Where to Invest in 2024

As we step into the year 2024, it is only right that we take a look at how the equity market performed in 2023 and the factors that helped it to surge. It is also the right time to now open the curtains a bit on what lies ahead in 2024. The Indian equity market as of now is like a knight in shining armour. Will this positive trend remain in the months to come? Set against the backdrop of global uncertainty, Shashikant puts things into a proper perspective 

As the curtains close on 2023, the Indian equity market stands tall, painting a canvas of vibrant green on the year-end review. It has been a remarkable turnaround from the jittery lows witnessed in March, fuelled by global uncertainties and geopolitical tensions. But what sparked this impressive rise? While most of the global equity indices are still likely to test their 52-week high, the Indian equity indices are at their lifetime high. And will this momentum carry over into 2024?  [EasyDNNnews:PaidContentStart]

Most of the equity indices have generated returns in double digits on a year-to-date (YTD) basis. There are hardly any indices that have given single-digit returns since the start of the year. However, the rally has not been uniform. While the Mid-Cap and Small-Cap segments danced with abandon, the frontline indices, often weighed down by heavyweight financials and IT giants, remained relatively subdued. The best performing index, BSE SME IPO, which is constituted by SMEs listed on the BSE SME platform, has generated return of 94.34 per cent year-to-date. 

The second-best performing index was the Realty index. Realty companies are showing signs of resilience after a gap of almost 14 years. The shares of a not-so-great company such as Unitech Limited are up by more than 350 per cent since the start of the year. Even Large-Cap names such as DLF are up by more than 80 per cent this year. Another segment that surprised many by its superior returns was public sector undertakings (PSUs). An index that tracks the price of major PSUs listed on the BSE has witnessed gains of 54 per cent. Both banks and other enterprises with a majority stake of the president of India saw a huge run-up in their share prices this year.
 

Factors Supporting Growth 

The surge in such growth in the stock market finds support in a convergence of factors. Many of the hurdles that plagued the global economy, including those of India, over the past year are now fading into the background. Concerns over rising interest rates, inflation and the conflict in Ukraine, which previously roiled the financial markets, are dissipating rapidly. Additionally, India’s distinct resilience, bolstered by domestic measures, stable Indian currency and robust economic fundamentals, has acted as a potent elixir. 

Listed below are some of the key factors that have fostered growth in the Indian equity market: 

• Favourable Macro Conditions - A decrease in inflation, coupled with the Reserve Bank of India’s accommodating stance on interest rates, has provided a fertile environment for economic expansion. The government’s emphasis on infrastructure spending and reforms has further galvanised investor confidence.

• Higher GDP Growth - India’s higher GDP growth,standing at 7.8 per cent in Q1FY24 and 7.6 per cent in Q2FY24, has surpassed economists’ expectations. It was primarily propelled by robust investment growth, despite subdued consumption growth. The surge in gross value added (GVA) was driven by industrial sector expansion. Expectations prevail that strong corporate profitability will sustain growth figures in the coming quarters, even though consumption might face continued pressure. 

• FIIs Inflows - Despite global market fluctuations, India has consistently attracted foreign investment due to its relative stability and appealing valuations. This influx of liquidity has acted as a catalyst for the recent bullish trend, especially evident in the past 18 months. Foreign investors, encouraged by India’s robust macroeconomic fundamentals and the domestic market’s upward trend, have re-entered the Indian markets. In November, they ended a three-month selling streak, becoming net buyers of Indian equities, injecting a total of ₹ 27,775.95 crore month-to-date (MTD) and ₹ 33,179.44 crore in the last nine months ending December 20. Domestic institutional investors (DIIs) have also played a pivotal role, acquiring domestic shares worth ₹ 81,490 crore since the beginning of the financial year. The significant drop in US bond yields, dipping below 5 per cent has triggered substantial capital flows toward emerging markets like India. Sectors like large-cap financials and IT, favoured by FIIs and reasonably valued, are expected to sustain their upward trajectory. 

