Investors are keen to know how will Indian equity markets react to recent macro-economic data points which are expected to be released in the upcoming week. While the US Fed is not talking regarding the rate cuts, global experts do believe that rate cuts can happen in the early half of 2024. Some analysts say that it will be overly optimistic to assume that the US Fed and other central banks will cut the rates in the first quarter of 2024. Thus, they believe that the rate cuts should take the full course in the 2H24. These expectations have helped the Indian stock market, with frontline indexes touching record highs. However, still there are certain fundamentally-strong companies trading at reasonable valuations despite market rally.
Indian equity markets have seen exponential and consistent growth since March 2020 lows to see a two-fold rise, with Sensex and Nifty trading near all-time high levels. Several stocks from mid-cap and small-cap categories have become multi-baggers and these stocks have resulted in multi-fold returns to domestic investors. Given the current levels of Indian equity markets, fundamentally-strong companies trading at reasonable valuations should be preferred by the long-term investors.
BSE Midcap has seen an increase of ~40% over the previous year, while small-cap index increased by ~43%. Several sectoral indices including Nifty Bank, Auto, and IT, etc. have seen strong and healthy gains. Coming to public sector stocks, firms such as NTPC, Indian Oil Corp, GAIL and Coal India have seen impressive gains. In the private sector, companies such as Tata Motors, Bajaj Auto, etc. have seen a sharp rise.
With this in mind, let us now have a look at fundamentally-strong companies trading at reasonable valuations despite market rally.
1. Titan Company Limited
The company has been categorised as a leading lifestyle company and is the most admired and respected company in India. It has established leading positions in several verticals such as Jewellery, Watches and EyeCare categories.
The company’s Board of Directors approved acquisition of entire ~91,90,327 equity shares which were held by the Founder of CaratLane Trading Private Limited and his family members. This represents ~27.18% of total paid-up equity share capital of CaratLane on fully-diluted basis.
It has results for quarter and half-year to 30th September 2023, with the company recording (Standalone) an income growth of 21% in 2Q24 in comparison to 2Q23. Corresponding PBT came in at INR1,261 crores, exhibiting a rise of 9% against INR1,155 crores achieved in 2Q23. Talking about the Jewellery business, its total income came in at ~INR8,575 crores, exhibiting a rise of 19% in comparison to 2Q23. Business of the company saw healthy double-digit growth in both buyers and average bill value per buyer. EBIT sits at INR1,206 crores, resulting in an EBIT margin of ~14.1% for 2Q24 supported by better studded share in portfolio.
All consumer businesses of the company saw healthy growth for mentioned quarter. Watches and Wearables business surpassed quarterly revenues of INR1,000+ crores, which was an important milestone for the company. Jewellery business shined well, with its consumer sales increasing ~27% in over the previous year.
The company retained its focus on improvement in market share through providing differentiated products to consumers. Festive season for the company went off well and it expects optimistic views for its performance in remainder of financial year. Tanishq expanded presence in Gulf Co-operation Countries (GCC) as it entered Qatar with the opening of 2 new stores in Doha. Its international presence came in at ~10 stores, which includes 1 store in New Jersey, USA.
2. Pidilite Industries
Pidilite Industries is a consumer centric company, with its business ranging from adhesives, sealants, waterproofing solutions and construction chemicals to arts & crafts and industrial resins.
The company released financial results for quarter and half-year ended September 30, 2023. Consolidated revenue of the company for 2Q went up by ~2% as a result of strong UVG throughout categories and geographies. Its C&B segment went up by ~3%, with B2B registering a decline of 1% in revenue as a result of price adjustments and lower demand from export and export-oriented industries. Standalone gross margin (%) saw expansion both in comparison to previous quarter (by 228 bps) and year-on-year (by 1,095 bps).
It remained focussed on building resilient supply chain and it saw investments in upgrading and setting up new manufacturing facilities. In 2Q24, it commissioned 4 new plants along with additional 4 plants that were commissioned earlier.
3. Maruti Suzuki India Ltd.
Maruti Suzuki India Limited, which is the subsidiary of Suzuki Motor Corporation of Japan, has been categorised as India’s largest passenger car company.
It has released results for 2Q24, with the company clocking highest-ever quarterly sales volume of 550,000+ units. It saw highest-ever quarterly net sales and profit, and its passenger vehicle wholesales went up by ~8%, higher than the industry growth of ~5% in its domestic market. The company achieved leadership in SUV segment as a result of strong product lineup.
The company saw expansion of export portfolio as it started exports of Jimny-5 Door for Latin America, Middle East and Africa. Through exporting ~69,000 units, it has been categorised as largest exporter of Passenger Vehicles from India.
During the quarter, the company sold ~552,055 vehicles and sales in domestic market came in at ~482,731 units. The same period of previous year saw total sales coming at ~517,395 units, making up ~454,200 units in domestic and ~63,195 units in export markets.
It saw net sales of INR 355,351 million versus INR 285,435 million in similar period of previous year as a result of higher sales volume and product mix.
Conclusion
The above are some of the fundamentally-strong companies trading at reasonable valuations despite market rally. There have been several drivers, both global and domestic, which has surged investors’ optimism. Recently concluded meeting of the US Fed have indicated the possibility of several rate cuts in the next year, which led to the domestic markets’ rally.
Additionally, Indian markets were supported by dovish commentary from the US Fed Chair.
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