 7.9% a year ago.

On the back of strong operational performance, Goa Carbon had a dream run at the bourses, as the stock posted gains in 11 out of the 12
months during last fiscal. Following a strong breakout in mid-April 2017, it went on to multiply investor wealth by more than 8x in FY 2018.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-51-
Muthoot Capital Services
EPS Strength Price Strength Buyer Demand Group Rank
GREAT : 89 GREAT : 93 POOR : D+ POOR : 115

EPS 18% to Pivot LOG (Fixed) PRICE


20 x
1900
1700

1500
High earnings and price ratings 1300
1200
23%
1100
+78% 1000

Stock breaks out of a 22-week long 900


+322%
cup base pattern on the back
800
746.90 INR
700
of massive accumulation +229%
+38.55 +5.44%
600
Financial

26% 500
460
44% 420
380
340

300
41%
+278%
260
+98% 240
+22% 220
+22%
190
+44% 170
-45%
-33% 150
-24%
130
120
110
-27% 100
+46% -43%
+4% 90
80

-39% 70

-26% 60

50
46
42
38

Consistent and solid growth 34

in sales and EPS 28-03-2018


LOG VOLUME

40K
34.5K
10K
-57%
3K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-52-
Muthoot Capital Services

Muthoot Capital Rides High on Two-Wheeler Boom


Muthoot Capital Services had an outstanding FY 2018 in terms of generating wealth for its investors. The Com-
pany’s accelerated revenue and earnings growth in FY 2017 and 2018 spurred a 3x leap in its stock price.
In FY 2018, its EPS rose 66% and sales, 40%. From FY 2014–17, the stock hardly had any such run due to its
poor financial performance. It only managed an average EPS growth in low-single digits, despite strong growth
in the AUM size.

So what brought about such a massive turnaround? As we know, N in CAN SLIM stands for any “new” de-
velopment - one such development pushed up Muthoot’s stock too. After recording persistent losses in the
three-wheeler financing segment on a poor loan turnaround time and higher NPA, it reengineered its efforts in
FY 2016 and FY 2017 to capture the booming vehicle financing industry. Its efforts worked well.

Digitizing the key aspects of the loan process helped the Company reduce its loan turnaround time, also bolstering new steps in the collection pro-

Financial
cess, such as setting up of call centres and the appointment of collection agencies and arbitrations. In FY 2018, the Company reported 4.6% gross
non-performing assets compared with 5.7% in FY 2017.

As of December 2017, NBFCs in India had a 67% share of the two-wheeler financing market (up from 60% a year ago) whereas, private banks
had a drop in their share to 33% from 38%. With higher government spending on rural road connectivity, rising disposable incomes, and more
women joining the workforce, the two-wheeler industry is poised to grow further, providing ample opportunities for the Company. In FY 2018, Mut-
hoot’s two-wheeler financing segment grew 15% y/y.

It also enjoys synergic benefits from Muthoot FinCorp’s strong network of 3,800 branches in India. It can simply follow a branchless model that
saves the cost of maintaining and opening branches. Currently, Muthoot Capital Services has a low industry share in the two-wheeler financing
segment, with Kerala being its densest market. It plans to expand to the northern parts of the country to grab a bigger chunk of the market which is
forecast to expand at a CAGR of 13% between FY 2016 and FY 2020.

Muthoot reported strong numbers in FY 2018. Disbursements were up 51.8% y/y and the AUM grew 55.4%. Its PAT jumped 78.4%. The Company
has plans to improve its profitability by tapping into additional sources of funding like NCDs and commercial papers.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-53-
Hester Biosciences
EPS Strength Price Strength Buyer Demand Group Rank
GREAT : 90 GREAT : 89 GOOD : B- GOOD : 32

17% to Pivot LOG (Fixed) PRICE

Stock breaks out of a 35-week-long


High EPS Rank and good technical profile consolidation base pattern on
2600
2400

more than 6x the 10-week average volume +131% 2200

1900
1700
29% 1,625 INR
1500
+59.00 +3.77%
1300
1200
25% 1100
+35%
1000
900
800
-32%
700
-9%
-16% 600

500
-39%
Health Care

460
420
380
340
-60% 300
-36%
260
240
220

190
170
+99%
150

+22% 130
120
110
100
90
-35%
80

70

60

50
Decent earnings growth rates 28-03-2018
LOG VOLUME
100K
40K

12.2K
6K
-75%
2K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-54-
Hester Biosciences

Poultry Vaccine Growth and Expansion Plan Propels Hester


Hester Biosciences is one of India’s leading animal healthcare companies. It is the second largest poultry vac-
cine manufacturer after Venky’s with a ~30% market share. The Company owns and operates Asia’s largest
single-location animal vaccine manufacturing facility along with an R&D facility near Ahmedabad.

Hester’s vaccines and health products gained prominence in FY 2018 against the backdrop of increasing
awareness of poultry and cattle health. Moreover, rising demand for poultry following the ban on cow slaughter
in India, in turn, boosted the demand for poultry vaccines in the country. On the back of improving fundamen-
tals and a 22.5% growth in net profit, the stock witnessed strong price action, more than doubling investors’
wealth during last fiscal.

