Some of the biggest beneficiaries of GST implementation will be sectors with a high percentage of the market occupied by unorganised participants. Stocks such as Kajaria Ceramics, Exide Industries, Havells India, Dabur India, among many others, are a few of the market favourites that can give fantastic returns to investors over the medium to long term. In the ceramic tiles and sanitary ware sector, Kajaria Ceramics is a market leader and GST will immensely benefit the company, as the removal of taxes such as octroi, sales, etc., would make the country one market. The company should also get a margin boost from falling gas prices and pay hike approval for government employees. The Cabinet has recently approved the 7th Pay Commission recommendations that will grant a salary hike to over one crore government employees and pensioners. This pay hike for government employees is likely to boost consumption and bolster growth with higher spending. This will benefit the top quarter of urban consumers and therefore housing, transportation and ceramic tiles companies are favourite plays. Kajaria Ceramics has reported a consolidated total income from operations of Rs 667 crore and a net profit of Rs 63.41 crore for the quarter ended June 2016. A further pick-up in infrastructure projects will also pump up the ceramic and sanitary tiles industry, particularly Kajaria Ceramics Ltd. Even though a few analysts are worried about the sharp stock price improvement in recent months and rich valuations, we feel that the Kajaria stock will continue to trade at higher valuations on account of excellent earnings’ visibility on volume expansion and margin improvement, coupled with demand revival. With a one year investment horizon, the company stock is an excellent buy at the current levels of Rs 1,250. Shareholders can be rewarded with a liberal bonus issue from the company also.
Fitness and health centres across the country are growing in leaps and bounds on increasing disposable income, rising young population and growing awareness about being fit and attractive. Talwalkars Fitness Ltd is the country’s largest fitness chain, with a strong brand value and high leadership position. It has a 40% market share in the organised fitness segment, which is growing at a rapid pace. Estimating the revenue and net profit growth to be at 15% and 25%, respectively, over the next few years, the stock currently quoting at Rs 234 is a good portfolio investment. The Talwalkars Fitness stock can double from present levels during the next 18-24 months.
For the week ended Friday, 5 August, the indices ended on a divergent note, with Sensex rising 28 points to close at 28,078, while the Nifty rose 44 points to settle at 8,683. The percentage gains were higher in the Nifty than those from the Sensex. Key developments during the week were the passing of the GST Bill in Rajya Sabha, which prompted foreign portfolio investors to pump in nearly Rs 2,000 crore into Indian equity markets. The stock indices should trade in the positive territory during the next week on the back of positive foreign inflows.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.