Expect Nifty to head towards 18600 in couple of months led by BFSI, Consumption, Capital goods, Auto and IT

Crude Decline Beneficiaries 

•  PVC pipes, consumer Electricals and paints companies will be major beneficiaries of declining crude prices 
• key raw materials such as PVC is down by 24%, HDPE down by 26%, VAM prices down by 25%, TiO2 prices down by 5% from its recent peak 
•  companies are expecting festive season sales to be 30-40% higher than its pre-covid 
• We upgraded Havells India to BUY with a target price | 1650 factoring in improved performance of its Lloyd division. 
• We also like Bajaj Electricals (TP: | 1470) and Polycab India (TP: | 2950) factoring in EBITDA margin expansion and comfortable valuation. 
•  Asian Paints continue to be our best pick amongst paint companies with TP of | 4045. 
• Within piping front, Supreme Industries (TP | 2510) will be one of the major beneficiaries of demand revival of PVC pipes 

Retail Sector 

•  We expect upcoming festive season (Q3: generate ~30% annual revenues) to be robust. 
•  Healthy store addition pipeline for FY23 (Pantaloons: 70, Westside: 35, Zudio: 100, V-Mart: 60). 
•  Expect revenue to grow at a CAGR of 26% in FY22-24E (CAGR of ~17% from pre-Covid market in FY20). 

Kewal Kiran Clothing (CMP: 425, TP: | 500, upside 18%, MCap: | 2630 crore) 

KKCL continues to be one of the most profitable branded apparel players in India (RoCE: 20%) with strong presence in branded menswear category. Expect company to register revenue, earnings CAGR of 16%, 21% in FY22-24E. 

Trent Ltd (CMP: 1410, TP: 1665 | , upside 18%, MCap: | 49506 crore) 

Trent was amongst the very few that has doubled its store presence from 200 fashion stores in Q1FY20 to the current 450 stores.In the long run, the company aims to grow its revenue at CAGR of 25%+ 

5G launch 

Real Estate 

Roads and construction companies 

•  Roads and construction companies posted strong growth in Q1, rising 32.9% on YoY basis 
•  Most of the road developers are sitting on the healthy 2.5-3.5x TTM revenues providing visibility over next 2-3 years. 
•  Expect some benefits on margins from Q3 onwards on superior execution 
• Preferred picks in EPC space include PSP Projects, PNC Infratech, KNR Constructions, and HG Infra. 

Power Sector: Thermal power generators in a sweet spot 

•  PLF’s of coal-based power plants will sustain at higher levels. 
•  NTPC will be in a sweet spot in thermal segment (70000 MW plus capex planned to the tune of 5-6 GW) 
• NTPC provides attractive entry opportunity with a target of | 196 (1.4x FY24 BV) with an upside of 18%. 

Cement Sector 

•   Cement company’s margins were resilient in Q1FY23 with EBITDA/t of over |1000/tonne 
•  The domestic & international (US & Saudi Arabia) petcoke prices have fallen by ~30% & 40% respectively from its peak  in Jun’22/May’22.  
•  The impact of softening fuel prices to reflect from Q3FY23 onwards. 
•  Fuel cost/tonne to decline by ~Rs 250-300/tonne in H2FY23 while cement price could go up post monsoon 
•  Our key top picks are Ultratech, Shree Cement in the large cap space. We also like Orient Cement & Heidelberg in the mid-cap space.  

PSU Banks – decline in yields to propel RoA 

•  PSU banks like SBI, BoB, Indian Bank reported earnings at Rs 9449 crore in Q1FY23, impacted due to treasury loss of Rs 7324 crore (led by increase of 65 bps in yields). 
• Recent decline of 35 bps in Gsec yields is seen to partially reverse treasury losses in Q2FY23 which can propel sequential growth of 20% plus in earnings and RoA by 5-10 bps QoQ in Q2FY23 

SBI (CMP – Rs 550, Target – Rs 615, Rating - BUY) 

After posting a treasury loss of Rs 6500 crore which impacted PAT reported at Rs 6068 crore (-6.7% QoQ), the bank is poised to report a sequential jump in earnings of more than 20% in Q2FY23 

Hidden Gem 

Lemon Tree Hotels (CMP |77, Market Capitalization |6,140 crore,  TP |110, Potential upside 43%)  

• With favorable location of its properties in prominent business and tourist districts, Lemon Tree Hotels remains a best proxy play on Tourism sector revival. 
•  Post expansion, it will be operating ~10,462 rooms in 105 hotels by FY24E from current room inventory of ~8500 rooms. 
• The current employee count has now reduced from 0.95/room to 0.62/room. 
• we expect the company’s operating margin to scale up to 50% (highest in the industry) over next one year.  
•  We retain BUY rating on this stock with SOTP based TP of |110/share (i.e., at 28x FY24E EV/EBITDA)