The bears are in firm control. With the BSE mid- and small-cap index down by 16 and 21 per cent respectively for the year, the market has taken every reason it can find to hammer stocks. Even large-cap stocks, perceived to weather such hammering better, are not safe either. Of the 82 large-cap stocks, 44 have lost investors their money.
We screened the large-cap space to bring you three high-quality large caps that you could look at.
Here are the filters we used:
- Large-cap companies with a market cap above Rs 33,686 crore
- Negative price return more than 25 per cent
- ROE above 15 per cent in each of the last three years
- Compounded increase in earnings of more than 20 per cent in the last three years.
A part of the troubled Essel Group, this broadcasting company commenced its journey with the country's first satellite television channel, Zee TV, in 1992, followed by the country's first private news channel, Zee News. At present, it operates around 41 channels in 10 languages, including Marathi, Kannada and Tamil. It enjoys the highest viewership in the country with around 20 per cent network share. It is also a leader in the Marathi, Bengali and Kannada entertainment markets. Zee has a content bank of over 260,000 hours of programmes and a strong international presence (10 per cent of its FY19 revenue), backed by its operations in 173 countries. Primarily, it earns its revenues from advertisements (63.5 per cent of the total revenue in FY19) and subscription (29 per cent).
In 2018, the company launched its over-the-top (OTT) platform, Zee5. At the end of Q1FY20, it had 76.4mn monthly active users. The company is also involved in the movie production business, with plans to make 10-12 movies in a year. It also has a music business, wherein its YouTube channel is the third most subscribed in the country.
Driven by the need to repay its debt at the parent level and reduce pledged shares, the company is currently looking for buyers, which has led to volatility in the stock price. Its stock price has corrected by more than 25 per cent in the last one year. The promoters sold 11 per cent of the total promoter stake in the company to Invesco Oppenheimer for Rs 4000 crore. The promoters have said they are looking to repay the entire Rs 11000 crore debt by the end of September 2019. The stock trades at a PE of 18 times as compared to a five-year median of 35 times.
Godrej Consumer Products
The number one player in household insecticides and hair colour and number two in soaps in India, Godrej has a wide range of brands, such as Cinthol, Goodknight, Hit, Ezee, etc.which are commonly used may be present in Indian households. Having a significant international presence, the company is number one in hair care in Sub-Saharan Africa and the number one in air fresheners and wet tissues. Its international operations accounted for 47 per cent of the consolidated revenues in FY19.
Despite its leadership, the stock was down 25 per cent in the last year because of a slowdown in the core household insecticide business in India and weak growth in Africa and Indonesia. Even though the management has a strategy in place to beat the anaemic growth, recent quarterly results have shown the signs of a clear slowdown in consumption, which is expected to pick up during the upcoming festival season. Its strategy, called three by three is aimed at three products, namely hair, home and personal care across three continents i.e Asia, Africa and Latin America. Hence, it sold its UK business last year.
In terms of financials, sales and earnings have increased at a five-year CAGR of six and 23 per cent, respectively. Debt has fallen to 0.47 times of equity from 0.63 times in FY15. The stock trades at 28 times and is at one of its lowest levels in the last three years, the five-year median being 44 times.
Headquartered in Kolkata, Bandhan Bank began operations on August 23, 2015, with 501 branches, 50 ATMs and 2022 service centres (DSCs). At present, they have 1,000 branches, 481 ATMs and 3014 DSCs serving more than 1.73 crore customers on the back of 32,342 employees. It offers regular banking services, microfinance, micro small and medium enterprise loans and affordable housing finance.
In September 2018, RBI imposed two restrictions on the bank -one, prior approvals would be required before opening up new branches and the MD and CEO's salary would be frozen to the current level. However, it still managed to get approvals for 65 new branches of which, 48 have already been open. In addition, the bank has announced the takeover of Gruh Finance to capitalise on the affordable housing space. This move is expected to reduce the promoter stake from 82 per cent to 61 per cent.
As on FY19, the bank had total deposits worth Rs 43,232 crore. Its outstanding loan book stood at Rs 44,776 crore. Its CASA (current account saving account) ratio stood at 40.75 per cent, with return on assets being 4.23 per cent. Microloans continued to form a major part of its assets at 86 per cent. Capital adequacy ratio (minimum 10.5 per cent for banks) stood at a healthy 29.2 per cent. Net interest margin stood at 10.43 per cent, reporting a jump from FY18, which was 9.69 per cent and is one of the highest in the industry. Gross NPAs increased to 2.04 per cent in FY19 from 1.25 per cent in FY18. The company currently trades at a price to book of 4.5 times, down from its five-year median of 5.6 times.
Disclosure: The intent of the article is not to recommend any specific stocks. If you wish to invest in any of the above-mentioned securities, please do thorough research.