Perspective on 2024 

Looking ahead to 2024, our vision into the future appears clearer compared to what was visible this time last year. While geopolitical tensions, global rate adjustments and inflation patterns may linger, India’s inherent strengths present ample reasons for optimism. Projections indicate that India’s GDP growth will rank among the highest globally, driven by domestic consumption and a thriving services sector. The International Monetary Fund recognises India as a standout performer, estimating its contribution to global growth at over 16 per cent. 

With infrastructure and digitalisation reforms in place, India is positioned as one of the fastest-growing large emerging markets, likely to attract further investments. Continued governmental focus on reforms, particularly in infrastructure and manufacturing, could unleash the next phase of economic expansion. Inflation has eased, and a corresponding moderation in interest rates seems probable. Expectations lean toward a phase of moderate and stable interest rates in the Indian economy, potentially supporting economic activities.

India’s policy rates have largely reverted to pre-pandemic levels, unlike in the developed markets where rates remain significantly higher than the pre-pandemic levels. As lower interest rate favours equity, we might see better returns from the equity market. Going ahead, what will also help the Indian equity market are the foreign portfolio investor (FPI) holdings at a decade-low. As potential foreign investment is anticipated in the debt market ahead of India’s inclusion in the JP Morgan Emerging Market Government Bond Index, there might be increased stability for the Indian rupee and lower yield, which means lower cost of equity that will favour the equity market. 

Despite lingering geopolitical uncertainties and global market fluctuations, India’s unique fundamentals and resilience paint a compelling picture for sustained optimism. In the current market surge, large-cap stocks have notably underperformed, positioning them favourably in terms of valuations and offering more resilience against potential negative developments in the coming months. High-quality mid-caps seem to thrive in a bull market, despite short-term operational challenges and potential medium-term fundamental shifts that the market appears to overlook. However, caution is advised regarding several low-quality mid-cap and small-cap stocks, which have surged substantially and might be overvalued, potentially representing a bubble market segment. 

Nonetheless, there is still room for growth for many high-quality mid-cap and small-cap names. As we step into 2024, the next few months will be pivotal in shaping the trajectory of the global and Indian markets in the first half of CY24. The duration and impact of peak interest rates in the US and other developed economies will influence global economic strength and market sentiment in 2024. For the Indian equity market, the year may signify ongoing consolidation alongside selective growth. The broader market, driven by escalating consumer demand and corporate earnings, is anticipated to sustain its upward trend. Identifying sectors poised to benefit from structural economic shifts will be the key. 

DSIJ Portfolio Performance

In line with our track record, the ‘DSIJ Where to Invest 2023’ portfolio has outperformed the BSE Sensex and BSE 500 by a significant margin. The best-performing stocks in the portfolio were Cholamandalam Investment and Finance Company, Cochin Shipyard, Action Construction Equipment and H G Infra Engineering, all of which have shown remarkable growth over the period, generating returns of more than 50 per cent. These stocks have significantly outperformed the market indices. On the other hand, the two lowest-performing stocks in the portfolio were Siyaram Silk Mills and Asian Paints which did not meet our expectations.

The best part is that none of the recommended stocks in the portfolio turned negative. Overall, the DSIJ portfolio delivered a return of 35.13 per cent in one year or 36.56 per cent including dividend, while the BSE Sensex and BSE 500 indices recorded returns of 16.50 per cent and 21.91 per cent, respectively, in the same period. It is evident that the DSIJ portfolio has outperformed both the benchmark indices. This robust performance can be attributed to the impressive growth of the stocks mentioned above, all of which made significant contributions to the portfolio’s success. 

In the following pages, we will take you through the rationale of selecting the stocks for 2024 portfolio. It is a well diversified portfolio comprising of different sectors and caps. 

Accelya Solutions India Ltd. 

CMP (₹ ): 1,387.70
BSE CODE : 532268 I Face Value (₹ ) : 10
Mcap Full ( ₹  Cr.) : 2,073.26 

Accelya Solutions India Limited is a software solutions provider for the global airline and travel industry and drives end-to-end digital transformation in airline businesses. Specialising in passenger, cargo and industry solutions, Accelya Solutions India (ASI) builds on the Accelya Airline Retail Platform, aligning with NDC and One Order standards. With certified solutions like Order Accounting, the company supports airlines in embracing new retailing and distribution strategies. Post-pandemic, ASI’s financial services have gained prominence, aiding airlines in long-term growth and recovery. 