The Company’s product portfolio consists of about 50 vaccines, 35 health products (drugs, feed supplement, and disinfectants), and diagnostic kits
for poultry and large animals (cattle, buffalo, sheep, goat, and swine). During last fiscal, poultry products accounted for 87% of revenues and the
rest 13% came from large animal products. Hester exports its products to 25 countries and generated 9% of revenues from international markets.
In India, the market size of poultry vaccines is about Rs 350 crore. On the other hand, animal vaccines such as PPR and Brucella in which Hester
has a strong presence have a market size of about Rs 100 crore. The animal vaccine market is growing at a much faster pace (30-40%), mainly

Health Care
driven by efforts from government and Food and Agriculture Organization to increase awareness about vaccination against PPR and Brucella. In
the next three years, Hester expects animal vaccines and health business to outpace poultry business growth and generate 50% of the Company’s
revenues.

Besides India, the Company also has a presence in Nepal, where its manufacturing plant not only produces animal vaccines for the local market
but also supports Indian operations. In June 2017, Hester announced plans of setting up a new facility in Tanzania to strengthen its internation-
al operations by developing products for Africa-specific diseases which are largely unaddressed. The Company also intends to establish a strong
marketing and distribution network to cater to the underserved African market. Considering a demand-supply mismatch in Africa, with imports
accounting for more than 80% of the required vaccines, Hester’s new facility could be a game changer for the Company’s international business.
Its Tanzanian plant will be backed by Bill & Melinda Gates Foundation through a secured loan as well as a grant.

The stock broke out of a 35-week-long consolidation base pattern in April 2017 on huge volume. It went on to gain in 10 out of 12 months on the
back of strong double-digit net profit growth, plan of entering African market, and anticipation of solid vaccine growth in the future. Eventually,
Hester’s stock appreciated a whopping 113% during last fiscal.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-55-
Jubilant Foodworks
EPS Strength Price Strength Buyer Demand Group Rank
POOR : 28 GREAT : 95 GREAT : A+ GREAT : 4

-0% from Pivot LOG (Fixed) PRICE

10K
Leading technical ratings 9000
8000

7000

6000

5000
4600
Stock breaks out of a 50-week-long 4200

consolidation base pattern on huge volume 3800


3400

3000

2600
2400
2,325 INR
+44% 2200
+48.80 +2.14%
+55% 1900
1700
+35%
+28% +42% 1500
+52%
+33%
+31% 1300
-21% -32% +48% 1200
1100
-21% 1000
-20% -28% 900
-34% -33%
-55% 800
-28%
-41% 700
Retail

600

500
460
420
380
340

300

260
240
220

190

Accelerating sales and earnings growth rates 28-03-2018


LOG VOLUME
7M
5.0M
4M
-11%
2M

600K

Mar, 13 Jun, 13 Mar, 14 Jun, 14 Mar, 15 Jun, 15 Mar, 18

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-56-
Jubilant Foodworks

Jubilant Foodworks Puts Things in Order


Jubilant Foodworks, operator of Domino’s Pizza and Dunkin’ Donuts restaurants in India, is the country’s larg-
est player in the organized pizza market with more than 60% share. It owns the exclusive franchise rights for
Domino’s Pizza in India, Bangladesh, Sri Lanka, and Nepal. The Company’s network consists of 1,134 Domi-
no’s Pizza restaurants across 266 cities and 37 Dunkin’ Donuts restaurants across 10 cities in India.

After going through a rough patch in FY 2016 and FY 2017, Jubilant Foodworks delivered the goods in FY
2018, with its stock price jumping by 111.5%. Driven by accelerating sales growth, margin expansion, and an
improved growth outlook, stock market participants thronged the counter of Jubilant Foodworks throughout the
last fiscal.

Multiple strategic initiatives taken by the Company’s management under the leadership of its new CEO, Mr. Pratik Pota drove it to greater heights
in FY 2018. The launch of Everyday Value (lower-priced medium pizzas), Rs 100 crore-investment to upgrade products, strong growth in online
sales, and closure of unprofitable stores were the key factors behind Jubilant’s transformation.

On the product front, the introduction of pocket-friendly Everyday Value pizzas along with improvement in pizza quality turned out to be a game
changer. From August 2017, Domino’s Pizza began serving pizzas with new herbier tomato sauce, soft crust, more cheese, and bigger toppings at
older prices. These initiatives helped the Company in posting same-store sales growth of 6.5%, 5.5%, 17.8%, and 26.5% in Q1, Q2, Q3, and Q4
FY 2018. On annual basis, Jubilant Foodworks scripted a strong comeback by clocking a same-store growth of 13.9% in FY 2018 compared with
a 2.4% decline in FY 2017.

Retail
In addition, a strong pickup in online orders (OLO) also played an important role in driving top-line growth. Average OLO contribution to deliv-
ery sales increased to 63% in Q4 FY 2018 from 51% a year ago. Mobile orders accounted for almost four-fifths of all online orders. Tie-ups with
fast-growing food-ordering apps, Swiggy and Zomato, further helped the Company in driving digital sales.

In July 2017, the stock broke out of a 50-week-long consolidation base pattern and remained in a strong uptrend since then. On the back of im-
proving fundamentals and accelerating profit growth, Jubilant Foodworks more than doubled investors’ wealth in FY 2018.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-57-
Future Retail
EPS Strength Price Strength Buyer Demand Group Rank
FAIR : 59 GREAT : 86 GOOD : B- GREAT : 17

16% to Pivot LOG (Fixed) PRICE

1900
Decent technical ratings 1700

1500

1300
1200
1100
1000
900
800

700

600
550.80 INR
500
+8.70 +1.61%
460
Stock breaks out of a 13-week-long 420

cup base pattern on high volume 380


340

300
27%
260
240
220

190
170

150
Retail

130
120
110
100
90
80

70

60

50
46
42
38

Improving growth rates 28-03-2018


LOG VOLUME

1.1M
700K
-56%
300K
100K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-58-
Future Retail

Future Retail Hits Century Aided by Strong Market Share


Buying leading stocks in top-performing sectors always fetches handsome returns. In FY 2018, Retail was one
such sector and Future Retail one such stock! A pacesetter in the Indian organized retail market with about 13%
share, the Company doubled investor wealth with shares yielding a return of more than 100% last fiscal!

