Eicher, MRF, HCL Tech top MF buys in January


Mutual funds in January eyed companies with sustainability of pricing power, expansion in margins, and high visibility of earnings. Auto and auto ancillaries, construction and IT companies were among the top picks of leading fund managers. Here are a few prominent companies which caught the eye of managers at leading fund houses:

Eicher Motors

CMP: Rs 2,769

Market Cap: Rs 75,662 crore

Buyer: Canara Robeco MF

Eicher Motors, known for its Royal Enfield (RE) motorcycles, is a play on a recovery in bike sales in urban areas. The company’s total bookings in the top 10 and 20 cities were at 18 per cent and 25 per cent at the end of the December 2020 quarter. In the first quarter of FY21, its bookings in the top 10 and 20 cities stood at 15 per cent and 20 per cent respectively. The company’s online application called ‘Make-It-Yours’ (MIY) to book RE bikes online has been a success as it has a high conversation rate. Besides this, the company has expanded its presence by adding more stores which makes its presence close to 1900 touchpoints across India. Lastly, the demand for the company’s flagship brand Royal Enfield has improved considerably in the December 2020 quarter in comparison with the same period last fiscal. In the December 2020 quarter, the company’s exports of Royal Enfield have risen close to 30 per cent year-on-year. This will boost the company’s margins and enhance its Earnings per Share (EPS) in the next two fiscals in the range of 24-57 per cent.

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CMP: Rs 90,542

Market Cap: Rs 38,400 crore

Buyer: Invesco MF

One of the key reasons MRF has caught the eye of leading fund managers is the return in demand for Truck and Bus Radial (TBR) and Passenger Car Radial (PCR) tyres and two-wheelers in recent months. Analysts say this demand is expected to sustain in the coming quarters. Analysts expect that MRF will be able to address its production issues (supply constraints) and meet increasing demand from replacement segment of automobiles industry. They say that there is a high demand for MRF tyre products across categories in the automobile industry. Analysts estimate the company will be able to show higher growth in its revenues compared to its peers for FY22. The company’s EPS is expected to grow in the range of 20-27 per cent in the present and the next fiscals.

HCL Technologies
CMP: Rs 953

MCap: Rs 2,59,019 crore

Bought by: PPFAS MF

Fund managers are bullish on the IT services company as they believe it has unique capabilities in the digital and cloud space, which is poised for growth on the increasing demand for hybrid cloud adoption and large scale digital transformations. It has a higher exposure to financial services, technology services, and life sciences where demand continues to be robust. HCL has been chasing big deals in the past few quarters and has a well-established infrastructure management practice, which could help it win some of the large size deals and drive revenue growth

PNC Infratech
CMP: Rs 273

Market Cap: Rs 7,003 crore

Buyer: Principal MF

One of the top performers in the construction space, PNC Infratech has an order book of Rs 18,000 crore, which gives visibility of revenues for at least the next four years. The order book is well diversified in terms of sectors and geography. The company’s pace of execution of projects has improved meaningfully over the past few quarters and the pace is set to improve going by the December 2020 quarter financial performance. The company aims to monetise eight of its assets by the end of the current fiscal. Besides, it also plans to explore more orders in the water segment. The National Highways Authority of India (NHAI) has a strong pipeline of awarding of roads projects in the current and the next fiscals. PNC expects to win orders totalling Rs 10,000 crore at the end of FY21. Given its low net debt to Ebitda ratio at 0.5 and a strong order book, the company’s net profits are expected to grow in the range of 20-50 per cent during the next two fiscals.

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