Finolex Industries & Care Research & Fag Bearings India
updated on 8 Oct 2016
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FINOLEX INDUSTRIES: GST will boost this market leader's growth

With the government's focus on increasing the land under irrigation and improving rural sanitation infrastructure, Finolex Industries, the country's largest PVC pipes player, is poised for a healthy growth in the coming years. A good, well-distributed monsoon this year, which will spur rural demand, is expected to provide better earnings visibility to Finolex going forward.
Being the dominant player in the agri-pipes segment, it is well-placed to benefit from the increase in demand. Finolex is strengthening its distribution network, particularly in the underpenetrated North and South Indian markets, by adding dealers and setting up warehouses. It is also looking at adding almost 1 lakh tonne in capacity, over the next couple of years, to cater to the rising demand.

The company has, in recent years, pared down its debt significantly and reduced its receivables (money others owe the company) leading to improved operating cash flows.

Analysts expect Finolex's return ratios to improve going forward as it focuses on high-margin products and incurs nominal capex. The implementation of GST will also be a positive for the company as demand will shift from the huge unorganised agri-pipe market towards the organised players, due to the reduction in the pricing gap.

MF Holding as a % of total share capital
18 schemes hold the stock

Top 5 funds holding the stock

CREIT ANALYSIS & RESEARCH: Revenue will rise with economic recovery

Credit Analysis and Research (CARE), the second largest credit ratings company in the country by market share, offers a focused play on the rating business with nearly all of its revenue coming from this segment, unlike peers such as Crisil and ICRA. CARE boasts of the best margin among rating agencies: 65% operating margin and 44% net profit margin in 2015-16.

This is primarily on account of its focus on the highmargin bank loan and bonds rating business and bolstered by relatively lower employee costs. CARE's presence in the small and medium enterprise segment is muted compared to peers, but the company intends to improve its involvement in this segment by increasing its locations and hiring employees.

While revenue growth from its rating business has moderated significantly in recent years, in line with the slowdown in the economy, analysts expect improved traction in the coming years as the economic recovery plays out.

CARE's asset-light business model and a strong operating cash flow has helped the company increase its dividend payout over the years. With limited capital requirement, incremental profit growth is expected to further enhance its already healthy return ratios.
MF Holding as a % of total share capital
24 schemes hold the stock

Top 5 funds holding the stock

FAG BEARINGS INDIA: New emission norms will drive demand

With the new set of emission norms slated to kick in the coming years, automakers are expected to shift to newer generation of bearings to meet the stringent requirements, which provides revenue visibility for the country's largest supplier of bearings to the passenger car segment, FAG Bearing.
Since the new generation of bearings are pricier compared to the earlier offerings, the shift in the product mix will improve the company's realisations and support margins. FAG recently commissioned a new plant in Gujarat, which offers higher revenue visibility going forward.

The government's plan to upgrade railway infra through dedicated freight corridors, metro and highspeed trains in major cities also augurs well for the company. FAG has seen a steady rise in its RoE over the past three years. Its stock, however, is trading at rich valuations despite a muted growth in recent years. Investors should come in only for the longer term.
MF Holding as a % of total share capital
40 schemes hold the stock
Top 5 funds holding the stock