A flagship company of Future Group, Future Retail caters to the Indian consumption space by offering a wide
range of household products through multiple retail formats such as hypermarkets, supermarkets, fashion and
convenience stores. Each year, over 34 crore customers walk into its stores and purchase products and services
supplied by over 30,000 small, medium and large entrepreneurs and manufacturers across the country.

As of FY 2018, the Company has a strong presence in India with 1,035 retail outlets, consisting of 666 Easyday, 285 Big Bazaar, 61 fbb, 13 Ezone
and 10 Foodhall stores, spread in 321 cities with a total retail space of about 14.5 million sqft.

The growth is not majorly due to expansion of stores but also the existing stores are doing well for Future Retail. The Company has already been
reporting double-digit same store sales growth (SSSG) over the last six quarters. In FY 2018, its SSSG was 12% and for Big Bazaar 14%. In FY
2018, the sales grew 22%, supported by strong SSSG and 134 store additions.

The Company has a high gross margin of around 26%, which was mainly attribute to the private label products. Presently, about 35% of the
Company’s revenue comes from private label products and the target is to increase to 65% in next five years. The stock price of Future Retail also

Retail
fuelled up due to the recent acquisitions made by the Company. After acquiring Heritage Foods’ retail business in 2016, the Company made an
acquisition of retail chain Hypercity, which it bought from K. Raheja Corp’s Shoppers Stop in October 2017 for Rs 655 crore.

The future outlook of the Company seems to be very bullish. The Company has set an expansion target of 350 Big Bazaars, over 500 fbb and
4,000 Easyday stores in the next three to five years. It is primarily focusing on Tier 2 and Tier 3 retail expansion to drive Future Group’s next phase
of growth. The Company will open smaller format retail stores and by 2021 clock revenues worth Rs 20,000 crore in the food and consumer busi-
ness.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-59-
V-Mart Retail
EPS Strength Price Strength Buyer Demand Group Rank
GREAT : 87 GREAT : 92 GREAT : A+ FAIR : 52

+ 6% from Pivot in 4 Weeks LOG (Fixed) PRICE

3400
Strong EPS Rank Leading price strenght and accumulation rating 3000

2600
2400
2200

1900
1,899 INR
1700
+0.600 +0.03%

Stock breaks out of a 15-week-long


1500

1300
cup base pattern on heavy volume; 1200

scales new high in the following week 1100


1000
31%
900
800
+61%
40% +40% 700
+34% +34% +31%
600

500
25% 460
420
-33% -36%
380
340

300

260
240
Retail

220

190
170

150

130
120
110
100
90
80

70

Solid and consistent growth profile 28-03-2018


LOG VOLUME

109.6K
50K
-4%
4K

Mar, 13 Mar, 14 Mar, 16 Mar, 18

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-60-
V-Mart

Low Price Strategy Brings Handsome Gains for V-Mart Investors


Catering to diverse household needs, ranging from apparels, general merchandise to groceries, V-Mart Retail
has something for everyone in the family. With about 171 departmental stores in more than a dozen cities and
union territories, and a total retail space of about 14 lakh square feet, the Company caters to a booming mid-
dle class in Tier 2 and Tier 3 cities through its Value Retail chain.

Enjoying an edge over its peers in the offline and online categories, the Company sells products at unbeatably
low rates in areas with limited to non-existent modern shopping facilities. It fills the void by offering higher cus-
tomer experience at affordable prices.
Moreover, limited internet accessibility in its operational areas, lower rent and a cluster-based expansion ap-
proach enables it to give the best deals to customers, ensuring it has little threat from ecommerce players who
find it hard to beat V-Mart’s price point.

The Company maintains its profitability through businesses with highest gross margins, such as apparel and non-apparels (footwear, wallets, bags,
jewellery, etc). The contribution of its fashion business to the total revenue stands at 94% for FY 2018 (versus 76% in FY 2012), while Kirana busi-
ness contributes 6%. Gross margins in the fashion business are above 30%, whereas the gross margin of Kirana comes in at about 12-13%.
Interestingly, shrinkage costs from damage and shoplifting, among others, have reduced drastically. In a low margin business like retail, companies
are likely to avoid such costs. V-Retail, with its better technology systems, has been able to reduce the shrinkage as a percentage of sales to 1.3% in
FY 2018 from 4.1% in FY 2016.

Retail
V-Mart also avoids debt for business expansion. It relies on internal accruals instead. Its long-term debt-to-equity ratio was zero at the close of FY
2018, as compared to 0.13 in FY 2017, which indicates the absence of external financing. This ratio was 0.24 in FY 2014.
In FY 2018, V-Mart reported an increase in revenue by 22% to Rs 1,222.4 crore, which was led by strong store addition of 30 stores as well as
robust same store sales growth of 9%. EBITDA grew 57% to Rs 132.8 crore and PAT came in at Rs 77.7 crore (+77%). The footfall for the year grew
23%.