Financials - For the quarter ended September 30, 2023, the company posted net revenue of ₹ 127.29 crore compared to ₹ 115.26 crore from the previous year’s corresponding quarter, signifying a YoY growth of 10.44 per cent. Its net profit stood at ₹ 31.52 crore compared to ₹ 33.11 crore, a YoY decline of 4.80 per cent. The EBITDA margin fell by 677 bps YoY to 39.6 per cent. 

Valuation and Growth Triggers - At TTM, ASI shares are trading at a PE of 17.5 times, which is lower compared to its long-term historical median of 22.8 times. The company has gradually posted improvement in operating margins over the last three years from 29.5 per cent to 39.5 per cent, which has led to healthy compounded bottom-line growth of 13.44 per cent. 

The company’s revenue has remained muted over the last three years. While the company has posted a healthy average ROE and ROCE of 31.8 per cent and 39.9 per cent, respectively, over the last three years, it is on an improving trend on a YoY basis. Furthermore, he company is virtually debt-free. Given that the airline and travel industry is back to the booming times of the pre-pandemic period, Accelya Solutions India stands to gain from the demand for new platforms to match the evolving needs of the industry. Considering these factors, we recommend BUY. 

Aptus Value Housing Finance India 

CMP (₹ ): 329.25
BSE CODE : 543335 I Face Value (₹ ) : 2
Mcap Full ( ₹  Cr.) : 16,397.14 

Aptus Value Housing Finance (AVHF) is a retailfocused housing finance company catering to the housing needs of self-employed, low-income and middle-income families, primarily in semi-urban and rural areas. AVHF exclusively targets first-time home buyers, focusing on self-occupied residential properties as collateral. Serving 72 per cent self-employed individuals and the rest from the salaried segment, AVHF operates with a strong presence in South India. Notably, AVHF refrains from providing loans to builders or for commercial real estate, maintaining a strict focus on its retail clientele. 

Financial Strength - In Q2FY24, AVHF reported a robust profit after tax of ₹ 148.01 crore, a significant increase from the previous fiscal quarter. The net consolidated total income rose by 24.33 per cent to ₹ 344.46 crore. Disbursements of ₹ 1,391 crore in the first half of the year resulted in a notable 28 per cent growth in assets under management (AUM), reaching ₹ 7,604 crore. 

Market Performance - With a market capitalization of ₹ 16,183 crore, AVHF's current stock price is ₹ 324, featuring a PE ratio of 29.4 and a book value of ₹ 71. The company's financial indicators include a dividend yield of 1.23 per cent, ROCE at 14.6 per cent, and ROE at 16.1 per cent. The three-year EPS growth is -23.7 per cent, while the five-year EPS growth is 3.53 per cent. The company's financial health is evident in an OPM of 83.6 per cent, a debt-to-equity ratio of 1.22, and a quick ratio of 12.4. The PEG ratio stands at 0.59, and the price-to-sales ratio is 13.2, instilling confidence among investors. 

Valuation and Growth Triggers - AVHF is strategically expanding its market presence in regions like Odisha and Maharashtra, aiming to enhance operational efficiency, reduce credit costs, and target ticket sizes ranging from ₹ 5–₹ 15 lakhs. The focus on diverse customer profiles ensures business growth while effectively managing risks, providing flexibility and outreach in the retail segment. Given these promising factors, we recommend BUY.

Bharat Petroleum Corp. Ltd. 

CMP (₹ ): 446.65
BSE CODE : 500547 I Face Value (₹ ) : 10
Mcap Full ( ₹  Cr.) : 96,835.44 

Bharat Petroleum Corporation Limited (BPCL) operates in the area of refining crude oil and the marketing of petroleum products. It runs refineries in Mumbai and Kochi, along with LPG bottling plants and lube blending facilities across various locations. Its extensive marketing infrastructure comprises installations, depots, retail outlets, aviation fuel stations, and LPG distributors. 

