Long Term Investment

HDFC : Fundamentally very sound company, Hold it & add at every dip

SBI : Dark Horse for Long term Investment

Maruti : Stock continue to be outperformed with attractive EPS

L & T : Excellent future with strong order book

Britannia : Defensive blue-chip available at very low priceri

* SBI (Code : 500112) : The largest domestic banker SBI, with 16 per cent market share, is amiming to up its share further. It is consolidating with its affiliate banks and unlocking its value which is beneficial for its investors. Recently, it merged SBS with itself. Rural and agricultural segments are an under penetrated market for the banking sector. SBI owns 13 per cent of the industry's total branches in rural areas. Around 70 per cent of its total branches are in the rural and semi-urban regions. It intends to improve its branch strength in this region to around 10,000 by 2010, backed by enhanced use of technology. Its insurance business is increasing rapidly. Financially, SBI is very much strong. Its total interest income and the net profits have grown by an average 12.5 per cent and 16.3 per cent respectively in the last 5 years. In the H1 of 2009, the net profit increased by 29 per cent, which is above its five years' average. In Q2, its advances increased at 37 per cent, which is much faster than in the whole last year's 23.5 per cent. It is continuously expanding its branches and ATM network. The stock is trading at around 9 times its estimated current year EPS. It is definitely a best buy at every decline.

* Maruti Suzuki (Code : 532500) : Maruti Suzuki has slashed prices by Rs. 6,500 for its top selling Maruti 800 small car to Rs. 23,000 for the premium SX4 sedan, a day after the Government reduced Cenvat by four percentage points. It also reduced price by Rs. 8000 for its largest selling car model-Alto. It has doubled the discount on its Wagon-R to Rs. 25,000 plus insurance. Thus it has given benefit of reduction in Cenvat to its custormers which will boost its sales in this difficult time. Also, the government has reduced petrol and diesel prices by Rs. 5 and Rs. 2 respectively which will indirectly help car companies, including Maruti. Experts say that this move will also help in reducing inflation. RBI has reduced Repo and Reverse Repo rate by 100 basis points which will make auto loans cheaper and therby drive the demand for Maruti cars. Government's stimulus package will also drive Maruti in top gear. At Rs. 516, Maruti trades atg about 9.3 times its current year's expected EPS which is attractive for this market leader. Accumulate.

* L & T (Code : 500510) : Engineering giant Larsen & Toubro is planning to foray into power generation and targets a capacity of 5000 MW in the coming years. The company has already signed MoU for two power projects with a total capacity of 3500 MW, in which L & T's share will be equivalent to 2000 MW. It also intends to invest around Rs. 4500 crore at Hazira near Surat, where it will build plants for super critical boilers and super critical turbines. It is a JV with Mitsubishi. It is also setting up a plant for forging and heavy casting at Hazira with an investsment of Rs. 2000 crore. The company is also planning to set up power plants having total capacity of 3000 MW. It will generage 10,000 jobs in five years, including 5000 in Surat alone. L & T has deferred its shipbuilding plans as there is slump in demand. It is a proper decision by its management. L & T stock has recovered almost 15 per cent in last 10 days which shows that it has been accumulated at every decline. Invest at every decline for long term.

* Britannia Industries (Code : 500825) : Britannia Industries is among the cheapest FMCG stocks, with its current market price of Rs 1,165 discounting trailing 12-month earnings by just 14 times. This is a steep discount to every other leading player in the FMCG space. A host of new product rollouts (iron fortified Tiger, Good Day Classic), expansion of the premium portfolio (Good Day and Treat), the positioning of NutriChoice as a snacking alternative and the launch of Nano packs at Rs 2 and Rs 5 price points have all helped revive Britannia's sales. Going ahead, an expanding cakes and risks portfolio (the business has doubled in two years), further expansion of the Daily Bread bakery business and new markets for Britannia's brands in West Asia and Africa (through acquired subsidiaries), offer growth opportunities. A moderation in wheat prices and sharp decline in global prices of vegetable oils and milk have now significantly moderated cost pressures. It is very much defensive blue-chip which is available at very cheap price. Buy. Buy more at decline.

* HDFC (Code : 500010) : The leading home loan company, HDFC will gain from the recent efforts of the RBI and the government to make money cheaper and more easily available. HDFC grew its loan book by a strong 25 per cent in the September 2008 quarter but the sentiment wasn't quite as weak then. So loan growth could slow down somewhat in the coming months. However, it now needs to set aside less capital for loans below Rs 30 lakh and also for some commercial loans. Moreover, loans below Rs 20 lakh will now be considered a part of the priority sector lending done by banks. This means banks can now lend more to housing finance companies, which, in turn, can lend to home buyers. CLSA estimates the two measures together would free up around 100 basis points of Tier I capital for HDFC. With money now likely to be cheaper than it was borrowing costs for HDFC will come down. So, overall, RBI's actions will make actions in HDFC also. Watch out.