The Company exhibits strong technical characteristics. Its Price Strength of 91 and Buyers’ Demand of A- is top notch. The stock hogged the lime-
light as the fund holding increased 56% y/y to 36 in March, making it one of the winners in FY 2018, with a return of 130%.v

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-61-
V2 Retail
EPS Strength Price Strength Buyer Demand Group Rank
FAIR : 75 GREAT : 86 GREAT : A- FAIR : 52

LOG (Fixed) PRICE

Decent earnings profile Strong technical ratings Stock rallies to a new high after 700

600
breaking out of a eight-week-long
36%
�at �ase pattern on high �ol��e 480
420
418.15 INR
380
-4.05 -0.96%
340
300

29% 260

220
190
170
150
45% 130

110
100
90
80
70

60

48
42
-50% 38
34
35%
30
26
-44%
Retail

22
19
17
15
13

11
10
9
-46%
8
-55% 7

6
-51%
-54%
Strong growth profile 5
4.4
barring one quarter
28-03-2018
LOG VOLUME

1M
300K
277.8K
90K
-70%
20K
5K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-62-
V2 Retail

Focus in Tier 2 and Tier 3 Cities Bodes Well for V2 Retail


V2 Retail is one of the fastest growing retail companies in India with a focus on middle-class consumers in Tier
2 and Tier 3 cities. V2, which stands for ‘Value and Variety,’ had a fabulous run in FY 2018 and doubled inves-
tors’ money during the period. The Company’s success was attributed to its strong set of financial numbers and
favorable industry dynamics.

Similar to D-Mart, V2 Retail also follows a cluster-based model while expanding its store base and distribution
centers. Clustering helps tailor its inventory based on customer needs, allowing the Company to serve its cus-
tomers in an effective and efficient manner. Currently, it has one distribution center, which is capable of catering
to 10 lakh square feet of retail space. It believes in ‘growth through focus’ strategy over ‘growth through more,’
which makes it profitable and enhances its operational efficiency without the need for any geographical expan-
sion plan.

The Company has high sales per square feet of more than Rs 1,100 per month for the last three years, the best among apparel retailers. The price
differential between V2 Retail and big organized retailers such as Reliance Trends moving to Tier 2 and Tier 3 cities drives growth. V2 Retail has low
average selling price as compared to its competitors. Also, it has an edge over mom-and-pop stores as it enhances the overall shopping experi-
ence and provides a range of products at different price points.

To improve its cost-efficiency, the Company has built a product design team and invested in technology to ensure efficient inventory management. It
has also identified a set of high volume products that can be outsourced to vendors at a lower cost. Low production cost helps it lower the price of

Retail
products, thereby attracting customers.

In Q4 FY 2018, the revenue grew 18% y/y (19% y/y in FY 2018) and EBITDA rose 28% y/y (28% in FY 2018). The Company remains focused on
building a brand and looks to penetrate unexplored markets and open new stores. Currently, V2 Retail owns and operates 49 stores across 15
states with a retail area of about 5.56 lakh square feet. Management guided to increase its store count from the existing 102 by March 2019.

The stock was trading in the third-stage flat base pattern for eight weeks in the months of April-May 2017. However, after it broke out from its flat
base pattern, there was no stoppage for the stock. The stock went multifold to become one of the winners in FY 2018.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-63-
Avenue Supermarts
EPS Strength Price Strength Buyer Demand Group Rank
GREAT : 96 GREAT : 89 GREAT : A- GREAT : 17

EPS + 3% from Pivot in 6 Weeks LOG (Fixed) PRICE


20 x
7000

Leading earnings profile High price strength, strong buyer demand 6000

and strong industry group 5000


4600
4200
3800
3400

3000

2600

Stock breaks out of a six-week-long 2400


2200
cup-with-handle base pattern 1900
1700

1500

1,324
1300 INR
1200
+43.70 +3.41%
1100
1000
900
800

700

600

500
460
Retail

420
380
340

300

260
240
220

190
170

150

Consistent strong double-digit sales 130


120
and earnings growth rates 28-03-2018
LOG VOLUME

20M

7M
-100%
3M
1.9M

Sep, 12 Mar, 13 Sep, 13 Mar, 14 Sep, 14 Mar, 17 Sep, 17

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-64-
Avenue Supermarts

Avenue Supermarts Shines at the Bourses


Last year, Avenue Supermarts hit a century in its highly anticipated market debut by listing its shares at a pre-
mium of more than 100%. The exuberance didn’t just stop there – the Company’s share prices hit a high of Rs
1,387 in March, before ending FY 2018 with a 107% rise.

The Company, led by Radhakishan Damani, is only second to Future Retail in the food and grocery (F&G) retail
business in India, and flaunts a market share of 10%. It primarily focuses on delivering high-quality retail goods
at competitive prices.

Avenue Supermarts, which runs the hypermarket chain - D-Mart - is a one-stop-shop retailer that caters to mid-
dle income households. All its major stores are situated in residential areas, following no frills layout. Not just
that, the Company has sound supplier relationships that help it stay cost efficient. It directly purchases its products from manufacturers and primary
vendors, saving on distributor and dealer margins. The Company also saves a good amount, about 2-3%, by paying its vendors faster than market
norms. The Company has the lowest payable days of around 9-11 among its peers.

D-Mart likes to spread in clusters, opening new stores near existing ones, helping it have higher operating efficiencies than those of its peers. This
approach also cuts down on transportation cost and improves economies of scale.

The Company also owns the land it operates which saves it rental costs that typically make up 3-8% of the total expense of any other company.
The other factor that’s made D-Mart successful is its lower employee expense (below 2% of its sales vs. 4.5% of its peers), meaning least number of

Retail
employees per square foot than its peers. The Company has one employee for every 800 sq. ft worth of space against one employee for 400-500
sq ft among its competitors.