Financials - In the quarter ending September 2023, BPCL reported a remarkable 1,051 per cent growth in its consolidated net profit, amounting to ₹ 7,943 crore as compared to a loss of ₹ 834 crore in the corresponding period last year. However, the revenue from operations dipped by 9.1 per cent to ₹ 1.17 lakh crore from ₹ 1.28 lakh crore in the previous year’s quarter due to lower refining throughput, standing at 9.4 MMT compared to 10.4 MMT in Q1FY24. This was due to planned maintenance shutdown at the Bina refinery in Madhya Pradesh. 

Valuation and Growth Triggers - Looking ahead, BPCL plans to add 1,000 retail outlets in FY24, having already added 300 outlets in 1HFY24. The management has emphasised that Bina refinery’s gross refining margin (GRM) surpasses that of the other refineries, thanks to its capability to process up to 90 per cent of high sulphur crude in its basket. Oil marketing companies like BPCL are anticipated to exhibit strong performance in Q3 due to improved gross marketing margins on petrol and diesel. The Singapore GRM for the current quarter stands at USD 4.5 per barrel, exceeding the Q1FY24 figures. Despite the Middle East conflict, Brent crude has dropped by 15 per cent since September end. 

Given the scenario, investing in OMCs like BPCL would appear to be an advantageous proposition. OMCs, except for potential short-term inventory losses, appear to be the major beneficiaries. At 1.4 times the P | BV, the current levels indicate limited downside potential compared to historical trading patterns of around 2 times. Considering these factors, we recommend BUY. 

Bigbloc Construction Ltd 

CMP (₹ ): 164.55
BSE CODE : 540061 I Face Value (₹ ) : 2
Mcap Full ( ₹  Cr.) : 1,162.34 

BigBloc Construction Limited is a prominent player in the Indian aerated autoclave concrete (AAC) block manufacturing industry, boasting a robust capacity of 825,000 CBM/PA across three state-of-the-art facilities. The company has positioned itself as a leading manufacturer of sustainable building materials. With a marquee clientele of over 100 realtors and a diverse product portfolio, BigBloc Construction stands out as one of the largest AAC block manufacturers in India. 

Financials - In Q2FY24, BigBloc reported revenue of ₹ 58.9 crore, a 21 per cent YoY growth from ₹ 48.5 crore in Q2FY23. Its EBITDA reached ₹ 14.9 crore, indicating 7 per cent increase YoY. However, the PAT for Q2FY24 was ₹ 7.5 crore, signalling a decline of 11.8 per cent YoY. The management is focusing more on EBITDA margins rather than net profit margins due to factors like capital expansion, where control is limited. The net debt-to-equity ratio is at 1.2 times – a slight increase from FY23’s 1.1 times, reflecting a small rise attributed to internal accruals for capital expansion. 

Valuation and Growth Prospects - BigBloc Construction is well-positioned for growth in India’s construction industry, supported by government initiatives and increasing acceptance of AAC blocks. Collaborating with Siam Cement Group has enhanced the company’s technological expertise. By FY25, the company expects to commission its second phase plants. The margins have improved with AAC blocks being 15-20 per cent cheaper than bricks. The company’s assets have doubled since FY22 on account of ₹ 75 crore worth of capital expansion as of November 2023. 

Post-expansion, BigBloc Construction aims to be India’s largest AAC block manufacturer, targeting ₹ 500-₹ 600 crore revenues in the next five years. Its strong financials include a three-year revenue CAGR of 19 per cent and three-year EBITDA CAGR of 69 per cent. Hence, we recommend BUY. 

Garden Reach Shipbuilders & Engineers Ltd 

CMP (₹ ): 819.65
BSE CODE : 542011 I Face Value (₹ ) : 10
Mcap Full ( ₹  Cr.) : 9,388.11 

Garden Reach Shipbuilders & Engineers Limited (GRSE) is a premier warship-building company in India, operating under the administrative control of the Ministry of Defence. GRSE, since 1960, has built more than 107 warships for various roles, starting from state-of-the-art frigates and corvettes to fast patrol boats. The main businesses of GRSE include shipbuilding and ship repairing, engine assembling and testing, and engineering products. 

