Indian equities may continue to rise in anticipation of the ensuing recovery

1.Alembic Pharma: Monetisation of the oncology and general injectables in the US market, on the strength of the recently concluded capex of Rs 2,000 crore is a big positive.It is in a formidable position in the domestic formulations segment and is among the top 20 players and domestic business to rebound after a weak FY20. The stock valuation at 22 times FY22 P/E does not capture solid growth visibility beyond FY22.

2. VST Industries: The third largest tobacco company, with brands like Charms, Charminar Total, has gained market share, growing cigarette volumes by 8 per cent and revenues by 18 per cent in the [ast couple of years. With its dominance in the small-sized segment, it can be expected to double the industry growth run-rate for next 2-3 years.The company has a strong cash-heavy balance sheet, growing cash flows, high consistent dividend payout of 65 per cent and an ROCE of 52 per cent, but the stock trades at a low P/E multiple of 16.8 times currently.

3. Nippon AMC: Low penetration in India ensures multi-year story for AMCs to grow in mid-teens. It’s a better way to play the BFSI space, at a time when concerns over fresh slippages in banks and NBFCs, on account of Covid-19. Risk of adverse regulatory interventions incrementally low for industry. Under the new management and with a strong legacy distribution network, company has been able to gain market share since October 2019.RoE is expected to improve from 16% in FY20 to 22% in FY22. We expect a PAT CAGR of 23% during FY20-22E and find the valuations at FY22E P/E of 29x attractive.

4. Birla Corporation: Among the top five cement groups in India in volume terms, with highest utilization levels of 90%, the company is enjoying scale benefits. With 60% exposure to central India and 25% exposure to North India, pricing will remain favourable and sustain cash flows. Huge land bank and limestone reserves post acquisition of Reliance Cement, will ensure incremental capacity additions at lower cost.Trading at 6.5x EV/Ebitda and ~$60 EV/te on FY22E, offering a significant margin of safety.

5. Polycabs: Depressed valuation offers an opportunity for early entry into the largest organised cables and wires player in India with 18 per cent market share. With four decades of experience in the field, Polycabs is a sizeable player and brand,with Ebitda levels as high as Havells India.The FMEG business would continue to gain market share led by improving reach and introduction of new SKUs. The current stock valuation at 18 times looks unjustified compared with 60 times for Havells.