This shows that D-Mart’s model of cost-efficiency is difficult to replicate and helps it post strong financials in comparison to its peers. For the last
five years, D-Mart has grown its revenue and EPS at an average rate of 37% and 50%, respectively. The Company has the best same store sales
growth in the industry. It has clocked more than 20% over the last four years. As of March, the Company had 155 retail stores, including 24 it
opened in FY 2017-18. The Company plans to add 21 lakh sq ft or about 70 new stores by 2020.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-65-
Titan Company
EPS Strength Price Strength Buyer Demand Group Rank
FAIR : 66 GREAT : 91 GOOD : B+ GREAT : 20

0% from Pivot LOG (Fixed) PRICE

3400

Strong technical ratings 3000

2600

Stock rebounds from 10-week moving average; 2400


2200
clears resistance of three-week tight area to 1900
break out to new high ground 1700

1500

1300
1200
1100
26% +217% 1000
942.30
900 INR
+47.25
800
+5.28%

700

600

+30% +47% 500


+110% 460
22%
+30% 420
380
+53% 340
+34%
+32% 300

260
240
220
Retail

190
170

150

130
120
110
100
90
80

70

Solid and consistent


earnings growth rates 28-03-2018
LOG VOLUME

20.1M
10M
+52%
5M
3M

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-66-
Titan

Titan Strengthens its Position in Jewelery Market


Titan, an iconic Indian jewelry retailer and watch manufacturer, had its share price doubled in the last one
year due to market share gains made in its jewelry segment amid favorable industry dynamics.

The Company has shaped up an impressive jewelry business that flaunts well-known brands such as Tanishq
(243 showrooms including three Zoya stores), Mia (32 stores), Gold Plus (four showrooms), and Caratlane
(30 stores). It is a joint venture between the Tata Group and the Tamil Nadu Development Corporation with
1,480 stores and more than 11K multi-brand outlets in India, and 2,264 in 33 other countries.

As per management, Titan held 5% revenue share of the Indian jewelry segment in FY 2017, up from 4% in
FY 2016. Its revenue is expected to increase to 6% in FY 2019.

The Indian jewelry market is highly fragmented with the organized segment accounting for ~20% of the market. Recent government policies such
as mandatory gold hallmarking, 1% excise duty levy, demonetization, PAN requirement for transactions above Rs 200,000, and the introduction of
the Goods and Services Tax will continue to compel consumers to prefer organized players over unorganized ones.

This has prompted an increased traction for Tanishq’s Golden Harvest Scheme (GHS), which enables customers to buy gold through instalment
payments. GHS sales increased to Rs 2,500 crore (19% of total jewelry sales) in FY 2017 from Rs 1,550 crore in FY 2016 (14% of total jewelry
sales).

Retail
Titan is also world’s fifth largest manufacturer of watches with a market share of 60-65% in the wrist watches segment. It has a portfolio of six ma-
jor in-house brands, eight licensed brands, and nearly 712 showrooms and more than 11K plus dealers or multi-brand outlets across India.
Management is optimistic about achieving 2.5x growth over the next five years in its jewelry business. Titan reported a stellar set of numbers in FY
2018. Revenue from operations grew 16% y/y to Rs 4,107 crore. The jewelry segment grew 13.6% y/y to Rs 3,360 crore, driven by 19% y/y growth
for Tanishq which had same store sales growth of 17% y/y. The Company added 41 stores with a total retail space of 47k square feet during the
quarter.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-67-
Venky’s (India)
EPS Strength Price Strength Buyer Demand Group Rank
GREAT : 99 GREAT : 98 GREAT : A FAIR : 46

EPS +27% from Pivot in 6 Weeks LOG (Fixed) PRICE


20 x
7000

Strong technical profile 48%


6000

5000
4600
4200
3,871
3800 INR

Venky's breaks out of a six-week-long +668% +30.25


3400 +0.79%

consolidation base pattern


3000
+542%

on above-average volume
2600
2400
Leading EPS Rank 2200

1900
1700

1500

1300
1200
55% 1100
1000
900
800

700
+162%
600

500
+97% +42% 460
+39% +127%
+44% +30% +104% 420
+22% 380
-31%
340
Consumer Staple

-3% 300
-13% -22% -32%
-31% -29% 260
-34%
240
220
-41%
190

-35% 170

150

Strong earnings growth rates 130


120

28-03-2018
LOG VOLUME

1M
543.5K
400K
-63%
60K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-68-
Venky’s

Beef Ban Boosts Chicken Consumption


Venky’s India, the largest integrated poultry group in Asia multiplied investor wealth by a massive 3.8x in FY
2018. Great strides made in broiler realizations along with a reduction in feed costs vaulted the Company to
prosperity. The Company holds 80% of market in chicken production and 75% in egg market. The Company
supplies chicken to top players such as McDonald’s, KFC, Pizza Hut, and Domino’s, in addition to its own quick
service restaurant chain, Venky’s XPRS in South and West India. In FY 2018, the Company’s revenue break-
down stood at: poultry and poultry products, 49%; oilseeds, 44%; and animal health products, 7%.

The Company had multiple factors going its way during last fiscal. The ban on illegal slaughter and sale of cat-
tle implemented in February 2017 boosted chicken consumption in India. Also, high temperatures in the coun-
try impacted bird mortality leading to a shortage in chicken supply. Amid rising chicken prices, Venky’s clocked
a 10% y/y revenue growth in FY 2018. While broiler realization grew at high single digit in FY 2018, the domestic poultry feed prices were muted
over the last year following surplus availability in the Indian market. Subdued poultry feed costs aided a 320bps increase in EBITDA margin. Ven-
ky’s also improved its financial position by reducing long-term borrowings by more than 50%, which in turn helped it in reducing interest costs by
35% in FY 2018. Aided by a double-digit revenue growth, higher operating margin, and lower finance expenses, Venky’s delivered a 60% growth
in EPS during last fiscal.