Financials - Garden Reach Shipbuilders & Engineers Limited reported a strong second quarter for FY24, with net sales growth of 31.74 per cent to ₹ 897.91 crore, compared to ₹ 681.60 crore in the same quarter last year. The net profit for the quarter stood at ₹ 80.74 crore, which was ₹ 58.73 crore in the previous year’s same quarter. The company has a return on capital employed (ROCE) of 20.3 per cent and return on equity (ROE) of 16.4 per cent. 

Valuation and Growth Prospects - It has an order book of ₹ 23,739.59 crore, including projects for the Indian Navy, the Government of Bangladesh and the DRDO. The order book is expected to last for the next five years, and the revenue recognition peak could be in FY25 or FY26. The Indian Navy and Indian Coast Guard will be coming up with new projects in the coming years and months, which will benefit the company. GRSE is currently trading at a PE of 35.5 times, which is high when compared to its industry peers, but it can justified due to the growth of the company. 

In the last three years, the sales of the company have increased at a CAGR of about 21 per cent with profit growth of 10 per cent. The stock trades at 6.29 times its book value and has a PEG ratio of 1.75 times. The company has achieved a healthy average ROE and ROCE of 20.3 per cent and 16.4 per cent, respectively. It is debt-free with an interest coverage ratio of 30.9 times over debt-to-equity of 0.01 times. Given all these factors and the fact that its order book is well-positioned, we recommend BUY. 

HDFC Bank Ltd 

CMP (₹ ): 1,670.85
BSE CODE : 500180 I Face Value (₹ ) : 1
Mcap Full ( ₹  Cr.) : 12,68,143.20 

HDFC Bank Limited, headquartered in Mumbai, stands as India’s largest private sector bank of the country by market capitalisation. The bank caters to a wide range of banking services covering commercial and investment banking on the wholesale side and transactional or branch banking on the retail side. The bank has three key business segments: wholesale banking, treasury and retail banking. In April 2022, HDFC Bank announced a merger with India’s largest housing finance company, HDFC Limited. 

Financials - In Q2FY24, on a consolidated basis, the company’s net interest income was ₹ 75,039.10 crore, increasing from ₹ 40,929.79 crore with growth of 83.34 per cent YoY. On a YoY basis, its other income showed growth of 294.16 per cent to ₹ 32,527.52 crore from ₹ 8,252.31 crore in the same quarter. The net profit for Q2FY24 rose by 55.09 per cent YoY to ₹ 17,312.38 crore compared to ₹ 11,162.59 crore from the same quarter the previous year. 

Valuation and Growth Triggers - The current account saving account (CASA) deposits grew by 7.6 per cent. Its gross non-performing assets were at 1.34 per cent of the gross advances as on September 30, 2023 as against 1.41 per cent on a pro forma merged basis as on June 30, 2023 and 1.23 per cent as on September 30, 2022. The net nonperforming assets were at 0.35 per cent of the net advances as on September 30, 2023. 

HDFC’s group companies provide synergistic benefits and avenues for future growth in the areas of asset management and insurance. The merger of HDFC Bank and HDFC Limited offers substantial growth opportunities, especially considering the bank’s competitive advantage in mortgage financing and the potential for cross-selling to existing HDFC customers. In the last three years, the bank has delivered average ROE of 16.8 per cent and ROCE of 6.13 per cent. Given the strong financials, we recommend BUY. 

Hero Motocorp Ltd. 

CMP (₹ ): 3,935.70
BSE CODE : 500182 I Face Value (₹ ) : 2
Mcap Full ( ₹  Cr.) : 78,677.58 

Hero MotoCorp Limited is a pioneering twowheeler manufacturer. It manufactures and sells motorised two-wheelers up to 350 cubic centimetres (cc) engine capacity, spare parts and related services. As the world’s largest manufacturer of two-wheelers in terms of unit volumes for over two decades, Hero MotoCorp boasts a significant market share in the Indian motorcycle market. The company features strong brands such as Splendor, Passion and Glamour in the bike segment, and Pleasure and Maestro in the scooter segment. 

