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    Hidden gems: LIC’s favourite stocks that posted over 50% Q2 profit growth


    These companies are from across sectors such as paints, financials, cement, defence & pharma.

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    Analysts have turned bullish on some of them post Q2 numbers.

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    More than three dozen firms in the portfolio of the country’s biggest institutional investor, Life Insurance Corporation of India (LIC), reported more than 50 per cent year-on-year (YoY) increase in net profit for the quarter ended September 30.

    These companies are from across sectors such as paints, financials, cement, defence, pharma, paints, metal, insurance and PSUs.

    Analysts have turned bullish on some of them post Q2 numbers.

    Stocks up the pecking order in LIC portfolio are the country’s biggest mortgage lender HDFC, biggest lender by assets managed SBI and major power players NTPC and Power Grid. These companies posted between 50 per cent and 400 per cent rise in profit during the quarter.

    HDFC Securities has a ‘buy’ rating on SBI with a price target of Rs 389. “Positive surprises on asset quality can trigger a re-rating,” the brokerage said in a report. On a year-to-date basis, SBI shares advanced 7.57 per cent to Rs 322 till November 15.

    On the other hand, power majors NTPC and Power Grid each dented LIC’s portfolio by over 5 per cent so far this year.

    Edelweiss Securities said the recent corporate tax cut would not majorly impact the power sector, as it will be a pass-through for companies following the regulated business model.

    “Taking a cue from the weakness in power demand, we are pruning our FY20 and FY21 demand forecast to 3 per cent and 5 per cent from 5 per cent and 6 per cent earlier,” it said. In an October report, the brokerage maintained its preference for NTPC.

    Kotak Mahindra Bank, Bajaj Finserv, Dr Reddy’s Laboratories, Adani Ports, Adani Transmission, Asian Paints, UltraTech Cement, Indraprastha Gas, GSK Pharma and The Federal Bank are among other top stocks in the portfolio.

    Only those LIC stocks which reported over 50 per cent increase in Q2 profit along with a rise in net sales were considered for this report. The screener threw up 37 companies from largecap, midcap and smallcap segments as of November 18. LIC held 370 stocks in its portfolio as of September 30 and out of them only 287 have announced September quarter number till date.

    Garden Reach Shipbuilders, which delivered nearly 145 per cent return to LIC year to date, reported more than 300 per cent rise in profit on over 100 per cent increase in net sales in Q2.

    The warship builder posted a net profit to Rs 59.02 crore for the second quarter of this financial year, on the back of higher revenue. It had posted Rs 12.78 crore profit for the corresponding period of 2018-19. The company had as many as 22 projects are at various stages of construction, with an order book of Rs 27,400 crore.

    Bengal & Assam Company, Bharat Dynamics, Adani Transmission, Caprihans India, Chambal Fertilisers, Hudco, Gateway Distriparts, Indian Bank, ABB India, Hindustan Aeronautics and Granules India were among the companies that posted more than 100 per cent YoY rise in net profit for the quarter.

    Among other midcaps and smallcaps, Aditya Birla Capital, Pfizer, The New India Assurance, Dalmia Bharat Sugar, Torrent Power and Mishra Dhatu Nigam and Granules India posted between 50-110 per cent YoY rise in net profit on up to 50 per cent increase in net sales.

    In the financial space, Aashish Agarwal, Executive Director, Head of Research, CLSA has a preference for banking and non-lending financiers over NBFCs.

    “A few trends would continue to play out in the banking sector; a) banks will gain market share at the cost of NBFCs, b) savings will continue to go towards insurance and asset management companies. So, these companies are in a sweet spot of high growth and decent profitability,” he said.
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    The Economic Times