On capacity expansion front, the Company is set to increase its SPF egg capacity by 40% to 1.4 crore eggs in FY 2019. Strong operational perfor-
mance in FY 2018 and capacity expansion plan generated huge investor interest in the stock. After breaking out of a consolidation base pattern in
February 2017, the stock maintained its uptrend before ending the last fiscal with a whopping 281% gain.

Consumer Staple
©2018 williamoneilindia marketsmithindia@williamoneilindia.com
-69-
Radico Khaitan
EPS Strength Price Strength Buyer Demand Group Rank
FAIR : 60 GREAT : 96 GREAT : A GOOD : 24

EPS 21% to Pivot LOG (Fixed) PRICE


20 x

1300
Leading price action with 1200
1100
great buyer demand 1000
900
800

700

Stock breaks out of a 40-week 600

long consolidation base in early August 2017 500


460
420
380
340
332.25 INR
300
-13.40 -3.88%
260
240
220

190
170

150

130
-20% 120
110
100
-30% -25%
-42% 90
-33% 80
-20% -36% -36%
-55% -56% -23% 70
Consumer Staple

60

50
46
42
38
34

30

26
24
Accelerating earnings growth 28-03-2018
LOG VOLUME

3.3M
1M
-65%
300K
100K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-70-
Radico Khaitan

FY 2018 Brings Magic Moments for Radico Khaitan


One of India’s leading players in the Indian-made foreign liquor space, Radico Khaitan, overcame multiple
challenges to reward investors with a return of 141% in FY 2018. As the liquor industry recovered from the cash
crunch caused by the demonetization drive, the highway liquor ban added to its woes in December 2016.

Despite a challenging environment, Radico started off the fiscal year on a promising note. Even though reve-
nues declined 4% in Q1 FY 2018, it delivered net profit growth of about 17% on better product mix, cost opti-
mization measures, and lower interest expenses.

Radico’s product portfolio comprises some leading brands such as 8PM Whisky, Magic Moments Vodka, Con-
tessa Rum, Old Admiral Brandy, and Morpheus Brandy, among others. Riding on four millionaire brands (liquor
brands that sell over 1 million cases annually) and leadership in premium brandy and vodka segments, Radico posted accelerated sales and earn-
ings growth in three straight quarters (Q2, Q3 and Q4 FY 2018).

The Company’s recent product launches, Rampur Indian Single Malt luxury whisky, Regal Talons Semi Deluxe whisky and Pluton Bay Premium rum
have also gained good traction, laying a solid foundation for its growth as well as improvement in overall profitability. Radico’s relentless focus on
adding premium products to its portfolio and benign raw material prices aided margin expansion last year. Its EBITDA margin expanded 240bps to
14.8% in FY 2018, compared with 12.4% a year ago.

Also, continuous deleveraging of balance sheet helped Radico in improving its profit margins. The Company reduced its net debt by Rs 377 crore
in the past two years, bringing it down to Rs 570 crore in March. Ongoing debt reduction supported Radico in lowering its interest costs by 15% in
FY 2018.

Consumer Staple
More importantly, India’s high potential liquor market, which is characterized by a young population, rising disposable incomes, changing lifestyles
and growing acceptance of alcoholic beverages has certainly provided a fillip to demand for Radico’s products.

After a subdued start to FY 2018, its stock broke out of a long consolidation base pattern in August 2017. Thanks to improving fundamentals, it
accumulated strong gains for six months in a row, rewarding investors with a 2.4x price appreciation last fiscal.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-71-
Minda Industries
EPS Strength Price Strength Buyer Demand Group Rank
GREAT : 95 GREAT : 88 POOR : D+ POOR : 112

+ 19% from Pivot in 22 Weeks LOG (Fixed) PRICE

1800
1600
High EPS Rank and Price Strength
Stock breaks out of a six-week-long 21% 1400

ǷîƥċîƙĚūŠîċūDŽĚɠîDŽĚƑîijĚDŽūŕƭŞĚɒ 1200
1100
1,066 INR
enters new high ground 1000
+17.80 +1.70%
900
800
700

600

480
+88% 440
33%
400
360
320
280

-35% 240
26% 220
200
-13%
180
160
+34% 140
+13%
120
110
100
90
28% 80
70

60

48
44
40
36
32
28
Consumer Cyclical

-50%
24
22

19

Accelerating sales and earnings growth rates


5/1

28-03-2018
LOG VOLUME

300K
314.8K
100K
-53%
30K
10K

Mar, 13 Mar, 14 Mar, 15 Mar, 16 Mar, 17 Mar, 18

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-72-
Minda Industries

Market Leadership Fetches Strong Results for Minda Industries


Minda Industries, the flagship company of UNO MINDA Group, hogged the limelight in FY 2018 as its stock
appreciated 140%. A leading Tier 1 supplier of automotive components to more than 50 automobile OEMs, the
Company capitalizes on its fine R&D facility to provide superior products at a lower cost.

The Company has a strong presence across India’s automotive ancillary market with an impressive market
share of 65% in the switches segment, 47% in the horn segment, and 20% in the lights segment. Besides being
India’s leading automotive switch maker, it is also the country’s largest alloy wheel maker for passenger vehi-
cles, the second-largest air bags manufacturer, and the third-largest automotive lighting player.