Financials - Looking at the consolidated quarterly financial performance of Hero MotoCorp, in Q2FY24 the company reported revenue of ₹ 9,533 crore, registering growth of 4.09 per cent as compared to ₹ 9,158 crore in Q2FY23, while the EBITDA of the company surged by 28 per cent and stood at ₹ 1,360 crore as against ₹ 1,062 crore in Q2FY23. Similarly, the net profit of the company increased 47.65 per cent to ₹ 1,007 crore as compared to ₹ 682 crore in Q2FY23. 

Valuation and Growth Triggers - Hero MotoCorp’s ‘Win in Premium’ strategy is thriving, fuelled by strong bookings for Harley-Davidson X440 and Karizma models. The company plans to open 100+ premium stores and upgrade existing ones, part of a broader expansion in the electric two-wheeler business covering 100+ cities. With a focus on infrastructure development, Hero MotoCorp’s electric vehicle (EV) business, including an investment in Ather, is gaining momentum. Moreover, global business volumes reached 52,500 units in Q2, with heightened production for premium models. The company targets market share growth in the scooter segment through strategic interventions and portfolio strengthening. Improved gross margins, coupled with a consistent capital expenditure guidance of ₹ 1,000 crore, further underpin the positive outlook. Additionally, the company’s valuation metrics, including a PE multiple of 22.8 times and EV/EBITDA of 14, align with historical trends and industry benchmarks, indicating a fair valuation. Hence, we recommend BUY.

Landmark Cars Ltd 

CMP (₹ ): 811.30 
BSE CODE : 543714 I Face Value (₹ ) : 5
Mcap Full ( ₹  Cr.) : 3,332.87 

Landmark Cars Limited is a key player in India’s premium automotive retail sector, featuring dealerships for renowned brands like Mercedes-Benz, Honda, Jeep, Volkswagen and Renault. Engaging in the purchase and sale of pre-owned passenger vehicles, the company curates a diverse automotive portfolio. Beyond passenger vehicles, its strategic collaboration with Ashok Leyland has expanded Landmark Cars’ footprint into the commercial vehicle sector. The company offers a comprehensive automotive experience, covering new vehicle sales, after-sales service, repairs, and facilitation of pre-owned vehicle sales. Since 1998, Landmark Cars has focused on delivering top-notch services in the premium and luxury automotive sectors. 

Financials - In September 2023, the company witnessed a decrease in net sales amounting to ₹ 770.69 crore compared to ₹ 852.15 crore in September 2022, reflecting a decline of 9.56 per cent. The profit before interest, depreciation and tax (PBIDT) excluding other income also experienced a reduction, dropping from ₹ 60.96 crore in September 2022 to ₹ 54.45 crore in September 2023, marking a decrease of 10.68 per cent. 

On a positive note, the net profit showed an improvement, rising from ₹ 16.87 crore in September 2022 to ₹ 20.50 crore in September 2023, indicating a growth of 21.55 per cent. The calculated EPS increased from ₹ 4.57 to ₹ 5.00, representing a growth of 9.57 per cent. 

Valuations and Growth Triggers - The company plans a routine capital expansion of ₹ 10-₹ 15 crore, prioritizing strategic investments for ongoing operations. Additional capital will be allocated for organic or inorganic growth opportunities. The focus on new car models aligns with the growth strategy. Strategic partnerships with MG Motors and Mahindra & Mahindra aim to boost overall growth and market positioning. With rising automobile sales, the company is poised for success. Hence, we recommend BUY. 

Lincoln Pharmaceuticals Ltd. 

