31 TVS Srichakra
Part of the TVS Group, TVS Srichakra is the leader in the two- and three-wheeler domestic OEM tyre market and the No.3 in the after-market segment. It manufactures a wide range of two- and three-wheeler tyres and off-road tyres. The company has two manufacturing plants and a network of 3,000 dealers. About 57% of its revenue comes from OEM sales, while 30% comes from the replacement market and 13% comes from exports. TVS Srichakra has managed to grow faster than the overall industry, as its larger clients like Honda too managed to better industry growth. With rubber prices likely to remain soft and interest cost likely to stay lower, the company will probably improve its profitability. While revenue growth is expected to be around 12% over the next two years, net profit growth is expected to be higher at 22%, helped by better cost-management, lower interest cost and benign rubber price. The stock currently trades at 14x its estimated FY16 earnings.
30 eCLERX Services
This Mumbai-based KPO supplies outsourcing solutions to over 30 Fortune 500 companies. In May 2012, it acquired Agilyst Inc, a specialist outsourcing company serving the broadband, cable and telecom industry in the US and the UK, thereby giving it access to a diversified Fortune 500 client base and additional domain competence in service delivery. The company has managed to reduce its exposure to top 5 clients from 87% in FY11 to 56% in September 2015. Since recent revenue growth has been driven by short-term projects, the management expects margin to be under pressure during the second half of the fiscal. However, analysts expect eClerx to bounce back, with revenue expected to grow by 25% during FY15-17, supported by its acquisition of CLX, an Italian company specialising in digital marketing services.
29 Mayur Uniquoters
Mayur Uniquoters is one of the largest synthetic leather manufacturers in India, having an installed capacity of 3.05 million liner metre per month and clients such as Maruti, M&M and Tata Motors in the automotive space and Bata, Relaxo and Paragon in the footwear space. It has experience in making premium leather upholstery. Mayur’s export contribution jumped from 19% of revenue in FY11 to 26% as Ford and GM decided to shift their sourcing from China in favour of Mayur. For the second quarter of FY16 sales grew by 4% due to muted demand in the domestic market and lower exports. However, operating margins increased by 530 bps to 24% due to higher gross margins as well as falling crude prices. Analysts expect revenue to grow by 24%, on average, for the next two years.
28 HCL Technologies*
India’s fourth-largest IT services provider, which supplies software solutions, remote infrastructure management and BPO services, was besieged by currency fluctuations, cancellations and delays in its infrastructure management business. This resulted in lower revenue and a fall in net profit on account of the same in the first half of 2016. Half of its revenue comes from the US, another 30% from Europe and the remaining from the rest of the world. However, most analysts are upbeat about the stock given its strong positioning in engineering services, which, coupled with the MIS segment, brings in more than 50% of revenue. However, increasing competition could put pressure on pricing and margins.
27 Cera Sanitaryware
One of the leading sanitaryware and tile-makers in the country, Cera Sanitaryware has a strong brand image in the mass- and mid-market segment, with a pan-India distribution network. It has a plant in Gujarat with an annual production capacity of 3.3 million pieces of sanitaryware and 2.16 million pieces faucets. In FY15, Cera grew at 24%, however, its Q2 results were marred by weak real estate demand.
Note: *Financial year ending June 2015 and 6-month data comprises trailing two quarters; For the rest financials as stated. Market-related data as on December 14, 2015; M-cap, PAT, sales, assets, cash and dividend in cr; CMP in ₹; PE and D/E in x; return and CAGR in %. Source: Ace Equity