On the back of its market leadership position in multiple business segments, the Company benefitted immense-
ly from strong growth in passenger vehicle sales in FY 2018. Despite facing headwinds from the transition to BS-IV emission norms and GST-re-
lated disruption, India’s domestic passenger vehicles grew 7.9%, driven by strong demand from rural and semi-urban areas. Being a key supplier
to Maruti Suzuki, Minda Industries saw increased demand for its products amid solid growth in the former’s passenger vehicle segment. Maruti
Suzuki’s vehicle sales outpaced the overall industry by growing 13.4% in FY 2018. The car maker accounted for 55% of the Company’s switching
systems revenues, 29% of lighting systems revenues and 90% of alloy wheels revenues.

Minda Industries delivered strong double-digit sales growth in all the four quarters of FY 2018. Overall, its revenues grew 32% y/y last fiscal. Better
capacity utilization across its facilities drove margin expansions of 90- and 200bps at EBITDA and PAT levels, which jumped 43% and 88%, respec-
tively, as a result.

Besides strong growth in passenger vehicles, the Road Transport Ministry’s decision to make airbags, speed limit reminders, seat belt reminders,
and reverse parking sensors mandatory in all cars from 2019 also boosted investors’ confidence in Minda Industries. The stock witnessed a superb
run after it broke out of a six-week-long flat base pattern in April 2017 and remained in an uptrend for most part of the fiscal.

Consumer Cyclical
©2018 williamoneilindia marketsmithindia@williamoneilindia.com
-73-
Visaka Industries
EPS Strength Price Strength Buyer Demand Group Rank
GREAT : 96 GREAT : 86 GOOD : B- POOR : 110

23% to Pivot LOG (Fixed) PRICE

1700

Leading earnings profile Strong buyer demand with good relative strength 1500

1300
1200
1100
1000
25% +387% 900
800

700
646.85 INR
600
+6.85 +1.07%
Stock enters new high ground 500
on above-average volume 460
420
380
340

300

260
240
220

190

42% 170
+105% +117% +116%
150

130
120
110
+31%
100
90
-34%
-53% 80
-41%
70

-54% -31% -31% 60

48
44
Consumer Cyclical

40
36
32

Consistent double-digit EPS growth 28-03-2018


LOG VOLUME
1M
400K

113.7K
70K
-60%
30K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-74-
Visaka Industries

Visaka Industries Delivers Solid Returns


Visaka Industries grabbed the attention of investors during FY 2018 and in course more than doubled their
wealth with its stock appreciating 126%. The Company operates in two business verticals: Building Products and
Synthetic Yarn with the former accounting for 84% of revenue and 94% of EBIT as of FY 2018. The improving
demand from rural and semi-urban areas, lower GST rate on Visaka’s products, increasing government focus
on affordable housing and rural income, and pan-India distribution, is driving the growth for the Company.

Within the building products segment, the cement asbestos business (68% of total revenue), which had strug-
gled in the last two years, witnessed a turnaround by growing 6% y/y in FY 2018. The asbestos business has
a market share of 18% with an installed capacity of 802,000 TPA. Visaka continues to enhance its product in
terms of load bearing capacity which currently stands at 650-700 kg per sq. cm exceeding ISI requirement of
525 kg. This makes it the most sought after product in rural areas. Moreover, the lowered GST rate of 18% helped the Company in making its
products more competitive and affordable in comparison to steel sheet whose prices rose on the back of higher import duty.

Besides cement asbestos product, the Company’s non-asbestos products witnessed huge demand in urban and semi-urban markets. Among
non-asbestos product, the fibre cement board (26% market share) is preferred by urban customers as it is lighter, easier to install and possesses
a heat and sound resistant structure. The market is very much receptive of the product which is quite evident from the accelerating sales figure for
the segment (CAGR of 20% during FY 2013-2018). In order to cater to the strong demand; the Company has installed capacity of 120,000 TPA of
V-Boards and 9,750 TPA of V-Panels. In addition, they are investing in setting up its third plant in Jhajhar which will take the total installed capacity
to 179,750 TPA, one of the largest in India.

Visaka markets directly to retailers as opposed to the conventional company-distributor-retailer model, which helps it in understanding root level
requirements and pricing their products at reasonable rates. This is reflected in its pricing of V-Next product which is 40% cheaper than the general
plywood without compromising its quality. It has a strong distribution network of 7,000 retailers in rural and semi-urban markets.

Consumer Cyclical
The Company’s working capital cycle improved from 115 days of turnover in FY 2016 to 104 days in FY 2017 and 103 days in FY 2018. This
translated into lower interest cost (Rs 18.2 crore in FY 2018 vs Rs 19.6 in FY 2017) and subsequently improved interest coverage ratio to 8.5 in FY
2018 vs 6.3 in FY 2017. Apart from strong working capital management, in-time execution of projects and superior technology helped Visaka in
improving its profitability. Its EBITDA and net profit grew 26% and 56%, respectively, in FY 2018. On the back of improving fundamentals, Visaka
Industries shined at the bourses during last fiscal.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-75-
GNA Axles
EPS Strength Price Strength Buyer Demand Group Rank
GOOD : 86 GOOD : 89 GOOD : B+ POOR : 112

8% to Pivot LOG (Fixed) PRICE

2400
2200

1900
Good earnings profile and strong technical ratings 1700

1500

1300
1200
1100
1000
900
800

700

Stock breaks out after a long consolidation; 600

hits a new high on huge volume 500


460
437.50
420 INR
20% +5.70
380 +1.32%
340

300

260
240
220

190
170

150

130
120
110
100
90
80

70

60
Consumer Cyclical

50
46
42

Accelerating sales and EPS growth rates 28-03-2018


LOG VOLUME

800K
400K
-68%
200K
88.6K
100K

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


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GNA Axles

GNA Axles Witnesses Strong Demand for its Products


GNA Axles is one of India’s leading manufacturers of rear axle shafts, spindles, and splined shafts. Its components are
used in on-highway vehicles (LCVs, MCVs, HCVs, and buses) and off-highway vehicles (tractors, construction equipment,

GNA among others).

