InterGlobe Aviation :
InterGlobal Aviation (the parent company of IndiGo airline) is one of the most efficient low cost carriers (LCC) with a market share of 40 percent in the Indian aviation sector.
IndiGo passenger traffic grew by robust 31 percent CAGR versus industry growth of 15 percent CAGR, over FY14-FY18. Going forward, expanding market presence through fleet addition and firming up its regional connectivity plans augurs well.
IndiGo’s fleet comprise of 15 percent more fuel efficient models which will cushion its margins and market share even at times of higher oil prices.
In the long-term risk related to volatile oil prices is likely to come down. We remain constructive on IndiGo given RoE of 40 percent, efficient operations and strong balance sheet.
NBCC is a Navaratna Enterprise engaged in project management consultancy (PMC), Engineering Procurement & construction (EPC) and real estate business. Current order backlog of Rs 80,000 crore provides strong visibility for the next 5 years.
We expect execution to ramp up in coming quarters as Rs 10,000cr worth redevelopment project started at ground level with an execution period of 2years. NBCC is at sweet spot considering its huge order book, limited competition and expertise in executing large projects.
Big projects like Pragati maithan (Rs 2,500cr), Irrigation project in Maharashtra (Rs 1,000 cr), redevelopment of Nauroji nagar (Rs 2,500cr) started with an estimated execution period of 24 months. Given strong earnings outlook and executional capability we continue maintain a Buy rating for the stock.
Normal monsoon and more state subsidy for doubling the agricultural growth will continue to drive demand for tractors for FY19. EL's expanded portfolio & technology upgrades in tractors have resulted in improved numbers both in existing and newer geographies.
Revenue from Construction equipment and railway segments will continue to reflect sizable improvement in FY19. We expect revenue and PAT to grow by 15 percent/23 percent CAGR over FY18-20E factoring 13 percent YoY growth in the tractor sales and 18 percent in Construction equipment.
We expect EL to trade at a premium valuation of 25x (FY20E EPS) given its strong earnings outlook & massive government push for road infra projects.
Ashok Leyland (AL) is the second largest commercial vehicle manufacturer in India to witness numerous tail winds like government road infra spending, strategy of defence and Electric vehicle.
AL's growth in the higher tonnage vehicle was 247 percent on a YoY basis post the implementation of overloading ban in some northern states. The industry is likely to witness a demand of 600-700k vehicle if 15 year ban is enforced across the country.
AL holds 95 percent market share in this category (35.2t- 40.2t) and will be a direct beneficiary. We expect AL’s revenue to grow at 17 percent CAGR over FY18-20E- factoring 13 percent volume growth in M&HCV and 23 percent in its LCV business.
Wealth buildup Financial Services.