Diwali 2023 picks: Karnataka Bank, Triveni Engineering, Mastek, Zomato, Ugro Capital among Systematix's top Samvat 2080 ideas

Systematix Group has picked a bunch of stocks for Samvat 2080. Here's a look at the potential targets and investment rationale behind them.

1. Triveni Eng. & Ind Ltd: Buy for a target of Rs 421

Investment Thesis:

• Triveni Engineering and Industries Ltd is amongst the top 3 sugar manufacturers in India and a leading supplier of ethanol.

• The company has a robust outstanding order book of Rs 1,573 crores for combined engineering business and Rs 282 crores for power transmission business. The Water business has won the bid of RUDSICO Greater Jaipur under Joint Venture agreements with Triveni as the lead partner. Triveni share in the contract is Rs 355 crores.

• The company is planning to increase its distillation capacity from 660 KLPD currently to 1,100 KLPD in the coming years.

• In Q2FY24, the revenues grew by 10% YoY to Rs 1,617 crores and EBITDA grew by 32% YoY to Rs 75 crores. The company has growth its revenue at a CAGR of 19% over the past 5 years and reduced its debt position during the same time and has healthy ROCE of 17.5% and ROE of 23% and is trading at an attractive valuation of P/E of 18 and P/B of 3.

2. Mastek: Buy for a target of Rs 2600

Investment Thesis

• In Q2FY24, the company reported operating revenue of Rs 765.5 crores, marking a robust 22.4% year-over-year increase and a 5.6% quarter-over-

quarter growth (4.4% QoQ and 13.5% YoY in constant currency).

• A significant portion of this revenue, 56.6%, stemmed from their UK Business, where they experienced a surge in orders from the public sector, particularly in the provision of secure government services.

• The company boasted 441 active clients in Q2FY24, with a noteworthy 67 clients generating annual billings exceeding $1 million.

• 12 Month Order Backlog is Rs 1862 crores, up by 13.4% YoY in cc. The company's deal momentum remains robust, supported by a healthy pipeline.

Notably, account mining deals and effective project execution are poised to be key drivers of growth in the second half of FY24.

• The utilization rate is around 84%. The LTM attrition for Q2FY24 is 19.1% vs 24.2% in Q2FY23.

3. Zomato: Buy for a target of Rs 140

Investment Thesis

• The increase in no of orders and average order value has resulted in strong GOV growth. As on 30th Sep 2023, the GOV for the B2C business grew 47% YoY at Rs 11,422 crs . Zomato has also turned profitable in FY24 and its PAT was Rs 38 crs for H1FY24.

• At present, restaurant food accounts for just ~10% of India’s total food spends, with majority centered on home-cooked meals; in contrast, the US and China boast figures of ~54% and 58%, respectively. The Indian food industry is expected to grow at ~9% CAGR which will benefit Zomato.

• Zomato has consistently pursued strategic acquisitions like Uber Eats, Magicpin and Shiprocket which has strategically positioned the company and enabled it to increase its market share

4. Ugro Capital: Buy for a target of Rs 350

Investment Thesis

• UGRO Capital is a fintech with expertise in lending to MSME sector which has a huge addressable market ahead.

• The company uses technology to identify high growth sectors and minimize risks and reducing operation costs.

• UGRO has a co-lending business model with public sector banks and smaller private banks which are mutually beneficial to both the parties. UGRO’s approach to grow with a mix of on book and off book allows it to compete in various offering in its target segment.

• In Q2FY24 the company had an AUM of Rs 7,592 crores, Net Interest Income of Rs 115.7 crores, PAT of Rs 29 crores and healthy ROA of 2.3% and ROE of 2.2%. It is consistently reducing its cost to income and is currently trading at P/B of 2.

5. Karnataka Bank: Buy for a target of Rs 280

Investment Thesis

• Karnataka Bank is a South India based lender which was incorporated in 1924 and has 901 branches pan India and 575 of them are in Karnataka. The company is focused on increasing advances in the retail segment where they are growing the gold and home loans segment. It has traines a team of 600 sales personnel who would focus on Retail and Agri loans. It also wants to grow the MSME and mid-sized corporates loans through various digital, collaboration, and direct channels.

• The board has given approval for raising Rs 1,500 crores of Tier-1 capital which will aid the banks cost of funds. The bank has also been improving its asset quality over the years as GNPA reduced from 4.9% in FY18 to 3.47% in Q2FY24.

• At the end of Q2FY24 The deposits were Rs 89,532 crores with a Net Interest margin of 3.58%, CASA of 31.91% and GNPA and NNPA of 3.47% and 1.36% respectively. The ROE stood at 15.11% and ROA was 1.27% and was available at a P/B of 0.83

6. Shriram Properties: Buy for a target of Rs 124

Investment Thesis

• Shriram Properties is a combination of real estate development and real estate services, business model. Since inception most of its completed projects are in Joint Venture (JV), Joint Development (JDA) and Development Management (DM) business models. The low capital-intensive nature of its service model enables it to keep its debt in check, ensures high scalability and efficient use of capital.

• The company is led by their Chairman & Managing Director M Murali who is supported by an experienced and a professional management team. Being part of the Shriram group it also benefits from the trust that homebuyers and financial investors place in the Shriram Group.

• The company’s key operating metrics have been robust. As per the management, pre sales volumes are expected to increase ~19% YoY from 4.02 msf in FY23 to 4.80 msf in FY24E. Similarly the management expects increase in pre sales value ~25% YoY from Rs 1,846 crs in FY23 to Rs 2,300 crs in FY24E .

7. IDFC: Buy for a target of Rs 155

Investment Thesis

• The board of IDFC First Bank approved its merger with IDFC on 3rd July 2023 through an amalgamation scheme and the ratio of the deal has been fixed at 155:100. CCI Approval received on 17th October 2023 for the proposed scheme of amalgamation. IDFC Limited is a holding company of IDFC First Bank.

• IDFC First Bank delivered a strong financial performance and business growth momentum. Net Profit increased by 35% on YoY basis during Q2FY24 and it stood at Rs 751 crs. Net interest income grew by 32% on YoY basis.

• Customer deposits increased 44% YoY and it stood at Rs 1,64,726 crs. Total loans and advances increased by 26 % YoY and stood at Rs 1,83,236 crs. Gross NPA stood at 2.11% and Net NPA stood at 0.68% for the bank. CASA ratio stood at 46.40%.

• Post Merger, IDFC First Bank distinctive business strategy of aggressive retail expansion, coupled with a vigilant approach to managing non- performing assets will drive growth.

 

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