The stock had a strong run in FY 2018 and doubled the investors’ money driven by strong fundamentals, improved
growth outlook, and institutional accumulation. The Company continues its leadership position in the domestic market
with about 60-65% market share (FY 17) in off-highway and medium and heavy commercial vehicle axle shafts.

The Company caters to a broad customer base in India and overseas. Its primary OEM customers include Mahindra & Mahindra, John Deere,
TAFE, Escorts, and Claas India. Its overseas clientele includes Meritor HVS AB, Transaxle Manufacturing of America, Dana Limited, and Kubota
Corporation.

Though the line of products remains same for the overall market, sales mix across the geography vary for the domestic and export markets. While
off-highway vehicles dominate the Indian market with a 77% share, medium and heavy commercial vehicles (M&HCV) dominate the export market
with a 74% share.GNA’s business operation benefitted from the improved economic growth domestically. The government’s thrust on increasing
allocation toward infrastructure, especially on the development of roads and highways had a favorable impact on the industry. Implementation
of GST has an added benefit for the economy as the demand for heavy tonnage truck sale is increasing. This, in turn, helps improve the volume
growth for GNA, due to higher number of axle requirements (2-4x).

In FY 2018, the Indian automotive industry transformed into a powerhouse as it overtook Germany as the fourth largest global automotive market,
behind China, the U.S., and Japan. Total vehicle sales in India grew 9.2% y/y to 40.2 lakh units in FY 2018. The Commercial vehicle segment con-
tributed significantly with total sales growing by 20%, driven by 12.5% growth in M&HCV segment and 25.4% growth in light commercial vehicles.
The Company’s domestic revenues jumped 31% y/y and formed 55% of total revenues.

Consumer Cyclical
In the North American market, a massive jump of 78% in class 8 truck orders boosted the demand for the GNA’s products in FY 2018. Aided by
strong demand in the overseas market, the Company’s exports grew 30% y/y and accounted for 45% of total revenues.

On the earnings front, GNA’s EPS jumped 72% y/y, driven by a 31% sales growth and operating margin expansion of 191 bps. Driven by acceler-
ating sales growth in all the four quarters of FY 2018 and solid earnings growth, the stock had a phenomenal run during the last fiscal.

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-77-
Index
Ticker Company Change(%) Sector Name Industry Group

HEG HEG 1330% Basic Material Electrical - Power/Equipment

GOACARBON Goa Carbon 725% Energy Oil & Gas Refining/Marketing

GRAPHITE Graphite India 548% Basic Material Electrical - Power/Equipment

BEPL Bhansali Engineering Polymers 392% Basic Material Chemicals - Specialty

VENKEYS Venky’s (India) 281% Consumer Staple Food - Meat Products

RAIN Rain Industries 242% Basic Material Petrochemicals

HSCL Himadri Speciality Chemical 234% Basic Material Chemicals - Specialty

PHILIPCARB Phillips Carbon Black 229% Basic Material Chemicals - Specialty

GRAVITA Gravita India 206% Basic Material Mining - Metal Ores

AVANTIFEED Avanti Feeds 203% Basic Material Agricultural Operations

MUTHOOTCAP Muthoot Capital Services 199% Financial Finance - Consumer Loans

DBL Dilip Buildcon 187% Capital Equipment Roads and Highways

ACE Action Construction Equipment 181% Capital Equipment Machinery - Construction/Mining

SHAKTIPUMP Shakti Pumps India 177% Capital Equipment Machinery - General Industrial

STRTECH Sterlite Technologies 148% Capital Equipment Telecom - Fiber Optics

RADICO Radico Khaitan 141% Consumer Staple Beverages - Alcoholic

MINDAIND Minda Industries 140% Consumer Cyclical Auto/Truck - Original Equipment

VISAKAIND Visaka Industries 139% Consumer Cyclical Building - Construction Products

VMART V-Mart Retail 130% Retail Retail - Department Stores

TEAMLEASE TeamLease Services 129% Capital Equipment Commercial Services - Staffing

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-78-
Ticker Company Change(%) Sector Name Industry Group

PRAKASH Prakash Industries 120% Basic Material Steel - Producers

V2RETAIL V2 Retail 120% Retail Retail - Apparel/Shoes

HESTERBIO Hester Biosciences 113% Health Care Medical - Ethical Drugs

KEI KEI Industries 111% Capital Equipment Electrical - Power/Equipment

JUBLFOOD Jubilant Foodworks 110% Retail Retail - Restaurants

DMART Avenue Supermarts 108% Retail Retail - Super/Mini Markets

FRETAIL Future Retail 106% Retail Retail

NOCIL NOCIL 105% Basic Material Chemicals - Specialty

TITAN Titan Company 104% Retail Retail - Jewelry

GNA GNA Axles 100% Consumer Cyclical Auto/Truck - Original Equipment

©2018 williamoneilindia marketsmithindia@williamoneilindia.com


-79-
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