CMP (₹ ): 620.15
BSE CODE : 531633 I Face Value (₹ ) : 10
Mcap Full ( ₹  Cr.) : 1,236.33 

Established in 1979, Lincoln Pharmaceuticals Limited has proven itself as a prominent company in the realm of branded generics, known for delivering cost-effective and inventive medications that contribute to improved wellbeing. It is a dynamic pharmaceutical manufacturer committed to advancing the industry through innovative breakthroughs, effective business strategies, and unwavering customer satisfaction. 

Financials - In Q2FY24, the company reported consolidated revenue of ₹ 155.99 crore, increasing by almost 11 per cent year-on-year (YoY) from ₹ 140.61 crore while sequentially rising by around 15 per cent. Its PBIDT excluding other income) rose by 7.8 per cent YoY and stood at ₹ 31.15 crore from ₹ 28.90 crore while on a sequential basis it has recorded a jump of 55 per cent from 20.72 crore. The company’s net profit stood at ₹ 27.65 crore compared to ₹ 23.71 crore, indicating a YoY growth of 16.6 per cent, while on a sequential basis it grew by almost 42 per cent. 

Valuations and Growth Triggers - The recent capital investments of Lincoln Pharmaceuticals primarily focused on the expansion of the Cephalosporin plant in Mehsana, Gujarat. The company has successfully completed multiple expansion projects at this plant, which is expected to make a significant contribution to the company’s sales, with estimated revenue of around ₹ 150 crore over the next three years. Besides, the company aims to strengthen its portfolio in the lifestyle and chronic segments. 

It also aims to specifically focus on women’s healthcare and dermatology. If we look at the current valuations, the company is currently trading at a PE of 15.7 times, whereas the industry PE is currently at 31.2 times. If we look at the price-to-book value of the company, it is currently at 2.33 times, which is less than most of its peers. Its market capitalisation to sales ratio is 2.36 times. Taking into account the growth triggers and the company’s present financial status, we recommend BUY.

Ujjivan Small Finance Bank Ltd 

CMP (₹ ): 57.70
BSE CODE : 542904 I Face Value (₹ ) : 10
Mcap Full ( ₹  Cr.) : 11,281.43 

Ujjivan Small Finance Bank (USFB) is a small-cap bank with a market capitalisation of ₹ 11,675 crore. The bank is a mass market-focused small finance bank in India. Its portfolio of products and services includes various asset and liability products and services. The bank’s asset products comprise loans to micro banking customers that include group loans and individual loans, agriculture and allied loans, medium and small enterprise (MSE) loans, affordable housing loans, financial institutions group loans, personal loans and vehicle loans. 

Financials - In Q2FY24, Ujjivan Small Finance Bank’s net profit rose by 40.08 per cent year-on-year (YoY) to ₹ 1,391.14 crore compared to ₹ 993.12 crore from the same quarter the previous year. On a sequential basis, its revenue grew by 8.10 per cent. The total income of the bank increased by 38.60 per cent YoY to ₹ 1,579.78 crore compared to ₹ 1,139.83 crore from the same quarter the previous year, while sequentially it increased by 7.90 per cent. 

The bank’s operating profit stood at ₹ 483.36 crore compared to ₹ 384.98 crore, a YoY growth of 25.55 per cent, while sequentially increasing by 5.56 per cent. USFB reported a strong financial performance in Q2FY24 with its gross loan book witnessing impressive growth of 27 per cent YoY and 5 per cent QoQ to reach a significant ₹ 26,574 crore. Its current accounts and saving accounts (CASA) grew 28 per cent YoY, taking the CASA ratio to 24.1 per cent. 

Valuation and Growth Triggers - Ujjivan Small Finance Bank (USFB) is trading at a 2.9 times price-to-adjusted book value, with a return on assets of over 3.8 per cent. With a strong brand reputation, competitive advantage, and government support, USFB is well-positioned for a strong FY 2024. The growing demand for financial services in India is a major growth trigger, and its new products, brand campaign, and reverse merger with Ujjivan Financial Services are expected to drive further growth. Hence, we recommend BUY.

[EasyDNNnews:PaidContentEnd] [EasyDNNnews:UnPaidContentStart]

[EasyDNNnews:UnPaidContentEnd]